General services provided to business recipients located outside the United States qualify in the FDII formulas if the service confers a benefit on the business recipient’s operations outside the United States.
In today’s multinational marketplace, where there are complex stuctures, it is sometimes difficult establishing if a foreign company has any US component.
For purposes of determining the location of the business recipient’s operations that benefit from a general service, the location of residence, incorporation, or formation of the business recipient is not relevant. A business recipient has operations where it maintains an office or other fixed place of business. If the business recipient does not have an identifiable office or fixed place of business, it is deemed to be located at its primary billing address.
“Benefit” is defined for these purposes as having the same meaning set forth in Treas. Reg. § 1.482-9(l)(3), which specifies how to identify directly resulting benefits and distinguishes them from indirect or remote benefits arising from a service. The amount of the benefit conferred on a business recipient’s operations located outside the United States is determined under any method that is reasonable under the circumstances including (but not limited to) allocations based on the renderer’s time spent or costs incurred or the business recipient’s gross receipts, revenue, profits, or assets.
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