Foreign-owned US companies

Form 5472 instructions: who files and how to fill it in

Form 5472 reports transactions between a US company and its foreign owner or other related parties. The part that surprises people: a single-member LLC owned by a foreign person files one, attached to a pro forma Form 1120, for any year in which money moves between it and its owner, even a year with no income, and the penalty for missing it starts at $25,000. Here is who has to file, and how to fill it in.

Who has to file

Form 5472 is filed by a reporting corporation that had a reportable transaction with a related party. A reporting corporation is either a 25% foreign-owned US corporation, which, under regulations that apply from 2017 tax years, includes a foreign-owned US disregarded entity, or a foreign corporation engaged in a trade or business in the United States.

A company is 25% foreign owned if at least one direct or indirect foreign shareholder holds 25% or more of the voting power or the value of its stock at any point in the year. A related party is broader than an owner: it includes any 25% foreign shareholder, anyone related to the company or to that shareholder under sections 267(b) or 707(b)(1), and anyone related under section 482.

The single-member LLC trap

This is the one that catches founders abroad. A US LLC with one foreign owner is normally a disregarded entity: it files no income tax return of its own. Regulations issued in December 2016, and applying from 2017 tax years, made it a reporting corporation anyway, for this purpose only.

So the LLC files a pro forma Form 1120 with Form 5472 attached. The IRS asks for very little of the 1120 itself, but it does ask for the LLC’s own EIN, in item B, so the LLC needs one before it can file. Its tax year follows its owner’s US tax year, or the calendar year if the owner has none.

And the transactions that trigger it are not just sales. For a disregarded entity, Part V covers amounts paid or received in connection with the formation, dissolution, acquisition and disposition of the entity, including contributions to it and distributions from it. Funding your own LLC, or taking money back out, is reportable.

Filling it in for a single-member LLC

The common case is a US LLC that has not elected to be taxed as a corporation and has a single owner who is neither a US citizen nor a US resident. It files two documents together: a pro forma Form 1120 and, attached to it, a Form 5472 for each related party it dealt with during the year. Where the owner is the only related party the LLC dealt with, that is one Form 5472. A company the owner controls that bought from, sold to or lent to the LLC needs a form of its own.

The pro forma Form 1120 carries almost nothing. Write "Foreign-owned U.S. DE" across the top. The only entries the instructions require are the LLC’s name and address and two items on page one: item B, the employer identification number, and item E, the boxes for an initial return, final return, name change or address change. A first filing is an initial return.

On Form 5472 itself, enter everything in English and every amount in US dollars, with a schedule of the exchange rates used. Part by part:

Part I is the LLC itself, including its name, address and EIN, total assets, principal business activity and its code, the country and date of incorporation, and the box on line 1j if this is its first Form 5472. Line 1f totals the transactions on this form, which for a foreign-owned DE includes Part V. With a sole foreign owner, the boxes on line 2 (a foreign person owned at least 50% at some point in the year) and line 3 (the LLC is a foreign-owned U.S. DE) are both checked.
Part II is the owner. A foreign-owned DE reports its foreign owner on the lines for the direct 25% foreign shareholder, 4a to 4e: name and address, a US identifying number if the owner has one (an SSN or ITIN) or otherwise a reference ID number, the owner’s foreign taxpayer identification number or "None", and the countries where the owner does business, holds citizenship and files income tax returns as a resident.
Part III is the related party, and it has to be completed even when that is the person already named in Part II. When the LLC’s only related-party dealings are with its owner, the owner goes here again, with the box for a foreign person checked.
Part IV lists money-only transactions with a foreign related party by type, received on lines 9 to 22 and paid on lines 23 to 36, such as sales and purchases, rents, royalties, services, commissions, interest, and amounts borrowed or loaned. It has to be completed whenever the related party in Part III is a foreign person.
Part V is the part written for foreign-owned DEs. Check its box and attach a statement describing any other transaction with the related party that is not already in Part IV, including contributions to and distributions from the LLC and amounts paid or received in connection with forming or dissolving it.
Part VI is for transactions with a foreign related party that were not paid for entirely in money, or not paid for in full. Check its box and attach a description that includes a reasonable estimate of the value exchanged.
Part VII is a set of yes-or-no questions every filer answers, with amounts where an answer is yes: imports, cost sharing, interest and royalties disallowed under section 267A, the section 250 deduction, and the interest rate on related-party loans. A foreign-owned DE does not complete lines 43a and 43b.
Parts VIII and IX cover cost sharing arrangements and base erosion payments under section 59A, and are completed only where those exist.

