The 5471 is often regarded as one of the most complicated US tax forms.
Form 5471 is often regarded as one of the most complicated US tax forms. Used by US persons to report their ownership interest in a foreign corporation and calculate how much of foreign a corporation’s earnings would potentially end up as additional income on a US taxpayer’s income tax return.
However, even if a US person owns shares in a foreign corporation, it does not necessarily mean that there will be a Form 5471 filing requirement in every tax year. A filing requirement exists if a US person falls within at least one of five Form 5471 filing categories.
Without going in details about each of the filing categories (they will be covered in subsequent posts), below is the list of the most common situations that give rise to Form 5471 filing requirement:
a) Acquisition of more than 10% interest in a foreign corporation during the tax year.
b) Acquisition of new interest during the tax year which, when added to interest already held at the end of the previous tax year, exceeds 10% interest in a foreign corporation.
c) Disposal of interest in a foreign corporation below 10%.
d) Becoming a US person while already owning 10% or more interest in a foreign corporation.
e) Control over the foreign corporation – ownership of more than 50% in a foreign corporation. Note that for the purpose of control, the interest owned by a non-US spouse is attributed to the US person.
f) Being a US shareholder in a controlled foreign corporation (CFC). This requires ownership of at least 10% interest in a foreign corporation which, in turn, is more than 50% owned by US shareholders (i.e. each owning at least 10% interest).
At US Tax Services AG, we have been assisting US taxpayers with Form 5471 and numerous other tax forms and filings for over a decade. We are looking forward to hearing from you!
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