Do I file Form 8993 even if no tax is owed?
Relief or credit claim obligations of this kind are generally required on the facts rather than on the tax result, so a nil position does not remove one. US corporations with income from selling goods, services or intangibles to foreign customers.
What happens if I have missed Form 8993 for several years?
Missed years are dealt with as a package rather than one at a time, because the route chosen for the first year affects the relief available for the rest. We map the years and the obligations before anything is filed.
Is Form 8993 the same as the other reports I already file?
No. Claims the deduction for foreign-derived intangible income earned by a US corporation from serving foreign markets. Satisfying a different obligation, even one covering the same accounts or entity, does nothing for this one.
Can my US company claim a deduction on export sales?
A deduction exists for foreign-derived intangible income, which is income a US corporation earns from serving foreign markets rather than domestic ones. It is claimed by the corporation itself, on its own return, and it rewards income that is already inside a US company. That framing matters more than it first appears: the relief is aimed at keeping export earnings in the United States, so the question is not only whether your sales are foreign but whether the income from them is being earned in an entity that can claim the benefit. Establishing the foreign-market portion of the income is the substance of the work.
Does selling services to foreign clients qualify for this deduction?
Services to foreign customers are within the scope of the relief, alongside goods and intangibles, so a professional services business or a software company billing overseas clients is squarely the sort of taxpayer the rules contemplate. What has to be established is that the income is genuinely derived from serving a foreign market rather than a domestic one with a foreign-addressed invoice. That determination rests on the facts of who the customer is and where the service is used, so the supporting records are the contracts, the customer information and the billing data, gathered as the year goes along rather than reconstructed after it.
Should my export business sit in a US company or offshore?
Treat it as a computation rather than a preference. This deduction rewards export income earned inside a US corporation, which makes it the mirror image of the rules that tax low-taxed income earned in foreign subsidiaries. A group serving foreign customers therefore faces two routes with two different outcomes, and which one is better depends on the numbers for that specific business: where the people are, where the customers are, and what the income profile looks like. The mistake is deciding the structure first on general impressions about offshore arrangements and testing the tax position afterwards.
Can a partnership or an LLC claim the FDII deduction?
The deduction is a corporate one. It is claimed by a US corporation against income it has earned, so a business operating as a flow-through does not claim it in the same way on the same return. For an exporting business currently run through a partnership or a disregarded entity, that turns into a structural question rather than a filing one: whether the income should be earned somewhere that can access the relief, weighed against everything else that drives the choice of entity. It is worth modelling rather than assuming, because the answer depends on the size and profile of the export income.
How does this interact with our low-taxed foreign income?
They are two halves of the same design. One set of rules taxes income earned in foreign subsidiaries at low rates; this deduction relieves income from foreign markets earned inside a US corporation. A group with overseas customers can end up exposed to one while eligible for the other, and a change that reduces one often increases the other. That is why moving functions, customers or intangibles between a US company and a foreign affiliate should be modelled on both bases at once. Looking at either rule alone gives an answer that the other one can reverse.
What records do we need to support a claim on this form?
The computation separates income derived from foreign markets from the rest, so the records that matter are the ones that establish that split: customer contracts, evidence of who the customer is and where the goods or services are ultimately used, and sales data capable of being analysed on that basis rather than by billing address alone. Most of the difficulty in practice is that accounting systems are set up to report revenue by product or by entity, not by market. Deciding how the data will be extracted before the year ends saves reconstructing it from invoices afterwards.
Can I set up a trust that works in two countries?
You can, but the two systems classify and tax trusts differently enough that a structure which is efficient in one is often a reporting problem in the other — a Canadian family trust with a US beneficiary, or a US revocable trust holding Canadian property, are the classic pairs. Canada's twenty-one-year deemed disposition, the US grantor rules and each country's reporting have to be read together, before drafting rather than after. See cross-border wills and trusts.
Do I need to report a foreign business I own?
Almost certainly, and on more than one form. Canada requires reporting of foreign affiliates on the T1134; the United States has a family of returns keyed to the entity type and your level of control, and several carry penalties that apply whether or not any tax is owed. These are information returns, so the obligation follows the ownership rather than the profit. See T1134.