Reportable transactions, and the records behind them

For this LLC the test is not whether it made money but whether anything passed between it and a related party, which usually means you. Part V points to a definition in the regulations that covers any sale, lease, license, loan, advance, contribution or other transfer of money or property, however it is carried out and whether or not it is formally documented. Ordinary business with unrelated customers and suppliers is not what the form reports.

The form also comes with a duty to keep records. A reporting corporation must keep records that establish the correctness of its return, including records relevant to its transactions with related parties, and the exceptions that relieve small corporations and companies with small related-party totals of the detailed record rules do not apply to a foreign-owned DE. Records can be kept outside the United States only if, when the IRS asks, they are delivered to the IRS, or moved to the United States, within 60 days, with any translation it requests within 30 days. Keep them for as long as they may matter to how a related-party transaction is taxed, and never for less than the statute of limitations for that year. Not keeping them carries the same $25,000 penalty as not filing.

Typical examples for a single-member LLC owned by a foreign person:

Money you put in, which goes in Part V: the opening capital, later top-ups, and LLC costs you pay from your own account.
Money you take out, also Part V: distributions to you, and personal costs the LLC pays for you.
Amounts paid or received in connection with forming, dissolving, buying or selling the LLC, also Part V.
Loans between you and the LLC in either direction, and the interest on them, which go in Part IV.
Sales, services, rents, royalties and commissions between the LLC and you or a company you control, also Part IV, with a separate Form 5472 for each related party.

When and where it goes

A normal reporting corporation attaches Form 5472 to its income tax return and files by that return’s due date, including extensions.

A foreign-owned disregarded entity cannot do that, because it has no return to attach it to, and it cannot file Form 5472 electronically. The IRS asks these filers to write "Foreign-owned U.S. DE" across the top of the pro forma Form 1120 and send it by fax, at 300 DPI or higher, to 855-887-7737, or by mail to the Internal Revenue Service, 1973 Rulon White Blvd, M/S 6112, Attn: PIN Unit, Ogden, UT 84201. That is a dedicated address: not the one in the Form 1120 instructions.

The pro forma Form 1120, with Form 5472 attached, is due by the 15th day of the fourth month after the LLC’s tax year ends: 15 April for a calendar-year LLC, or the next business day if that falls on a weekend or legal holiday.

An extension is Form 7004, filed by that date, with the Form 1120 code, 12, entered in Part I, line 1 and "Foreign-owned U.S. DE" written across the top. It goes to the same fax number or Ogden address, not to the address in the Form 7004 instructions, and it generally adds six months, to 15 October for a calendar-year LLC.

The penalty

A reporting corporation that fails to file Form 5472 when due and in the manner prescribed is assessed a penalty of $25,000. The same penalty applies for failing to keep the records the regulations require, and filing a substantially incomplete Form 5472 counts as failing to file it.

If the failure continues more than 90 days after the IRS notifies you, another $25,000 applies, and it keeps applying for each related party for each 30-day period, or part of one, that the failure continues. This is not a percentage of tax owed: an LLC with no income and no tax can still be looking at $25,000.

When you do not have to file

There are exceptions, and the first is the one that matters most: no reportable transactions, no Form 5472. Specifically, a reporting corporation is not required to file if it had no reportable transactions of the types in Parts IV and VI and, for a foreign-owned US disregarded entity, none of the type in Part V either.

