8993 Instructions for Form 8993

Instructions for Form 8993

Department of the Treasury
Internal Revenue Service

(Rev. January 2020)

Section 250 Deduction for Foreign-Derived Intangible Income (FDII) and Global
Intangible Low-Taxed Income (GILTI)
Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

electing individuals. For the treatment of a
domestic corporation that is a partner in a
partnership, see Proposed Regulations
section 1.250(b)-1(e).

For the latest information about
developments related to Form 8993 and
its instructions, such as legislation
enacted after they were published, go to
IRS.gov/Form8993.

When and Where To File

Additional guidance may be issued
subsequent to this publication. Please
review any additional information on the
website mentioned above prior to
completing Form 8993.

Definitions and Overview

Important Reminders
Domestic corporation’s deduction. For
tax years 2018–2025, certain domestic
corporations are allowed a deduction
equal to 37.5% of FDII and 50% of GILTI.
Deduction limitation. If the sum of FDII
and GILTI exceeds taxable income, the
deduction under section 250 is limited to
taxable income.

General Instructions
Purpose of Form

Public Law 115-97 (Tax Cuts and Jobs Act
of 2017) enacted section 250 for the
allowance of a deduction for the eligible
percentage of Foreign-Derived Intangible
Income (FDII) and Global Intangible
Low-Taxed Income (GILTI).
See Form 8992, U.S. Shareholder
Calculation of Global Intangible
Low-Taxed Income (GILTI), and its
instructions for more information on GILTI.
Use Form 8993 to figure the amount of
the eligible deduction for FDII and GILTI
under section 250.

Who Must File

All domestic corporations (and U.S.
individual shareholders of controlled
foreign corporations (CFCs) making a
section 962 election (962 electing
individual)) must use Form 8993 to
determine the allowable deduction under
section 250.
The deduction is allowed only to
domestic corporations (not including real
estate investment trusts (REITs),
regulated investment companies (RICs)
and S corporations) and section 962
Jan 23, 2020

Attach Form 8993 to your income tax
return and file both by the due date
(including extensions) for that return.

Steps for Computing the
Deduction Under Section 250
1. Deduction Eligible Income (DEI) is
determined.
2. Deemed Tangible Income Return
(DTIR) is determined.
3. Deemed Intangible Income (DII) is
determined.
4. Foreign-Derived Deduction Eligible
Income (FDDEI) is determined.
5. Foreign-Derived Ratio (FDR) is
determined.
6. Foreign-Derived Intangible Income
(FDII) is determined.
7. The FDII reduction and the GILTI
reduction are determined.
8. The eligible deduction under
section 250 is determined.

Foreign-Derived Deduction
Eligible Income (FDDEI)

FDDEI means, with respect to a taxpayer
for its tax year, any deduction eligible
income of the taxpayer that is derived in
connection with:
1. Property that is sold by the
taxpayer to any person who is a foreign
person and that the taxpayer establishes
to the satisfaction of the Secretary is for a
foreign use (see Proposed Regulations
section 1.250(b)-4), or
2. Services provided by the taxpayer
that the taxpayer establishes to the
satisfaction of the Secretary are provided
to any person, or with respect to property,
located outside the United States (see
Proposed Regulations section
1.250(b)-5).
Special rules for determining foreign
use apply to transactions that involve
property or services provided to related
parties (see section 250(b)(5)(C) and
Proposed Regulations section
1.250(b)-6).
Cat. No. 33706N

Sale

The terms “sold,” “sells,” and “sale”
include any lease, license, exchange, or
other disposition of property.

Foreign Use

“Foreign use” is defined to mean “any use,
consumption, or disposition which is not
within the United States.” See Proposed
Regulations sections 1.250(b)-4(d) and
(e). For the latest guidance about foreign
use, go to IRS.gov/Form8993.

Documentation

For documentation requirements, see
Proposed Regulations sections
1.250(b)-4(c)(2), (d)(3), and (e)(3), and
1.250(b)-5(d)(3) and (e)(3). Also see
Proposed Regulations section 1.250-1(b)
for information about the applicability date
of the Proposed Regulations and a special
transition rule.

