Relief for nonresident aliens and foreign corporations due to travel disruptions arising from COVID-19

The global outbreak of the COVID-19 virus has significantly limited the ability of many individuals to leave the United States. Regardless of whether they are infected with the COVID-19 virus, individuals may have become severely restricted in their movements, including by order of government authorities. Individuals who do not have the COVID-19 virus and attempt to leave the United States may also face canceled flights and disruptions in other forms of transportation, and shelter-in-place orders. IRS has provided cross-border tax guidance related to travel disruptions arising from the COVID-19 emergency.

Medical condition travel exception: The IRS has provided guidance that under certain circumstances up to 60 consecutive calendar days of U.S. presence that are presumed to arise from travel disruptions caused by the COVID-19 emergency will not be counted fro purposes of determining U.S. tax residency and for purposes of determining whether an individual qualifies for tax treaty benefits for income from personal services performed in the United States.

Procedures for claiming the COVID-19 medical condition travel exception: Eligible Individuals who must file a 2020 Form 1040-NR, U.S. Nonresident Alien Income Tax Return, must claim the COVID-19 medical condition travel exception by attaching Form 8843 to their timely filed (with extensions) Form 1040-NR.

Relief from the U.S. Trade or Business Rules (USTB): IRS provides that certain U.S. business activities conducted by a nonresident alien or foreign corporation will not be counted for up to 60 consecutive calendar days in determining whether the individual or entity is engaged in a U.S. trade or business or has a U.S. permanent establishment, but only if those activities would not have been conducted in the United States but for travel disruptions arising from the COVID-19 emergency.

Nonresident aliens and foreign corporations (including those that are partners in partnerships) may make protective filings of their annual U.S. tax returns, even if they believe they are not required to file for the 2020 tax year because they were not engaged in a USTB, to avail themselves of the benefits and protections that arise from such filings.