International Tax

Reporting Requirements Under the Code for International Transactions and Foreign Assets (Portfolio 6840)

  • This Portfolio discusses special tax compliance issues for U.S. persons with foreign operations, subsidiaries, or other assets.

Description

The U.S. tax reporting requirements for cross-border situations, penalties for failure to comply with them, and IRS scrutiny of such compliance have rapidly increased. As summarized below, Tax Portfolio, Reporting Requirements Under the Code for International Transactions and Foreign Assets, No. 6840, discusses some of the special tax compliance issues for U.S. persons with foreign operations, subsidiaries, partnerships, or other assets, and foreign persons with U.S. operations, subsidiaries, partnerships, or other assets.

Section 6038 and §6046 require U.S. owners of interests in foreign corporations, and U.S. officers and directors of such corporations, to provide detailed information on Form 5471. Section 367 and §6038B require certain organizations, capital contributions, liquidations, reorganizations, and other transactions with respect to foreign corporations to be reported on Form 926 and otherwise. Investments in certain “passive foreign investment companies” governed by §1291–§1298 may be required to be reported on Form 8621. Foreign partnerships may be required under §6031 to file a tax return on Form 1065, and certain U.S. owners of interests in such partnerships may be required under §6038 and §6046A to file Form 8865. Foreign-owned U.S. corporations and foreign corporations with a U.S. branch are required under §6038A and §6038C to report information on Form 5472. Foreign corporations with a U.S. relationship may be required to file a U.S. income tax return on Form 1120-F. U.S. persons that directly or indirectly own interests in foreign entities that have elected to be disregarded for U.S. income tax purposes may have to report information with respect to such entities on Form 8858. Certain U.S. and foreign persons claiming benefits under a U.S. income tax treaty may be required, under §6114, to report that fact on Form 8833. U.S. persons having financial interests in, or signature or similar authority over, a foreign bank or other financial account may have to report that on FinCEN Form 114 (formerly known as FinCEN Form TD F 90-22.1). Section 6038D requires any individual (and, commencing for years beginning after 2015, certain domestic entities) who files an annual return and has interests in foreign financial assets of a certain value to disclose those assets on Form 8938. Such reporting on Form 8938 is in addition to (and partially duplicative of) reporting on FinCEN Form 114. U.S. persons that have operations in or related to boycotting countries (regardless of whether they receive boycott requests or enter into boycott agreements) have to report such operations and any requests or agreements on Form 5713. For tax years beginning after June 30, 2016, U.S.-headed multinational groups will be required to perform “country by country” reporting on Form 8975.

This Portfolio also discusses the interaction of the international tax compliance project with the transfer pricing rules, and the effect of the dual consolidated loss rules in §1503(d) on persons with losses deductible on both a U.S. and a foreign tax return. This portfolio also explains additional compliance requirements under proposed regulations under §6038 and §6038A.

This Portfolio may be cited as Blum, Lippe, Parsch, Messing & Mehrotra, 6840 T.M., Reporting Requirements Under the Code for International Transactions and Foreign Assets.

Table of Contents

I. Introduction
II. Pervasive Practical Issues
III. U.S. Owners of Foreign Corporations – Form 5471 Issues
IV. Creation/Liquidation/Reorganization/Funding of Foreign Corporations – Form 926 Issues and 367 Notices
V. Passive Foreign Investment Companies – Form 8621
VI. Reporting Requirements for Foreign Partnerships – Forms 1065 and 8865
VII. Foreign-Owned U.S. Corporations and Foreign Corporations with a U.S. Trade or Business – Form 5472 and Related Issues, and § § 6038A and 6038C
VIII. Foreign Corporations Engaged in a U.S. Trade or Business – Form 1120-F
IX. Transfer Pricing Documentation
X. Dual Consolidated Losses
XI. Form 8858: Disregarded Entities
XII. Treaty-Based Return Positions – § 6114
XIII. Returns Relating to Foreign Bank Financial Accounts

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