Are you or your employees stuck in a non-U.S. country due to COVID-19? If the answer is yes, the federal government is offering relief for "temporary activities" that could otherwise give rise to foreign branch reporting (IRS Form 8858) and related issues.
On May 7, 2020, Treasury and the Internal Revenue Service (the “IRS”) released Revenue Procedure 2020-30 which provides relief where foreign branch separate unit issues might otherwise arise. When employees are tied up or restricted in their travels due to COVID-19, taxpayers can exclude "temporary activities" performed in a non-U.S. country provided the following conditions are met:
Thus, if you find that your employees are stuck sheltering-in place, unable to fly home and having to work in a non-U.S. country, you have some room here to avoid foreign branch issues. Maintaining the facts in good contemporaneous written form for the period one wants to be availed of this exemption is required, and should be on-hand if the IRS requests.
Additionally, the IRS has offered some Permanent Establishment (“PE”) threshold relief for non-resident alien individuals and foreign businesses tied up or restricted in their travels due to COVID-19. The IRS is providing a 60-day exemption period between February 1, 2020 and April 1, 2020. Any person or business that seeks such relief must document and otherwise have the narrative in good contemporaneous written form for the period one wants to be availed of this exemption. The IRS has provided additional information regarding travel disruptions on its website.
Director, International Tax
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