Information Return Of A 25% Foreign-Owned U.S. Corporation
Designated for foreign corporations or US Corporations 25% or more owned by foreign shareholders, IRS Form 5472 is required to be filed under sections 6038A and 6038C of the Internal Revenue Code. The international tax experts at LSL CPAs have extensive experience executing IRS Form 5472 for past and present clients. IRS Form 5472 is essential for any foreign-owned corporation engaged in trade or business in the United States.
A U.S. corporation with non U.S. shareholders that own 25% or more of the stock of the corporation must file Form 5472 in any year when the US based corporation has a reportable transaction with the foreign shareholder. It is essential to understand that a separate form must be filed for each foreign shareholder. In general, a reportable transaction is any exchange of money or property with the foreign shareholder except for the payment of dividends. The specific transactions are listed in Part IV of the form and in the instructions to the form.
A question often asked by clients is what information is required in order to fill out this form. IRS Form 5472 basically requires the disclosure of the foreign shareholders’ name, address and country of citizenship, organization or incorporation, principal business activity as well as the nature and amount of the reportable transaction with each foreign shareholder. It is important to understand that Form 5472 is not required when various foreign persons own 25% or more of the U.S. Company in the aggregate. Rather, it is only required where any one foreign person owns 25% or more of the U.S. corporation. If two or more foreign persons each own 25% or more of a U.S. corporation, then multiple forms must be filed.
The penalty for failure to file IRS Form 5472 is $10,000. Even more problematic, failure to file once discovered can place a company under the microscope of the Internal Revenue Service. Although there are numerous exceptions available for having to file this form, these exceptions should be pointed out only by a tax professional with experience with international tax issues and regulations.
Filing an incomplete Form 5472 constitutes a failure to file and can also trigger a penalty assessment. Criminal penalties may also apply for filing false or fraudulent information.
You don’t want to make mistakes by working with an inexperienced accountant who does not understand the intricacies of Form 5472 and how to properly manage potential exceptions to the code. It always makes sense to have an experienced international tax professional on your side to deal with the Internal Revenue Service.
LSL CPAs has the knowledge and experience to guide you through filling out Form 5472 and managing any potential exceptions. For more information about Form 5472 and what LSL CPAs can do for you, please call Yana Weaver at 714.569.1000.
Link to “Information Return of a 25% Foreign-owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business” Form 5472
