Treasury removes United Arab Emirates from international boycott list
TAX ALERT |
On April 7, 2021, the Treasury issued the new List of Countries Requiring Cooperation With an International Boycott. Internal Revenue Code (IRC) section 999(a)(3) requires the Treasury to publish and maintain on a quarterly basis a list of countries that require (or may require) participation with an international boycott. Section 999 also imposes reporting obligations on taxpayers with operations in, or related to, a boycotting country and penalizes (but does not prohibit) participation in international boycotts. Taxpayers with operations in or related to a boycotting country will need to file Form 5713. Willful failure to file form 5713 can result in imprisonment (for no more than one year), and/or a fine of $25,000.
The countries included on the aforementioned recently published list are Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria and Yemen. Notably, the Treasury excluded the United Arab Emirates (UAE) from this list, which was a result of the UAE issuing a federal decree last year putting an end to the boycott on Israel.
On Aug. 13, 2020, Anwar Gargash, UAE Minister of State for Foreign Affairs, and Benjamin Netanyahu, Israeli Prime Minister, announced full diplomatic ties would be established between the countries. Subsequently, on Aug. 29, 2020, Sheikh Khalifa bin Zayed Al Nahyan, president of the UAE, issued Federal Decree-Law No. 4 of 2020, abolishing Law No. 15 of 1972 on the Boycott of the State of Israel. This would allow Emirati and Israeli companies to enter into commercial, trade and financial agreements with one another. The US Treasury removed the UAE from the List of Countries Requiring Cooperation with International Boycott as a result of the decree.
Based on our discussions with the IRS National Office, activities with the UAE through April 7, 2021 will still need to be reported on the Form 5713.