Using Export Tax Incentives for SaaS Resellers Abroad

by석아산 • • 2 min read
0

 

A four-panel digitally illustrated comic strip features two businessmen discussing SaaS export tax benefits. In the first panel, the younger man says, “SaaS exports can qualify for tax incentives…” In the second, the older man replies, “We could form an IC-DISC company,” as a monitor behind them shows “IC-DISC COMPANY.” In the third, the younger man says, “That will reduce our taxable income!” beside a screen labeled “FOREIGN SALES.” In the final panel, the older man concludes, “Great idea! I’ll set it up!” with the monitor displaying “TAX SAVINGS.”

Using Export Tax Incentives for SaaS Resellers Abroad

As Software-as-a-Service (SaaS) becomes increasingly global, U.S.-based software companies and resellers are expanding their reach into foreign markets.

What many don't realize is that exporting SaaS products—yes, even cloud-delivered software—can qualify for export tax incentives under IRS rules.

This strategy can result in significant tax savings, particularly for companies selling licenses, subscriptions, or usage-based access to clients abroad.

📌 Table of Contents

How SaaS Qualifies as an Export

The IRS generally considers software exported if it is sold to foreign customers—even if it is delivered digitally from U.S. servers.

This includes annual licenses, subscription models, or metered API access offered to customers located outside the United States.

If structured properly, these revenues may be eligible for export incentives originally designed for physical goods.

IRS Section 199A and IC-DISC Rules

The Interest-Charge Domestic International Sales Corporation (IC-DISC) regime allows qualifying U.S. exporters to shift taxable income to a special-purpose entity taxed at favorable dividend rates.

Section 199A also provides deduction benefits to qualified pass-through income, which can apply to SaaS exports with proper entity structuring.

While the IC-DISC benefit was originally intended for manufacturers, court rulings and IRS notices have extended eligibility to software services in many cases.

Setting Up Export Structures for SaaS

Companies need to form an IC-DISC, file Form 1120-IC-DISC, and maintain documentation of qualified export receipts.

For SaaS, the key is proving that the economic benefit is derived from non-U.S. usage, support, or data transfer.

Integrating transfer pricing documentation and foreign user analytics strengthens the defensibility of such claims.

Tax Benefits and Compliance Risks

Benefits include up to 20% effective tax reduction on qualifying profits and deferral of tax through dividend treatment.

However, misclassification of revenue or inadequate export documentation can trigger IRS audits or disqualification.

It is crucial to involve international tax experts and legal counsel to avoid pitfalls in entity structuring or reporting.

Best Practices and Tools for 2025

Explore platforms and updates relevant to export-compliant SaaS models:











Keywords: SaaS export tax, IC-DISC, Section 199A, international software sales, tax incentives

4.94 / 169 rates
다음 이전