U.S. Treasury Releases List of Countries Requiring Cooperation with an International Boycott; No Changes
Recently, the IRS published their list of countries that require participation in doing international business with a boycotting country per Internal Revenue Code Section 999(a)(3). The list of countries requires additional documentation and disclosures regarding export sales to countries in which benefiting export sales might be inconsistent with U.S. foreign policy objectives.
Section 999, also known as “the boycott provision,” was initially introduced in the Tax Reform Act of 1976 in response to the Arab League Boycott of Israel. It was later adjusted to align with U.S. foreign policy needs.
Taxpayers that have operations in or related to countries that are on the international boycott list must report this information via Form 5713. A taxpayer also must file Form 5713 if it’s known or there is reason to know that specific goods or services produced in operations are for use in a boycotting country, for the use or benefit of the government, a company, or a national of the boycotting country, or for use in transporting to a boycotting country. There are also potential reporting requirements if a taxpayer receives an invitation to bid in a boycotted country, has a partnership with operations that meet the prior stated requirements, and more.
If a taxpayer has conducted operations in a boycotted country, they may have to apply the international boycott factor. The international boycott factor is required for determining the reduction to foreign trade income qualifying for the extraterritorial income exclusion and determining if loss of benefits apply elsewhere. The form will then calculate how much additional taxes are required for their participation.
The recently released list of boycotts includes:
- Saudi Arabia
The new list makes no changes from the prior. However, this release is a timely reminder of the potential additional compliance required for U.S. taxpayers. Please reach out to McGuire Sponsel’s Global Business Services Practice to discuss the potential impact to your organization in more detail.
Jason Rauhe, CPA
Jason Rauhe, CPALearn moreContact Jason
Jason Rauhe, CPA is a Principal in the firm’s Global Business Services practice and is responsible for assisting clients and adding depth in all areas of the firm’s international tax consulting services including transfer pricing, and the firm’s compliance expertise.
Rauhe previously served as Director of International Tax at a Top 100 CPA Firm, where he was responsible for the firm’s international tax division and major industry alliance networks.