Treasury, IRS announce cross-border tax guidance related to travel disruptions arising from the COVID-19 emergency
IR-2020-77, April 21, 2020
WASHINGTON — The Treasury Department and the Internal Revenue Service today issued guidance that provides relief to individuals and businesses affected by travel disruptions arising from the COVID-19 emergency.
The guidance includes the following:
1. Revenue Procedure 2020-20 (PDF), which provides that, under certain circumstances, up to 60 consecutive calendar days of U.S. presence that are presumed to arise from travel disruptions caused by the COVID-19 emergency will not be counted for purposes of determining U.S. tax residency and for purposes of determining whether an individual qualifies for tax treaty benefits for income from personal services performed in the United States;
2. Revenue Procedure 2020-27 (PDF), which provides that qualification for exclusions from gross income under I.R.C. section 911 will not be impacted as a result of days spent away from a foreign country due to the COVID-19 emergency based on certain departure dates; and
3. An FAQ, which provides that certain U.S. business activities conducted by a nonresident alien or foreign corporation will not be counted for up to 60 consecutive calendar days in determining whether the individual or entity is engaged in a U.S. trade or business or has a U.S. permanent establishment, but only if those activities would not have been conducted in the United States but for travel disruptions arising from the COVID-19 emergency.
The Treasury Department and the IRS are continuing to monitor these and other issues related to the COVID-19 emergency, and updated information about relief will continue to be posted on Coronavirus Tax Relief on IRS.gov.
The IRS has previously listed countries for 2019 for which the eligibility requirements of section 911(d)(1) are waived under section 911(d)(4) because of war, civil unrest, or similar adverse conditions in those countries. See Rev. Proc. 2020-14, 2020-16 I.R.B. 661.
For 2019 and 2020, the Secretary of the Treasury, after consultation with the Secretary of State, has determined that, for purposes of section 911(d)(4), the COVID- 19 Emergency is an adverse condition that precluded the normal conduct of business as follows:
Individuals seeking to qualify for the section 911 foreign earned income exclusion because they could reasonably have been expected to have been present in a foreign country for 330 days but for the COVID-19 Emergency and have met the other 4 requirements for qualification may use any 12-month period to meet the qualified individual requirement.
For example, under this revenue procedure, an individual who arrived in China on September 1, 2019, and establishes that he or she reasonably expected to work in China until September 1, 2020, but departed China on January 10, 2020, due to the COVID-19 Emergency would be a qualified individual for the period from September 1 through December 31, 2019, and for the period from January 1 through January 9, 2020, assuming the individual has met the other requirements for qualification under section 911.
As another example, under this revenue procedure, an individual who was present in the United Kingdom on January 1 through March 1, 2020, establishes that he or she reasonably expected to work in the United Kingdom for the entire calendar year, but departed the United Kingdom on March 2, 2020, due to the COVID-19 Emergency, and returns to the United Kingdom on August 25, 2020, for the remainder of the calendar year, would be a qualified individual for 2020 with respect to the period between January 1 through March 1, 2020, and August 25 through December 31, 2020, assuming the individual has met the other requirements for qualification under section 911.