The IRS in April provided guidance to businesses and individuals impacted by travel disruptions related to the COVID-19 pandemic. Among various types of relief, the IRS provided a maximum 60-day period to generally exempt foreign persons from being treated as engaged in a US trade or business (USTB) and/or from having a US permanent establishment (PE) to the extent such foreign person’s presence in the United States was deemed to be caused by the pandemic.
While many employees continue to work remotely in different jurisdictions, whether by choice or due to the COVID-19 pandemic, the US Treasury Department and the IRS have not extended the relief period. As a result, companies may be risking USTB or PE exposure and inadvertently establishing a taxable presence in the United States.
In addition to the United States, other countries have issued similar guidance, and the OECD also has developed guidance. While most of the document below is focused on the risk of being treated as engaged in a USTB or creating a US PE, possible PEs in other countries in which US-based multinationals operate likewise are an important issue with similar considerations. As such, both inbound and outbound companies may want to consider assessing their taxable presence exposure and consider taking additional precautions depending on their facts and circumstances.