Form 8993, Section 250: Deduction for Foreign-Derived Intangible Income

Form 8993 is an official Internal Revenue Service (IRS) document used by domestic corporations (C corporations and S corporations) to calculate the allowable deduction under Section 250 of the tax code. This section allows a deduction for a portion of a corporation's foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).

Who Needs to File Form 8993?

All domestic corporations must use Form 8993 if they have:

A. Domestic Corporations: Any U.S. corporation that generates income from foreign-derived intangible assets, such as patents, trademarks, or copyrights, needs to use Form 8993.

B. U.S. Individual Shareholders of CFCs (Controlled Foreign Corporations): If you're a U.S. individual shareholder who has elected under Section 962 to pay tax on certain income of a CFC, you may also need Form 8993.

What is the Purpose of Form 8993?

The purpose of Form 8993 is to determine the amount of deduction a taxpayer can claim for two types of foreign income:

Foreign-Derived Intangible Income (FDII): This refers to income earned from the use of intangible assets in a foreign country.

Global Intangible Low-Taxed Income (GILTI): This refers to the share of a controlled foreign corporation's (CFC's) income that is considered low-taxed due to being earned in a foreign country with a lower tax rate.

Key Points about Section 250 Deduction:

Deduction Percentages: As of 2024, the deduction allows for:

  1. 37.5% of a corporation's FDII
  2. 50% of a corporation's GILTI

Taxable Income Limitation: The total deduction cannot exceed the corporation's taxable income. If the sum of FDII and GILTI is higher, the deduction is capped at taxable income. (Note: This limitation changes for tax years beginning after December 31, 2025.)

Filing Requirements: Form 8993 must be attached to the taxpayer's income tax return and filed by the due date (including extensions).

Do I need to file Form 8993 if I have no FDII or GILTI?

No, you only need to file Form 8993 if you have income from these categories.

Do I need to attach any other forms?

You may need to attach Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI), to calculate your GILTI.

Where can I download the Form 8993?

You can download the Form 8993 and its instructions attached below.