Understanding the Related Foreign Export Corporation and Its Legal Framework
Definition & Meaning
A related foreign export corporation is a type of foreign corporation that has specific ownership and operational criteria related to a domestic corporation. It can be categorized in two ways:
- Real Property Holding Company: A foreign corporation qualifies if more than 50 percent of its voting stock is owned directly by a domestic corporation, and its primary function is to hold real property exclusively for the domestic corporation's use.
- Associated Foreign Corporation: A foreign corporation qualifies if less than 10 percent of its voting stock is owned by the domestic corporation or its affiliated group, and the domestic corporation's ownership is deemed necessary for transactions that generate qualified export receipts.
Legal Use & context
This term is primarily used in tax law, particularly in relation to international trade and corporate taxation. Understanding the classification of a related foreign export corporation is essential for domestic corporations involved in exporting goods or services, as it can affect their tax obligations and benefits. Users may find it useful to access legal templates from US Legal Forms to navigate related forms and procedures effectively.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A U.S. company owns 60 percent of a foreign corporation that only holds real estate for the U.S. company's operations. This foreign corporation qualifies as a related foreign export corporation.
Example 2: A domestic corporation owns 5 percent of a foreign company that facilitates its export transactions. This foreign company may also qualify as a related foreign export corporation.
Relevant laws & statutes
Key legislation includes:
- 26 USCS § 993 - Defines the treatment of qualifying corporations, including related foreign export corporations.
- 26 USCS § 1563 - Provides definitions related to ownership and controlled groups of corporations.