The tax law provides six tax breaks for exporters – and for near exporters. Consider if your business can claim some - or perhaps all six - of these government-sponsored tax benefits:
- Your company can claim the tax-rate spread, paying 20 percent tax instead of the regular corporate tax – without limitation - if your company exports U.S. products.
- Your company can defer tax on a major share of its export profits – but only up to $10 million in gross receipts.
- Your company can obtain additional tax saving by – literally – venturing into foreign territory. These rules provide for even more tax deferral.
- Your company can claim both domestic production deduction tax benefits and export benefits if the company produces or manufactures items in the U.S.
- Your company can claim estate and gift tax benefits it the company follows all the rules.
- Your company can increase its tax benefits by grouping or segregating its export transactions.
These tax breaks apply to a plethora of industries. Here are some possible examples if the company meet all of the tax requirements then exports its property:
- Boat manufacturers can qualify for the export tax incentive. Boat wholesalers and sellers can qualify as well. The wholesaler or the seller must buy the boat – directly or indirectly - from a U.S. manufacturer and sell the boat to a customer offshore.
- Aircraft manufacturers can qualify for the export tax incentive. An aircraft repairfacility can qualify as well, but the repair facility must buy the aircraft and must make substantial repairs to the aircraft while in the U.S., and sell the aircraft offshore.
- Phone companies can qualify for the export tax incentive. If the phones are imported, the company must add very substantial value to the phones in the U.S., and the company needs to sell the phones overseas.
- Companies that farm, raise, or gather agricultural products can qualify for the export tax inventive unless the U.S. government gives them separate tax breaks. Eligible agricultural products can include grains, fruits, and other agricultural products.
- Electronic manufacturers can qualify. They need to ascertain that 50% of fair market value was U.S., and demonstrate the electronics then go overseas.
- The equipment refurbishers can qualify if they purchase the equipment and substantiate their refurbishing efforts.
- Chemical manufacturers and wholesalers can qualify for the export tax incentive. By-product and joint product costing issues can arise, particularly when the company sells one product domestically and sells the other product overseas.
- Architectural services, engineering services, other related services can potentially qualify for export incentive benefits if the project is for an overseas customer.
- Inland manufacturers have products that go overseas: The company can benefit from the tax incentive if the company produces the products in the U.S.; the goods go overseas, and the manufacturer can track the sales to the foreign customer.
- The company does not manufacture anything. The company buys items from an unrelated manufacturer and sends these products overseas. The company can qualify if it can track the purchases and sales.
- Recyclers of used equipment potentially can qualify for export tax benefits if the company can track the transactions that are overseas.
- The company consolidates U.S.-made products before they ship the goods overseas. This company can qualify for export incentive tax benefits.
- An importer substantially modifies a product in the U.S. before the company sells the good to foreign customers. This company can qualify for export incentive tax benefits.
- A distributor buys U.S. made products and sells these products to a cruise ship or to an international airline. This company can qualify for export incentive tax benefits.
- Foreign located companies that distribute U.S. made goods can potentially qualify if the goods are made in the U.S. and the goods go overseas.
- Initial – one time – IC-DISC Requirements
- Gross receipts test –the 95 percent requirement yearly
- Assets test-the 95 percent requirement yearly
- Importance of meeting timing requirements yearly
Marini & Associates, P.A.
Read more at: Tax Times blog