As a taxpayer, it’s crucial to understand the implications of participating in international boycotts, as they can directly impact the taxes you owe. In this article, we will explain the concept of international boycotts, discuss the relevant tax laws and forms, and provide an easy-to-understand guide to help you navigate this area of taxation.

Source: 21.8.1.3.11 (10-01-2021)

What is an International Boycott?

An international boycott is a concerted effort by one or more countries to stop or limit trade with another nation for political or economic reasons. When a taxpayer participates in or cooperates with such a boycott during the tax year, their foreign taxes resulting from boycott activities reduce the total taxes available for credit.

How does participation in an International Boycott affect my taxes?

When a US taxpayer participates in or cooperates with an international boycott during a tax year, the foreign taxes resulting from the boycott activities may reduce the total taxes available for credit. This means that your eligible amount for the Foreign Tax Credit could be less than expected.

For instance, if you own a business that has operations in a country that is currently boycotting another nation, the taxes you pay in that boycotting country due to your operations could decrease the amount you can claim for the Foreign Tax Credit on your US tax return.

Which form should I use to report International Boycotts?

You should use Form 5713, International Boycott Report, to report any operations related to boycotting countries, receipt of boycott requests, or boycott agreements made.

Which countries are currently listed as requiring participation in or cooperation with an international boycott?

The Department of the Treasury publishes a list of countries that may require participation in or cooperation with an international boycott each calendar quarter. As of now, the following countries are listed:

• Iraq
• Kuwait
• Lebanon
• Libya
• Qatar
• Saudi Arabia
• Syria
• Republic of Yemen

Please note that taxpayers with operations in or related to the United Arab Emirates (UAE) before April 8, 2021, must still file Form 5713, International Boycott Report, to report those operations.

Where is Form 5713, International Boycott Report, processed?

Currently, Form 5713, International Boycott Report, is processed at the Ogden Campus.