Understanding the Domestic International Sales Corporation [DISC] and Its Benefits
Definition & Meaning
The Domestic International Sales Corporation (DISC) is a special type of federal corporation designed to provide tax benefits to U.S. companies that export goods. A DISC primarily earns income from exports, allowing its shareholders to benefit from reduced income tax rates on qualifying export income. To qualify as a DISC, a corporation must have gross receipts and assets that are predominantly related to export activities.
Legal Use & context
The DISC structure is primarily used in international trade law and tax law. It is relevant for businesses engaged in exporting U.S.-made products. Companies can enter into contracts with producers or resellers of these goods to maximize their tax benefits. Users can manage related forms and procedures by utilizing resources like US Legal Forms, which offers templates drafted by legal professionals.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A U.S. company that manufactures electronics and sells them overseas can establish a DISC to benefit from tax reductions on its export income.
Example 2: A textile manufacturer that exports clothing can create a DISC to lower its tax burden on profits derived from these international sales. (hypothetical example)