Tax compliance season reminders for globally active businesses
TAX BLOG |
One of the most unrelenting trends in U.S. tax compliance is the constant addition of new, and sometimes overlapping, disclosure requirements for foreign investments and transactions. Penalties for missed disclosures can be quite large, so taxpayers should be very mindful of these requirements. Here are just a few of the situations that can require special disclosures:
Investments or subsidiaries in foreign domiciled entities
However they are formed, having subsidiaries or significant investments in foreign countries could require a disclosure on the U.S. owner’s tax return. These required disclosure forms are filed with the U.S. owner’s tax return and may include:
- Form 8858 for foreign disregarded entities
- Form 8865 for foreign partnerships
- Form 5471 for foreign corporations
U.S. corporations with significant foreign ownership
With certain exceptions, U.S. corporations that are more than 25 percent owned by foreign persons must report this ownership, along with certain related party transactions. This disclosure is filed with the U.S. corporation’s tax return.
U.S. persons with ownership of or signature authority over foreign accounts
U.S. persons owning more than 50 percent of a foreign bank or financial account, or having signature authority over such an account, must file Form FinCEN 114 (more commonly known as an FBAR) to report the account information, along with the maximum value in the account during the previous year. This filing follows the calendar year, and is due April 18,, 2017, however taxpayers are automatically granted a six-month extension beyond this date (making the effective deadline October 15).
Specified foreign asset reporting
For several years now, U.S. individuals have been required to report on Form 8938 foreign accounts and certain other foreign financial assets worth over $50,000 at the end of the year (or over $75,000 at any time during the year). In many cases, this reporting duplicates was has already been reported on the individual’s FBAR. New for the 2016 tax year, is the requirement that certain closely-held entities also file Form 8938. Form 8938 is filed with the reporting person or entity’s tax return.
Country-by-country (CbC) reporting
U.S. multinational enterprises with global combined revenue of $850 million or more must file Form 8975 to report a wide variety of data about their worldwide revenues, taxes, and operations. This form is required to be filed with the U.S. parent company’s tax return for tax years beginning after June 30, 2016, however early filing is permitted to allow U.S. multinationals to fulfill other countries’ CbC requirements without having to file reports directly with those other countries.