Foreign Sales Corporation
“FOREIGN SALES CORPORATIONS” are under attack before the World Trade Organization in Geneva. The US moved in December to dismiss the complaint on procedural grounds.
European countries complain that foreign sales corporations, or FSCs, are an illegal subsidy to promote US exports. FSCs are shell subsidiaries set up by US companies that export in order to reduce US income taxes on the export earnings. The FSC must be offshore. Many are formed in the US Virgin Islands or Bermuda. The US exempts as much as 30% of the export earnings on transactions run through FSCs. FSCs are also used in lease financings of US-made equipment that will be used offshore. US lessors pay reduced taxes on rents from FSC leases.