What is Form 5472?
Form 5472 is an IRS form for information return of a 25% Foreign-Owned US Corporation. In layman terms, if your US Company has foreign shareholders, then the company has to file Form 5472 with the IRS. Speaking broadly any business that has partners, owners or shareholders consider as a foreign entity by the IRS has to disclose all their transaction with international owners, partners or shareholders.
What is the purpose of Form 5472?
IRS Form 5472 is to prevent the requiring companies from income tax evasions based on the transaction taking between them and their foreign participants. It also prevents money laundering and foreign tax evasion. Form 5472 helps to bring in corporate transparency and checks for the ineligible companies claiming for the exemption which do not apply to them.
Who files IRS form 5472?
US C corps and LLC’s having at least 25 % foreign ownership, partners or shareholders or the foreign-owned US disregarded entities must file this form in a year; when the US Corporation have a reportable transaction with its foreign participants.
A separate form must be filled for each foreign shareholders along with corporation tax returns. The US-based corp. must report reportable transaction every year and also include any activity between the corporation and its foreign owners.
Here reportable transaction refers to an exchange of property or money with the foreign partners/owners /shareholders (except dividend). Some examples of the reportable transaction that require the use of form 5472 are:
- The premium received or paid.
- Capital contribution to the company.
- Any payment-related to acquisitions and dissolution.
- Payment of expenses on behalf of the foreign entity etc. and you can find this in part VI of the form along with instructions.
When Foreign-owned US corp. file form 5472?
Foreign-owned C Corporation and LLC with a minimum 25% foreign shareholdings or partnership must file the information return file 5472 with reportable transactions every year. The form must be filed by the corporation, not any individual partner and shareholders. And the penalties for non-compliance would be assessed to the US Corporation.
The due date for filing form 5472 is April 15 along with the company Form 1120. In case you file for an extension of tax return deadline then you need to file both the forms by October 15.
Foreign-owned LLC with a single owner is a Disregarded Entity for tax purposes as all the income follows from entity to the owner. However, the LLC must file form 5472 with pro-form form 1120 by the listed due date.
Why comply with Form 5472?
A US corporation to face penalties for non-filing or incomplete filings of form 5472 within the due date. The penalty for non-filing of the form is $10,000. Thus, you can’t afford to be non-compliant with tax laws.
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How to file?
A non-US owned LLC has to first apply for a US Employer Identification Number (EIN) to complete the form. You can submit the Form 5472 on completion either by paper or fax. You don’t have the option of e-filing 5472.
