Notice limits foreign tax credit rules in software licensing deals.

Australasian Business Intelligence, March, 2006

Byline: Eva Farkas-DiNardo and Kevin Rowe

Mar 29, 2006 (International Tax Review - ABIX via COMTEX) -- The US Internal Revenue Service (IRS) has issued Notice 2005-90 on foreign tax credits for foreign withholding taxes. The document

states that a "back-to-back computer licensing arrangement" entered in the ordinary course of the business of the licensor and the licensee is not subject to section 901(l) of the Internal Revenue Code. The IRS states in the notice that the head licensee must pay royalties to the licensor when the head licensee or one of the sublicensees uses the licensed software. The notice is effective for amounts that are paid

or accrued after 21...