Section 250 Deduction
Limitation

If the sum of FDII and GILTI exceeds
taxable income, the deduction under
section 250 is subject to limitation.
See the instructions for Part IV, lines 6
and 7, below for additional information.

Corrections to Form 8993

If you file a Form 8993 that you later
determine is incomplete or incorrect, file a
corrected Form 8993 with an amended tax
return, using the amended return
instructions for the return with which you
originally filed Form 8993. Write
“Corrected” at the top of the corrected
Form 8993.

Computer-Generated Form
8993

Generally, all computer-generated forms
must receive prior approval from the IRS
and are subject to an annual review.
Requests for approval may be submitted
electronically to [email protected],
or requests may be mailed to: Internal
Revenue Service, Attention: Substitute
Forms Program, SE:W:CAR:MP:P:TP,
1111 Constitution Ave. NW, Room 6554,
Washington, DC 20224.

Specific Instructions
Part I. Determining
Deduction Eligible Income
(DEI)
DEI means, with respect to any domestic
corporation, the excess (if any) of the
gross income of the corporation, less
exclusions, over deductions (including
taxes) properly allocable to such gross
income.

Line 1. Gross Income

For purposes of this form, gross income
includes all income from whatever source
derived.

Line 2. Exclusions

The following items of income are
excluded from gross income.
1. Any amount included in the gross
income of such corporation under section
951(a)(1).
2. Any amount included in the gross
income of such corporation under section
951A.
3. Any financial services income (as
defined under section 904(d)(2)(D)) of
such corporation.
4. Any dividend received from a
controlled foreign corporation (CFC) with
respect to which the corporation is a U.S.
shareholder as defined under section
951(b).
5. Any domestic oil and gas extraction
income. The term “domestic oil and gas
extraction income” means income
described in section 907(c)(1) determined
by substituting “within the United States”
for “without the United States.”
6. Any foreign branch income (as
defined in section 904(d)(2)(J)).

Line 5. Deductions Properly
Allocable to the Amount on
Line 4

Allocable deductions include all
deductions (including taxes) properly
allocable to gross income less total
exclusions on line 4. See Proposed
Regulations section 1.250(b)-1(d)(2) for
more details.

Part II. Determining
Deemed Intangible Income
(DII)
DII is the excess (if any) of the
corporation’s deduction eligible income
over 10% of its qualified business asset
investment.

quarter of the tax year, in specified
tangible property used in its trade or
business and of a type with respect to
which a deduction is allowable under
section 167. See Proposed Regulations
section 1.250(b)-2.
Specified tangible property means any
tangible property used in the production of
the gross income included in deduction
eligible income. If such property was used
in the production of deduction eligible
income and income that is not deduction
eligible income (such as dual-use
property), the property is treated as
specified tangible property in the same
proportion that the amount of the gross
income included in deduction eligible
income produced with respect to the
property bears to the total amount of gross
income produced with respect to the
property.

Line 2. Deemed Tangible
Income Return (10% of QBAI)

The calculations for Part II, line 2, are as
follows.
• First, compute QBAI (defined earlier).
• Then, multiply QBAI by 10%.
• Finally, enter this result on Form 8993,
Part II, line 2.

Part III. Determining
Foreign-Derived Ratio

The Foreign-Derived Ratio (FDR) is
determined by computing the ratio of
FDDEI over DEI. See Definitions and
Overview for discussion of FDDEI.

Line 1a. DEI Derived from
Sales, Leases, Exchanges, or
Other Dispositions (but Not
Licenses) of Property to a
Foreign Person for a Foreign
Use

Include DEI derived from the sale, lease,
exchange, or other disposition (other than
license) of property to any person who is a
foreign person which is established to the
satisfaction of the Secretary is for a foreign
use (as described under Definitions and
Overview).

