INTEREST CHARGE DOMESTIC INTERNATIONAL SALES CORPORATION (IC-DISC)
If your company exports goods, or you are considering entering the global market, you need to be aware of the advantages of establishing an IC-DISC (Interest Charge – Domestic International Sales Corporation). Your shareholders and owners can receive substantial tax savings through lower effective tax rates on your export profits by utilizing this often overlooked corporate structure.
IC-DISC is an export tax incentive for small and mid-sized U.S. businesses. A company that exports goods can use the IC-DISC designation to reduce the tax on up to 50% of their export income by owners and shareholders being taxed at the dividend rate rather than the ordinary income rate. This is achieved by creating a different corporate structure.
A business must be profitable and sell what the IRS terms as "export property to be eligible. According to the IRS § 993(c) defines export property as property:
- That is manufactured, produced, grown, or extracted in the United States;
- That is then held for sale, lease, or rental for direct use, consumption, or disposition outside the United States; and
- The fair market value of which is not more than 50% attributable to articles imported into the United States. for IC-DISC and Foreign Tax Credits.