Non-US Corporations (Form 5471)

Form 5471, titled "Information Return of U.S. Persons With Respect to Certain Foreign Corporations," is a U.S. tax form used by U.S. persons (including U.S. citizens and residents) to report their interests in certain foreign corporations. This form is required under Internal Revenue Code (IRC) Section 6038, which mandates the disclosure of certain information regarding foreign corporations in which U.S. persons have ownership or control.

Form 5471 is often filed by U.S. shareholders who own at least 10% of a foreign corporation. The purpose of this form is to provide the IRS with detailed information about the foreign corporation’s operations, ownership, income, and financial status, helping the IRS to monitor foreign income and ensure that U.S. taxpayers report their foreign business interests properly.

Key Requirements for Filing Form 5471

A U.S. person is required to file Form 5471 if they are:

1. A U.S. shareholder who owns at least 10% of the stock of a foreign corporation.
2. Involved in certain types of control over a foreign corporation, such as being a director or officer of the foreign corporation.
3. The U.S. person is required to report information about the foreign corporation, including its structure, operations, and financials.

Types of Foreign Corporations Subject to Form 5471 Filing

The form is used for reporting interests in foreign corporations that meet the following criteria:

• Controlled Foreign Corporation (CFC): A foreign corporation where more than 50% of the stock (by vote or value) is owned by U.S. shareholders.
• Foreign Corporation in which U.S. person has a significant ownership: U.S. persons who own at least 10% of the stock of a foreign corporation, even if the foreign corporation is not classified as a CFC.

Who Must File Form 5471?

You must file Form 5471 if you meet any of the following conditions:

• Category 1: U.S. shareholders who are required to report on a CFC (Controlled Foreign Corporation).
• Category 2: U.S. persons who are officers or directors of a foreign corporation and own 10% or more of the foreign corporation.
• Category 3: U.S. persons who acquire or dispose of stock in a foreign corporation and reach 10% or more ownership.
• Category 4: U.S. persons who are involved in certain corporate reorganizations involving foreign corporations.
• Category 5: U.S. shareholders of a foreign corporation that owns at least 50% of a foreign subsidiary.

Key Information Reported on Form 5471

Form 5471 collects extensive information on the foreign corporation and its U.S. shareholders, including:

1. Corporate Structure: Ownership information about the foreign corporation (e.g., percentage of stock owned, type of entity, and parent/subsidiary relationships).
2. Income and Expenses: Detailed financial data on the foreign corporation’s income, profits, losses, deductions, and credits.
3. Balance Sheet: Information on the assets, liabilities, and equity of the foreign corporation.
4. Shareholder Information: The ownership percentages of U.S. shareholders and the amount of income that passes through to the U.S. taxpayer.
5. Transactions Between U.S. Shareholders and the Foreign Corporation: Information on certain transactions, such as loans, payments, or dividends from the foreign corporation to the U.S. shareholders.
6. International Taxes: Reporting of foreign taxes paid or accrued by the foreign corporation (related to potential foreign tax credits).