The New US Tax Preference for 'Foreign-Derived Intangible Income'

36 Pages Posted: 30 Apr 2018 Last revised: 8 Oct 2018

Chris William Sanchirico

University of Pennsylvania Law School; University of Pennsylvania Wharton School - Business Economics and Public Policy Department

Date Written: April 30, 2018

Abstract

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

Sanchirico, Chris William, The New US Tax Preference for 'Foreign-Derived Intangible Income' (April 30, 2018). Tax Law Review, Vol. 71, No. 4, 2018; U of Penn, Inst for Law & Econ Research Paper No. 18-7. Available at SSRN: https://ssrn.com/abstract=3171091 or http://dx.doi.org/10.2139/ssrn.3171091

Chris William Sanchirico (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-4220 (Phone)

HOME PAGE: http://www.law.upenn.edu/faculty/csanchir/

University of Pennsylvania Wharton School - Business Economics and Public Policy Department

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

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