Fiscal Years 2022 and 2023: temporary relief from limitations on foreign tax credit introduced in the U.S.

Edited by Alessandro Di Stefano, Andrea Porcarelli, Giuseppe Falduto, Giorgia Monica Riviera

In 2022, the Internal Revenue Service (IRS) fundamentally changed the rules regarding credit for foreign taxes paid by U.S. companies, introducing strict requirements that limited the creditability in the United States of a range of foreign taxes (e.g., withholding taxes incurred at source on certain payment streams received by U.S. companies such as from Brazil).

Due to several concerns and application difficulties, last July 21 the IRS issued Notice 2023-55, which introduced a temporary exemption (fiscal years 2022 and 2023 for calendar entities) from the application of these “new” problematic rules where certain conditions are met (“Relief“). During this transitional period, U.S. taxpayers may continue to credit foreign taxes based on the previous standards (so-called “Section 901” and “Section 903”).

Moreover, to date, both the U.S. Treasury and the IRS are considering the feasibility of proposing amendments to the new – and currently suspendable – final regulations (i.e., T.D. 9959) to make them more consistent with the Relief.  


The Relief potentially suspends for fiscal years 2022 and 2023 the mandatory foreign tax credibility provisions introduced by the United States in 2022.

In light of the fact that the window to proceed with the related recovery is expected to be temporally limited, Italian-based groups are asked to assess:

  • the extent of negative outcomes in terms of U.S. tax burden related to the new FTC Regulations, now depowered for the 2022 and 2023 tax periods;
  • the potential applicability of Relief and subsequent fulfillment of the required conditions;
  • whether to activate the procedures for recovery / suspension of higher U.S. taxes no longer due as a result of the Relief.

For a deeper discussion, please reach out to our following international tax experts:

Alessandro Di Stefano

PwC TLS Avvocati e Commercialisti

Tax Partner

Andrea Porcarelli

PwC TLS Avvocati e Commercialisti

Tax Director

Giuseppe Falduto

PricewaterhouseCoopers LLP

Tax Manager