The following information is only applicable to US-based publishers.
US tax form 1099
Will I receive a 1099 from Relābe?
No, you will not receive a 1099 (or other similar reporting forms) from Relābe since Relābe does not have a 1099 reporting obligation. Even though Puerto Rico is a US territory, it has a unique territorial status and for US tax purposes Puerto Rico is treated as if it was a foreign country.
Tax form 1099 is a US tax document filed yearly by an organization that submits payments to contractors and suppliers above a certain threshold. The entity that pays fills out the 1099 form and files it with the tax authorities each year, typically before Jan. 31, for the previous year's income. The paying company also provides the recipient with a copy of the form, they can report any income received on their tax returns based on the 1099 form received.
Am I eligible for Foreign-Derived Intangible Income (FDII)?
Under FDII, a benefit is given for income that is deemed to be generated from foreign intangible assets. This is not based on the actual income generation of an intangible asset, rather it is backed into through a formula comparing foreign sourced income to the U.S. asset base. If the income qualifies, it can enjoy a lower tax rate through a deduction. This incentive is available for US “C” corporations.
As mentioned above, Relābe (a company headquartered in PR) is considered to be in a “foreign country” for US tax purposes, and as such, any goods or services provided to Relābe may qualify for FDII-treatment. However, this is a complex tax rule and not all organizations qualify. As with any tax planning, we recommend that you consult with the relevant accounting and tax departments at your organization.
The clear beneficiaries of the FDII provision are US-based corporate exporters of goods and services with no controlled foreign corporation (CFC) ownership. These corporations have long been subject to higher tax rates than their multinational competitors that have been able to move intellectual property outside the United States to lower tax jurisdictions. The FDII deduction is a big step toward eliminating this tax advantage. Furthermore, because FDII does not require the taxpayer to identify intangible assets, it avoids cumbersome and expensive valuation and segregation studies and other complex legal and tax undertakings. If you believe that your organization might qualify for FDII then please consult with the accounting and tax departments at your organization before aiming to take advantage of this provision.