The New US Tax Preference for 'Foreign-Derived Intangible Income'
Tax Law Review, Vol. 71, No. 4, pp. 625-664 2018
46 Pages Posted: 30 Apr 2018 Last revised: 5 Feb 2019
Date Written: April 30, 2018
The new US income tax deduction for “foreign-derived intangible income” effectively lowers the corporate tax rate — from 21% to around 13% — on export-generated income attributable to intangible assets. This paper considers the new provision both in relation to international trade and tax agreements and as a matter of national policy. It argues that FDII is not clearly in violation of international agreements — as has been claimed — but is difficult to justify from a national policy perspective.
Keywords: International Tax, Tax Cuts and Jobs Act, FDII, Foreign-derived Intangible Income, Global Intangible Low-taxed Income, GILTI, WTO, Agreement on Subsidies and Countervailing Measures, BEPS, Action 5, IP regimes
JEL Classification: K34, H25
Suggested Citation: Suggested Citation