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Foreign-derived Intangible Income (FDII)
Income Tax Guidance on Global Intangible Low-Taxed Income GILTI For Corporations, Individuals, Trusts, and Estates
Foreign-derived Intangible Income (FDII)
IRC 250 also establishes a new category of a U.S. corporation’s income, Foreign Derived Intangible Income (“FDII”), and provides a deduction separate from the GILTI and gross-up deduction discussed above. Generally, FDII is an estimate of a U.S. corporation’s direct income from sales of goods and services to foreign markets that exceeds a presumed return on its tangible assets.8 If a U.S. corporation has FDII, 37.5% of that amount for a taxable year can be deducted.9
8Internal Revenue Service, Notice of proposed rulemaking, Deduction for Foreign-Derived Intangible Income and Global Intangible Low-Taxed Income, 84 FR 8188 (March 6, 2019).
9IRC 250(a)(1)(A). The 37.5% deduction is reduced to 21.875% for taxable years beginning after 2025. IRC 250(a)(3)(A).