VAT responsibility for U.S. companies selling to U.K.

The U.S. is one of few countries without a VAT system. By way of background, and in overly simplistic terms, it’s assessed on all goods and services. In most European countries the rate hovers around 18-20%. Generally speaking, U.K. companies will collect it on sales, pay it on purchases and submit the difference to the …

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Updated regulations on IRC Sections 987 and 988

On December 7, 2016, the IRS released temporary regulations under IRC Sections 987 and 988, which provide guidance on recognizing foreign income or loss as well as currency gain or loss from a qualified business unit (QBU). The original proposed regulations (regs) were issued back in 1991. In 2006, the 1991 proposed regs were replaced …

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New Form 5472 requirements for foreign-owned disregarded entities

Under the proposed Internal Revenue Code Section 6038A regulations issued on May 6, 2016, U.S. disregarded entities owned by foreign persons would be treated as domestic corporations for purposes of filing Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. The new regulations …

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New due date for Form 8804 in 2017

As you may be aware, the IRS has changed the due dates for various forms, effective for 2016 tax forms due in 2017. Although the IRS has published the new due dates for most forms, the Form 8804, Annual Return for Partnership Withholding Tax, is not specifically mentioned in the new legislation. Even though Form …

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Guidance on FDAP withholding penalties

In an International Practice Unit released in May 2016, the IRS provides guidance to IRS examiners on the appropriate penalties associated with fixed or determinable annual or periodical (FDAP) withholding. Unless there is a treaty or other exception, payments of U.S. source FDAP income to foreign persons are generally subject to 30% withholding tax. Withholding …

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New guidance on sourcing FDAP income

In June 2016, the IRS released a new International Practice Unit to help IRS examiners determine the source of fixed or determinable annual or periodical income – also known as FDAP income. Withholding agents especially need to pay close attention to these rules, because if payments to foreigners aren’t confirmed as foreign source, they will …

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Form 8938 now required for entities

The IRS introduced Form 8938, Statement of Specified Foreign Financial Assets, for filing along with individual tax returns beginning in tax year 2011. Form 8938 is an informational reporting form that is used to report interest in certain foreign financial assets. Until now, filing has only been required for individuals. Beginning with tax year 2016, …

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Delayed refunds on Form 1120-F

Some taxpayers filing Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, have experienced a delay in receiving their refund. The delay is due to the issuing of Internal Revenue Manual code 21.8.2.12.2.3, which became effective for all 1120-F returns filed after January 1, 2015. The IRM states that all refunds based on withholding …

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ITIN mandatory renewal starts in 2017

The IRS has put into place mandatory renewal of Individual Taxpayer Identification Numbers (ITINs) for certain taxpayers beginning in 2017. An exception to this rule – taxpayers who only use an ITIN on an information return such as Form 1099 will not be required to renew their ITIN. Moreover, the filer of an informational return …

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Foreign Pensions from a U.S. Tax Perspective

As the IRS continues to increase their focus on exposing hidden foreign accounts of U.S. taxpayers, it is important to be aware of all filing requirements and be in compliance to avoid excessive penalties. One area that is commonly missed is foreign pensions. Many taxpayers assume if they hold a foreign pension that has no …

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