On January 17, 2020, the US’ Internal Revenue Service (IRS) announced that the agency may in some limited circumstances provide relief from double taxation resulting from application of the repatriation tax under section 965, as amended by the Tax Cuts and Jobs Act (TCJA).
The IRS said that, in unique circumstances, such as where a corporation paid an unusual dividend for business reasons, not because of the enactment of TCJA, it may be appropriate to provide relief from double taxation.
“When the same earnings and profits of foreign corporations are taxed both as dividends and under section 965, double taxation could result,” it noted.
The IRS announced that it is open to considering relief from such double taxation where there is no significant reduction in the resulting tax by application of foreign tax credits, such that the taxpayer would be required to pay more tax than it would have if the dividend had not been paid.
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