FDII Proposed Regulations: Accepted With Constructive Edits in the US But the EU Reiterates Concern

    View Authors June 2019

    After proposed regulations were released providing guidance for implementation of Internal Revenue Code Section 250, which provides a deduction for foreign derived intangible income (FDII), domestic groups submitted comment letters to suggest some minor improvements. On the other side of the Atlantic, the Delegation of the European Union to the United States (EU Delegation) threatened protective action in response to a FDII regime that it views as discriminating against foreign sellers, violating World Trade Organization (WTO) rules and incentivizing tax avoidance.

    In this update, we provide a brief overview of the FDII deduction and a summary of the key comments recently submitted, examine the EU Delegation’s position and provide comments from a tax policy perspective on what to expect next.