U.S. IRS Removes Restrictions on Income Earned in Cuba

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By Jared Mondschein

March 1—Foreign tax credits for income earned in Cuba are to be retroactively allowed to be applied to U.S. tax liabilities from Dec. 21, 2015, the IRS said in Revenue Ruling 2016-08.

The ruling specifically applies to Section 901(j) of the Internal Revenue Code, which generally does not allow foreign tax credits for income earned in countries which the U.S. does not recognize or has severed diplomatic relations.

Revenue Ruling 2016-08 will be in IRB 2016-11, set to publish March 14, the IRS said.

The Obama administration restored diplomatic relations with Cuba in 2015 but a congressionally-mandated embargo on Cuba bars major commercial ties from developing between the two countries.

Under Revenue Ruling 2005-3, Iran, North Korea, Sudan and Syria remain the only countries with which Section 901(j) still applies.

To contact the reporter on this story: Jared Mondschein at jmondschein@bna.com

To contact the editor responsible for this story: Michael Baer at mbaer@bna.com

For More Information

The IRS ruling is available at https://www.irs.gov/pub/irs-drop/rr-04-103.pdf.

More information on payroll issues in Cuba and the U.S. can be found in the Cuba and U.S. country primers.