U.S. Internal Revenue Service Announces Campaign to Increase Compliance with "Freight Tax"
On 31 January 2017 the U.S. Internal Revenue Service (IRS) commenced the campaign to identify foreign corporations that are not complying with their filing obligations under 26 U.S.C. Section 667, commonly known as the “Freight Tax”. Absent an applicable exemption, Section 887 requires all foreign entities to pay a tax equal to 4% of their gross income from transportation services provided during that taxable year. Although the US “Freight Tax” obligations imposed by Section 887 have been applicable since the enactment of the Tax Reform Act of 1986, data gathered from different sources, such as the U.S. Coast Guard and Customs and Border Protection, has shown that some foreign companies are failing to file a U.S. tax return.
Members are reminded that if their vessels have earned hire from carrying cargo to or from the United States in the last taxable year, they should seek advice from their tax advisors to determine what, if any, U.S. income tax filing obligations they may have.
Steamship Mutual is thankful for Sedgwick LLP’s collaboration in this article.
Article by Miguel Caballero
Sedgwick LLP