Did you know that a US corporation owned at least 25%-owned by one or more “foreign persons” and that have “reportable transactions” is required to file Form 5472?
Did you also know that a foreign-owned single-member LLC may also need to file even if it’s not a corporation for US income tax purposes?
If you didn’t, you probably also didn’t know that failure to file that form means a $25,000 penalty and an extended statute of limitations.
Form 5472 is not difficult to prepare, but is easily overlooked, so don’t let it slip through the cracks.
Note: “Reportable transactions” are those between the reporting entity and a foreign related party and include amounts paid/received/accrued for:
(1) Items listed on Form 5472, Part IV (income/expense/asset transactions; see https://www.irs.gov/pub/irs-pdf/f5472.pdf)
(2) Items listed on Form 5472, Part V (e.g., services, property use/ownership transactions, and formation expenses)
(3) Items listed on Form 5472, Part VI (e.g., nonmonetary transactions)
The instructions provide much more detail and can be found here: https://www.irs.gov/pub/irs-pdf/i5472.pdf
Anyone considering starting a business in the US needs to talk to a tax advisor with experience in cross-border tax issues. And it’s not always the tax hit; disclosure failures can be painful.