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FOREIGN ECONOMIC PROCESSING (FEP) FORENSIC
ADVISORY SERVICES
EXPORT ASSIST CONTINUES TO PROVIDE A FULL
SPECTRUM OF FEP FORENSIC ADVISORY SERVICES TO HELP THE EXPORTER RETAIN
FSC AND ETI TAX BENEFITS, AFTER THE FACT. THIRD PARTY (E.G., EXPORT
ASSIST) VERIFICATION OF COMPLIANCE HAS NEVER BEEN CONTESTED BY THE
IRS.
With the repeal of the Foreign Sales Corporation
(FSC) and ETI, Foreign Economic Processing (FEP) is no longer required
for new export tax-advantaged vehicles, however exporters must still
be able to prove that FEP qualifications have been met in their previous
FSC and/or ETI benefit years in case of a tax audit, amendment and/or
redetermination.
Under the former Foreign Sales Corporation
(FSC) legislation and the current Extraterritorial Income Exclusion
(ETI)
Act of 2000,
U.S. exporters with annual export gross receipts exceeding $5,000,000
are obligated to perform certain foreign economic processes (FEP)
in order to be eligible for the tax benefit. There are two tests
that must be satisfied separately:
- sales activity test, including solicitation, negotiation
and making of a contract
- foreign direct cost test,
including advertising and sales promotion; processing customer
orders and arranging for delivery;
transportation; determination and transmittal of a final invoice
or statement of account and/or receipt of payment; and assumption
of credit risk. This test is met if 50% of all export-related
direct
costs are foreign direct costs in all categories or if 85% of
export-related direct costs are foreign direct costs in each of
the two chosen
direct cost categories.
Although the sales activities and direct cost tests are to be done
on a transaction-by-transaction basis, the grouping of
transactions is allowed. There are four ways that transactions can be grouped
to accomplish these tests: by product, by customer, by contract,
or by product or product line with a customer or contract group.
Export Assist’s FEP Forensic Advisory
Services enable the U.S. exporter who had $5,000,000 or more in export
sales in 2001, 2002 and/or before the close of the 2003 tax year
to ensure that all FEP requirements have been met.
If the exporter missed or needs to re-evaluate any compliance steps
before the close of the 2001, 2002, or 2003 tax years, it is still
possible to analyze the activities concluded during the normal course
of business and to forensically comply with the FEP requirements.
In such a case, Export Assist helps to identify the basic or minimum
number of recorded FEP activities (sales activities and direct costs)
needed to comply with the Internal Revenue Code under ETI in each
particular year.
In order to take the ETI benefit, the exporter needs to meet the
minimum FEP requirements by establishing that it participated outside
of the United States in the sales promotion of export transactions
and that it satisfied either the 50% or the 85% foreign direct cost
test.
Export Assist will help the exporter comply
with the minimum FEP requirements by analyzing its financial information
and retrieving
all export-related activities. The results of this analysis and report
will offer guidance regarding how the exporter can meet the FEP tests
and how it can prepare records to verify the performance of FEP activities.
The exporter must take further action to ensure proper FEP documentation
in order to constitute proof of compliance.
EXPORT TAX ADVANTAGE® ANALYSIS
AND REPORT
In addition to taking ETI benefits for the
previous year(s), the
exporter can also form a new EXPORT TAX ADVANATGE® vehicle
to help it receive ongoing export tax benefits. In order to help
you
assess
the potential revenue and possible tax benefits, Export Assist
will do a FREE EXPORT TAX ADVANATGE® Analysis and
Report for you. This
personalized report of approximately 40 pages is prepared with
estimated transfer pricing support and option structuring guidance
from
an economist.
To proceed, please
click on the corporate structure applicable to your company:
You will be asked to complete an EXPORT TAX
ADVANTAGE® Inquiry Form which will supply us with sufficient, confidential
information
to
work with you and/or your tax advisor in the preparation of
this FREE Report. Upon completion of the inquiry form, please return
it to Export Assist with the requested documents as specified
in the
instructions. There is no obligation.
If you have any questions,
please contact Ms. Tamara Crews, Vice President – Professional
Markets, directly at 800-894-8366 or tcrews@exportassist.com.
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