A taxpayer who is a U.S. resident for purposes of a U.S. income tax treaty is generally entitled to request assistance from the U.S. “competent authority” where the actions of a treaty country or the United States would (i) cause double taxation or (ii) taxation that is inconsistent with the treaty.  Competent authority assistance is only available with respect to countries that have an applicable tax treaty with the United States.  Our Treaty Resource Page provides an overview of every U.S. tax treaty and the tax system of each such country.

A taxpayer seeking assistance from the U.S. competent authority should always first consult any applicable treaty articles, including the Mutual Agreement Procedure (MAP) article, before requesting assistance.  In addition to filing a request for assistance with competent authority, the taxpayer should consider (i) filing a timely protective claim for credit or refund; and (ii) take any required actions that are necessary under the procedures of the foreign country to avoid losing the right to appeal or obtain competent authority review under that country’s income tax laws.

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IRS On Repatriation and Double Taxation

The IRS announced that the agency has become aware of limited circumstances in which it may be appropriate to provide relief from double taxation resulting from application of the repatriation tax under section 965, as amended by the Tax Cuts and Jobs Act (TCJA).

The IRS has determined that in unique circumstances, such as where a corporation paid an unusual dividend for business reasons, not because of the enactment of TCJA, it may be appropriate to provide relief from double taxation. When the same earnings and profits of foreign corporations are taxed both as dividends and under section 965, double taxation could result.

The IRS is open to considering relief from such double taxation where there is no significant reduction in the resulting tax by application of foreign tax credits, such that the taxpayer would be required to pay more tax than it would have if the dividend had not been paid.

Taxpayers who have fact patterns that may fit these limited circumstances may raise them with the IRS by contacting the Office of Associate Chief Counsel (International) at 202-317-3800.