Line 1b. DEI Derived from a
License of Property to a
Foreign Person for a Foreign
Use

Include DEI derived from the license of
property to any person who is a foreign
person and which is established to the
satisfaction of the Secretary is for a foreign
use (as described under Definitions and
Overview).

A domestic corporation’s Qualified
Business Asset Investment (QBAI) is the
average of the aggregate of its adjusted
bases, determined as of the close of each
-2-

Line 1c. DEI Derived from
Services Provided to a Person
or with Respect to Property
Located Outside of the United
States

Include DEI derived from services that are
established to the satisfaction of the
Secretary are provided to any person, or
with respect to property, located outside
the United States.

Line 4. Foreign Derived Ratio

Divide the amount on line 2 by the amount
on line 3. The resulting ratio must not
exceed 1.

Part IV. Determining FDII
and/or GILTI Deduction
Line 3b. Global Intangible
Low-Taxed Income (GILTI)
Inclusion

Enter the amount of GILTI reported on
Form 8992, Part II, line 5.
Additional guidance may be issued
after the publication of these instructions.
Please review any additional information
on IRS.gov/Form8993 prior to completing
Form 8993.

Line 4. Taxable Income

Enter the taxable income of the domestic
corporation (determined without regard to
section 250).

Line 5. Excess FDII and GILTI
Over Taxable Income

Subtract the taxable income amount
reported on line 4 from the total FDII and
GILTI on line 3c.
If the result reported on line 5 is zero or
negative, your taxable income is greater
than the sum of FDII and GILTI and your
deduction under section 250 is not limited.
If the result reported on line 5 is a
positive number, your taxable income is
greater than the sum of your FDII and
GILTI, and your deduction under section
250 is limited to taxable income. Refer to
the instructions for Part IV, line 6 and 7, to
determine the amount by which you need
to reduce FDII and GILTI.

Line 6. FDII Reduction

The reduction in FDII for which a
deduction is allowed equals such excess
multiplied by a percentage equal to the
corporation’s FDII divided by the sum of its
FDII and GILTI.
Use the Part IV, Line 6 Worksheet to
compute the FDII reduction.

Part IV, Line 6 Worksheet
Line A

Enter the
amount
from Part
IV, line 5. If
zero or
less,
enter -0- on
line E of
this
worksheet
and stop.

Line B

Enter the
amount
from Part
IV, line 3a.

Line C

Enter the
amount
from Part
IV, line 3c.

Line D

Divide line
B by line C.

Line E

Multiply line
A by line D.
Enter this
line E
amount on
Form 8993,
Part IV,
line 6.

Line 7. GILTI Reduction

The reduction in GILTI is determined by
the excess amount less the FDII
reduction.
Use the Part IV, Line 7 Worksheet to
compute the FDII reduction.

Part IV, Line 7 Worksheet
Line F

Enter the
amount
from Part
IV, line 5. If
zero or
less, enter
zero on line
H of this
worksheet
and stop.

Line G

Enter the
amount
from line E
in the
worksheet
above, as
reported on
Part IV,
line 6, of
Form 8993.

Line H

Subtract
line G from
line F.
Enter this
line H
amount on
Form 8993,
Part IV,
line 7.

Line 8. FDII Deduction

To figure the FDII deduction, subtract the
amount from Part IV, line 6 (FDII
reduction), from the amount on Part IV,
line 3a (FDII).
Then multiply the resulting amount by
37.5% to obtain the FDII deduction and
enter it on line 8.

Line 9. GILTI Deduction

To figure the GILTI deduction, subtract the
amount from Part IV, line 7 (GILTI

-3-

reduction), from the amount on Part IV,
line 3b (GILTI inclusion). Then, add any
amount received by the corporation (or
962 electing individual) that is treated as a
dividend under section 78 which is
attributable to GILTI, from Form 1118,
Schedule A, column 3(b). Lastly, multiply
that amount by 50%.
Enter the sum of lines 8 and 9 on Form
1120, Schedule C, line 22, or on the
comparable schedules of other corporate
returns.
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