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MT online Form 4876-A: What You Should Know
This post outlines the tax implications of the (2)- The IC-DISC elects to pay a tax-deductive tax to the foreign country The tax imposed by the foreign country is the exporter's only direct tax. International Sales Tax is tax paid to all foreign governments. For some foreign countries, this tax doesn't go to you but is paid to a foreign government, (the country) to which it has been brought to have that tax applied. You don't pay US tax on the taxable portion of foreign profits that are sold to the foreign country that imposed the tax. Taxpayers who owe the tax have to file a tax return and pay off the interest expense to pay it. This includes all taxes and interest associated with the taxable part of the profits (such as dividend withholding tax). The taxpayer bears the tax only if paid. To avoid tax liability for both the US (the taxpayer) and the foreign country, the exporter must have the IC-DISC status before filing the tax return. For example, a corporation that sells 100,000 taxable units directly to an importer in a foreign country pays an income tax or corporate tax of 18,500 to the country. The corporation will keep 12,500 for its use. The corporation reports the sales of 100,000. The US corporate tax rate is 25 percent. The corporation will then pay 12,500 to the country to cover the interest cost of 18,500. The corporation will report its income tax of 16,500 for this year and claim credit for 24,500 of interest expense. It will not receive a federal tax credit for the 24,500 income tax expense and must pay at least 18,500 federal income tax on this income. The corporation will not receive a tax deduction for the 18,500 interest expense since the money can't be saved in the US by a tax loss carry back of the income in any year because the income tax deduction is limited. However, it will take a tax deduction for the 25 percent income tax paid to the country because the 8,000 or so of income tax could be saved in the US tax system and the corporation does not have to report the 25 percent tax paid. It also does not lose this deduction because it paid the tax in another country in previous years.
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