Understanding the Export Trade Corporation: Legal Insights and Definitions
Definition & meaning
An export trade corporation is a type of controlled foreign corporation defined under U.S. tax law. To qualify as an export trade corporation, a company must meet specific criteria regarding its income sources. Primarily, at least ninety percent of its gross income over the past three years must come from outside the United States. Additionally, seventy-five percent or more of that income must be derived from export trade activities.
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This term is primarily used in the context of U.S. tax law. It is relevant for businesses engaged in international trade and those looking to benefit from specific tax incentives. Understanding the definition and implications of an export trade corporation can help businesses manage their tax obligations effectively. Users can find legal templates on US Legal Forms to assist with the formation and compliance of such corporations.
Key Legal Elements
Real-World Examples
Here are a couple of examples of abatement:
Example 1: A company based in Canada that exports machinery to various countries and earns ninety-five percent of its income from these activities could qualify as an export trade corporation.
Example 2: A hypothetical company that manufactures electronics in Mexico and sells them to customers in Europe, earning seventy-eight percent of its income from exports, would not qualify as an export trade corporation due to not meeting the income threshold.
Relevant Laws & Statutes
The primary statute governing export trade corporations is found in the Internal Revenue Code, specifically under 26 USCS § 971. This section outlines the definitions and requirements for corporations seeking to be classified as export trade corporations.
Comparison with Related Terms
Term
Definition
Key Differences
Controlled Foreign Corporation
A foreign corporation where U.S. shareholders own more than fifty percent of the stock.
Focuses on ownership rather than income sources.
Foreign Corporation
A corporation incorporated outside the United States.
Does not require specific income thresholds or export activities.
Common Misunderstandings
What to Do If This Term Applies to You
If you believe your business may qualify as an export trade corporation, consider consulting with a tax professional to ensure compliance with the necessary criteria. Additionally, you can explore US Legal Forms for templates and resources to help establish and manage your corporation effectively.
Quick Facts
Typical income requirement: 90% from foreign sources.
Export income requirement: 75% must be from export activities.
Relevant legal code: 26 USCS § 971.
Key Takeaways
FAQs
It is a controlled foreign corporation that meets specific income thresholds related to foreign sources and export activities.
Review your income sources and consult a tax professional to ensure you meet the criteria.
Yes, there can be tax incentives and benefits associated with this classification.
