As diplomatic relations with Cuba continue to open, the IRS has issued a revenue ruling removing some restrictions on income earned in the island nation1.
Previously, restrictions denied a foreign tax credit for income taxes paid to Cuba and disallowed deferral on income earned in Cuba through a controlled foreign corporation. The revenue ruling removes these restrictions.
Generally, U.S. taxpayers are allowed to claim a foreign tax credit for income, war profits, and excess profits taxes paid or accrued, or deemed paid or accrued, to any foreign nation or United States possession. But the foreign tax credit is subject to various limitations and restrictions in the case of income and taxes attributable to certain countries. Cuba is no longer one of those countries.
The IRS has yet to issue a revenue ruling on the foreign earned income exclusion, which would apply to U.S. persons working in Cuba.
1 Revenue Ruling 2016-08 (Doc 2016-4376)
Questions? Contact your Berdon advisor or Saul Brenner, CPA, J.D., LL.M. Berdon LLP, New York Accountants