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Rev. Rul. 2016-8: Tax Aspects of the Cuban Thaw

2016-03-10

Last week the IRS released Rev. Rul. 2016-8. The ruling removes certain restrictions that had been in place for over 25 years on income earned in Cuba. In particular, Cuba had been a country to which Code §901(j)(1)(A) had applied.

Code §901(j)(1)(A) applies to any foreign country:

the government of which the United States does not recognize, unless such government is otherwise eligible to purchase defense articles or services under the Arms Export Control Act,
with respect to which the United States has severed diplomatic relations,
with respect to which the United States has not severed diplomatic relations but does not conduct such relations, or
which the Secretary of State has, pursuant to section 6(j) of the Export Administration Act of 1979, as amended, designated as a foreign country which repeatedly provides support for acts of international terrorisms.

When Code §901(j)(1)(A) applies to a country, generally any taxes paid to the country cannot be claimed as credits in the U.S. under Code §§901, 902, or 960. In addition, generally all income earned by a controlled foreign corporation in such a country is Subpart F income.

With Cuba now removed (effective December 21, 2015) from the list of countries to which Code §901(j)(1)(A) applies, only the following countries remain: Iran, Sudan, and Syria. See Rev. Rul. 2005-3.

International Tax Blog - New and Interesting International Tax Issues

Rev. Rul. 2016-8: Tax Aspects of the Cuban Thaw

Tags: 901 Foreign Tax Credits, 951 Subpart F Income, Authority - Revenue Rulings

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