Why don’t more international companies take advantage of the IC-DISC (Interest-Charge Domestic International Sales Corporation) export tax break? The international tax accountants at LSL CPAs are surprised when business owners fail to access the tax savings provided by the IC-DISC. As an export tax incentive specifically designed for small to mid-sized companies, IC-DISC is a significant opportunity for exporters to protect their profit margin.
The extension of the lower capital gains rates makes IC-DISCs a valuable tax savings vehicle. For the benefit of small to mid-sized companies, the IC-DISC remains in place today. If your company provides services to customers located outside the United States or if you export your products to foreign countries, the IC-DISC tax break can save you money. Although the IC-DISC has strict qualifications, the international tax accountants at LSL CPAs have successfully navigated these waters.
The first question looming for many small to mid-sized business owners is, “Can my company benefit from the IC-DISC?” If applied effectively, the IC-DISC can reduce the tax on the export income by about 50%. Ordinary taxes on such export income can climb as high as 39.6%. When the IC-DISC structure is used, profits are taxed at the much lower current dividend rate of 20%. The result is the potential to increase your company’s after-tax income.
Many companies believe they do not qualify for the IC-DISC tax structure because they are not involved in traditional exports. They do not think the IC-DISC could apply to their businesses. What surprises business owners is that the net is cast much wider for IC-DISC than most people realize. If your company is directly exporting its products, naturally, the IC-DISC applies. Understanding how many other IC-DISC tax structure applications are legitimate is important.
The IC-DISC covers a lot more territory than just traditional manufacturing and the export of whole-material products. For example, the IC-DISC export tax structure applies if your company manufactures only a part of a product, like a circuit on a motherboard in a computer. If that computer is exported, these sales still qualify as foreign sales for IC-DISC purposes. Beyond material products, this structure applies to consulting services as well. If your company provides consulting services in the United States for an international project, the IC-DISC tax break will save you money.
The advantage of working with an international tax accountant is to access a working knowledge of such tax structures. The international tax team at LSL CPAs has years of hands-on experience taking advantage of the IC-DISC tax incentive for client companies. This is why LSL CPAs can help you.
This content contains accurate information. It is inherently limited, however, because of the article’s length and the IC-DISC’s complexity. It is important to note that this article presents only a partial view of the subject matter. To learn more about how these issues might apply to your company, please call LSL CPAs international tax accountant Yana Weaver at 714.569.1000
