January 23, 2018
Privately held U.S. software companies who sell software – directly or indirectly, physically or downloaded – to customers outside the U.S. should be taking advantage of a U.S. income tax export incentive known as The Interest Charge-Domestic International Sales Corporation (IC-DISC)
So how does an Interest Charge-Domestic International Sales Corporation work? IC-DISC is a widely available IRS-approved export incentive that provides permanent tax savings to companies exporting goods made in the USA. The IC-DISC is not itself a taxable entity. This is a powerful tax saving device and certain criteria must be met in order to qualify for and maintain its IC-DISC status.
One common myth among U.S. software companies is they feel they do not qualify for this powerful income tax incentive, as there has been uncertainty around the taxation of software since it does not fit into traditional tax principles.
An intangible software sale differs from the sale of a physical product since the value of the software is often much greater than the value of the physical deliverable on which it is transferred. In addition, software products are often transferred electronically or downloaded with no physical deliverable at all. This, however, does not prevent private software companies in the U.S. from using the IC-DISC.
If you want to learn more about the potential tax savings your business could acquire with the IC-DISC tax incentive, contact Think, LLP. One of their specialists can perform a no-cost preliminary analysis for your business.
If you’re looking for technology consulting services for your software company, People Driven Solutions International provides a variety of technology solutions to help your business identify, execute, and manage the right plan at the right time.
This is a guest post from Greg Elias of Think, LLP