A second exception covers companies whose transactions are already reported: where a US person controlling the foreign related corporation files Form 5471 with Schedule M showing all the reportable transactions for the year. The instructions rule that one out for a foreign-owned US disregarded entity, along with exception 3, for foreign sales corporations, and exception 6, for transactions between two non-US persons that produce no US income or deductions. Exceptions 4 and 5 are for foreign corporations, so for a single-member LLC owned by a foreign person the first exception is the only one that can apply.

Open your business bank account with Mercury

Once your company has its EIN, open a business account so company money stays separate from personal money. That separation is what your tax return and your LLC’s protection rely on.

Open a Mercury account

USTAXX is a Mercury partner. Mercury is a financial technology company, not a bank; banking services are provided by its partner banks.

Foreign-owned LLC with a 5472 due?

USTAXX prepares the pro forma Form 1120 and Form 5472 for foreign-owned US LLCs, files it the way the IRS requires, and keeps the deadline off your desk. USTAXX works with founders remotely, through a secure portal, by phone or by video, and in person in Naperville, IL.

Get my 5472 filed Book a consultation (847) 773-7070

Checklist · 7 steps

File Form 5472 for a foreign-owned LLC

Income is not the test; reportable transactions are.

Check whether you are a reporting corporation, disregarded entity included.
Get an EIN first; the pro forma return asks for it.
List reportable transactions, contributions and distributions included.
Attach the form to a pro forma Form 1120 marked as the instructions say.
Fax or post it to the dedicated address; a disregarded entity cannot e-file.
File an extension on Form 7004 if you need one, by the regular due date.
Do not assume a year with no income is a year with nothing to file.

Save to MyCheck

Opens MyCheck, where you can tick the steps off on the web or in the app.

Questions people ask

Does my foreign-owned LLC file Form 5472 if it made no money?

Income is not the test; reportable transactions are. For a foreign-owned disregarded entity those include contributions to and distributions from the entity, and amounts connected with forming or dissolving it. A year with no income but with funding movements is a filing year.

What is the penalty for not filing Form 5472?

$25,000 for each tax year in which the failure occurs, counted separately for each related party. If the failure continues more than 90 days after the IRS mails a notice, a further $25,000 applies for each related party for each 30-day period, or part of one, that it continues. A substantially incomplete form counts as a failure to file, and the same penalty applies for not keeping the required records.

Can I file Form 5472 electronically?

If it is attached to an income tax return you file electronically, yes. A foreign-owned US disregarded entity cannot: it faxes the pro forma Form 1120 and Form 5472 to 855-887-7737 or mails them to the dedicated Ogden address.

Do I need an EIN to file Form 5472?

Yes. The pro forma Form 1120 that carries your Form 5472 asks for the entity identification details on page one, so the LLC needs its own EIN before it can file.

Do I need an ITIN to file Form 5472?

Not for the form itself. Parts II and III ask for a US identifying number only if the owner has one. Without one, the LLC enters a reference ID number it assigns itself, with no application to the IRS: letters and numbers only, no spaces or special characters, up to 50 characters, and the same number every year. A foreign-owned DE also enters the owner’s foreign taxpayer identification number, or "None" if there is none.

Which parts of Form 5472 does a foreign-owned single-member LLC fill in?

Parts I, II and III always, and Part VII apart from lines 43a and 43b. Part IV whenever the related party is a foreign person, Part V for contributions, distributions and any other transaction with the related party not reported in Part IV, and Part VI for anything not paid for entirely in money or not paid for in full. Parts VIII and IX only where there is a cost sharing arrangement or base erosion payments.

When is Form 5472 due?

With the income tax return it is attached to, by that return’s due date including extensions. For a foreign-owned disregarded entity it is the pro forma Form 1120 due date, the 15th day of the fourth month after its tax year ends, which is 15 April for a calendar-year LLC. An extension is requested on Form 7004 by that date, sent to the same dedicated fax number or address, and generally adds six months.

Where these rules come from

General information, current when written, not advice about your situation. Fees and forms change; the official pages above are the authority.