Iraq and Libya are no longer on a list of countries where US companies suffer a tax penalty for doing business.

US companies suffer two penalties for doing business in countries with which the US has severed diplomatic relations.  Their earnings in the country are taxed immediately in the US as “subpart F income” without waiting for the earnings to be repatriated to the United States, and they are not allowed to claim income taxes already paid on the earnings in the rogue country as a foreign tax credit against further taxes in the United States.

The US Treasury Department removed Iraq from the list on September 27.  The delisting is effective as of last June 28.  President Bush informed Congress a week earlier that he intends to grant a waiver from both penalties for Libya.

Keith Martin