Form 5472 for Foreign-Owned U.S. Corporations

Do you have to file U.S tax Form 5472? If your business was organized in the U.S. and has a foreign owner, the answer is likely “yes.”

It’s easier than ever to build your own business, and along with the rewards of entrepreneurship come additional tax obligations. You’d have to file IRS Form 5472 (formally known as the Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business) if:

• Your U.S.-based company has a non-U.S. person (which can include either individuals OR businesses) that owns at least 25% of company stock, or
• The company is foreign and is engaged in a U.S. trade or business
• Your U.S. LLCs is owned by a foreign entity and is treated as a disregarded entity

The IRS wants to keep tabs on U.S. businesses that have foreign ownership or foreign businesses that do significant business within the U.S., and this form is one way to do that. It’s used to disclose information about certain reportable transactions that occur with a foreign or domestic related party.

Who files Form 5472?

Who has to file?

A U.S. corporation with 25% or more foreign ownership, or foreign corporations that do business or trade in the U.S. are required to file IRS Form 5472. You must report the existence of all related parties in Form 5472 as well, and fill out a separate form for each foreign owner. If you’re filing on behalf of a foreign owned U.S. company, you may also have to file Form 1120.

Here are a few examples of when you’d file this form:

• Company A is equally owned by three people: two U.S. citizens and one Australian national. Company A would have to file one Form 5472.
• Company B is owned by a U.S. person, but that person gave one foreign national 26% of stock options as a reward for helping brainstorm the company’s inaugural product. Company B would file one Form 5472.
• Company C is a U.S. LLC owned by a foreign national and treated as a disregarded entity for U.S. tax purposes. Company D would have to file Form 5472.

There are a few exceptions to filing, examples of which include:

• If the company had no reportable transactions that year. You can find what counts as a reportable transaction on the IRS’ website.
• If the company is considered a foreign sales corporation for the tax year and files Form 1120-FSC. (Be careful—this exception does not apply to foreign-owned U.S. DEs)
• If you’re filing as a foreign corporation which doesn’t have a permanent establishment in the United States under an income tax treaty and you file the proper paperwork (Form 8833).
• If the foreign corporation has a gross income exemption under section 883 and has fully complied with the reporting requirements of sections 883 and 887.

Those aren’t the only exceptions — just a few common ones. Because of all the stipulations and nuances with international business taxes, you’ll definitely get the best results if you leave filing this form to a professional and let us handle your expat taxes for you.

How to file Form 5472

For your tax Form 5472 filing, you’d fill it out like normal and then include it on your corporation’s yearly tax return. You can make this process easier by having one of our seasoned tax advisors handle it for you.

Need help filing Form 5472? H&R Block is here for you

Ready to file your expat taxes? Start with H&R Block today and we’ll make sure your taxes are done right. No matter where in the world you are, we’ve got a tax solution for you — whether you want to DIY your expat taxes or file with help from an advisor.