On April 2, 2018, the Department of the Treasury and the IRS released their third notice on the Toll Tax also known as the Repatriation Tax (Notice 2018-26)
Some of the key guidance provided in this latest notice which affect US individuals living abroad are:
- Extension of time to pay the first installment of the Toll Tax for US individuals living abroad until June 15, 2018, the same date as the automatically-extended personal tax return deadline for these individuals.
- Clarification on the allowable deductions for US individuals subject to the Toll Tax, who wish to make an election to be taxed similar to a US domestic corporation (i.e. §962 election)
- US partners holding less than 5% in a partnership structure with investments in US domestic corporations may not be subject to the Toll Tax
- If a foreign corporation filed an election to be treated as a tax-transparent entity (i.e. check-the-box election) after November 2, 2017, the Toll Tax may still be attributed to its US individual shareholders for the 2017 tax year.
From a practical perspective, US individuals (US national, US green card holder, US tax resident) residing abroad who are investors in a structure holding directly and indirectly, 10% ownership in a US domestic corporation should carefully review their toll tax exposure before June 15, 2018.
For more information, a complete copy of the notice can be found in the following link: https://www.irs.gov/pub/irs-drop/n-18-26.pdf
Richard Barjon, CPA
PwC | US Tax Director
+41 58 792 13 53