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Complicated Form 5471 filing requirements simplified for dormant foreign corporations
The reporting requirements for IRS Form 5471 are complex, including ‘category of filer’ and required schedules. However, very few taxpayers know that there are special simplified filing rules for a foreign dormant corporation.
IRS Revenue Procedure 92-70, specifies specific, conditions that must all be met in order for a foreign corporation to be considered dormant:
- The foreign corporation conducted no business and owned no stock in any other corporation other than another dormant foreign corporation
- No shares of the foreign corporation (other than the directors’ qualifying shares) were sold, exchanged, redeemed, or otherwise transferred, nor was the foreign corporation party to a reorganization
- No assets of the foreign corporation were sold, exchanged, redeemed, or otherwise transferred, except for minimis transfers described in 4 and 5 below
- The foreign corporation received or accrued no more than $5,000 of gross income or gross receipts
- The foreign corporation paid or accrued no more than $5,000 of expenses
- The value of the foreign corporation’s assets as determined pursuant to the US generally accepted accounting principles (but not reduced by any mortgages or other liabilities) did not exceed $100,000
- No distributions were made by the foreign corporation; and
- The foreign corporation either had no current or accumulated earnings and profits or had only de minimis changes in its beginning and ending accumulated earnings and profits balances by reason of income or expenses specified in 4 or 5 above
If your foreign corporation satisfies all of the above requirements then you only need to complete page 1 of Form 5471 for each dormant foreign corporation; this includes your name and address, tax year, identifying number, category of filer, and the total percentage of the foreign corporation’s voting stock you owned at the end of its annual accounting period.
If you are filling out a Form 5471 for your dormant corporation, you have to note at the top of the document that ‘Filed Pursuant to Rev. Proc. 92-70 for Dormant Foreign Corporation’.
If you have any further questions about your reporting requirements on this, or any other offshore reporting form, contact us to schedule a confidential consultation.