Do I need to file Form 5472?

This is one of the most common questions we receive from foreign owners of U.S. entities.

Short Answer:

You need to file Form 5472 if a U.S. reporting corporation or a foreign corporation engaged in a U.S. trade or business has reportable transactions with a related party.

Explanation:

Form 5472 applies to three common situations. First, a U.S. corporation that is at least 25 percent foreign owned must report transactions with related foreign parties. Second, a foreign corporation engaged in a U.S. trade or business must report certain transactions with related parties. Third, a foreign-owned U.S. disregarded entity is treated as a reporting corporation for these purposes.

In the case of a foreign-owned U.S. LLC, the entity is required to file Form 5472 along with a pro forma Form 1120, even if it is otherwise disregarded for tax purposes.

Example:

A foreign parent owns a U.S. subsidiary that pays management fees to the parent. These payments must be reported on Form 5472.

Separately, a foreign individual owns 100 percent of a U.S. LLC and contributes funds to the entity. That contribution may also be treated as a reportable transaction.