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Preparing Form 1120-F for Foreign Corporations: Form Revisions, ECI, Protective Claims, and Branch Profits Tax

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, July 2, 2024

Recorded event now available

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This course will provide a practical explanation of completing Form 1120-F, U.S. Income Tax Return of a Foreign Corporation. Our experts will explain how to properly prepare this onerous form, including who is required to file, filing protective returns, and issues for consideration with respect to certain schedules and attachments to the tax return.

Description

Foreign corporations may have a U.S. tax return filing obligation based on their activities conducted in the United States. For example, if a foreign corporation is engaged in a U.S. trade or business, the foreign corporation generally should file Form 1120-F, U.S. Income Tax Return of a Foreign Corporation. Also, a foreign corporation should consider filing a U.S. tax return to preserve the right to claim deductions against effectively connected income or claim certain benefits under an income tax treaty. Various rules and exceptions apply in determining whether a foreign corporation has a U.S. tax return filing obligation.

In addition, foreign corporations engaged in a U.S. trade or business are also generally subject to the Branch Profits Tax. The Branch Profits Tax generally imposes a 30 percent tax on branch earnings that are deemed to be repatriated back to the foreign corporation's home office and such tax is reported on the foreign corporation's U.S. tax return. Income tax treaties may provide a lower tax rate or an exemption.

If a foreign corporation is entitled to benefits under an income tax treaty, the foreign corporation may need to file a U.S. tax return to claim benefits under the tax treaty. A foreign corporation is generally required to file Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) if the foreign corporation takes a treaty-based position unless reporting is specifically waived.

Listen as our authoritative panel of international tax experts details who should file, how to prepare Form 1120-F and its auxiliary forms and schedules, how to calculate the branch profits tax, and how to reduce overall taxation of foreign corporations.

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Outline

  1. Who should file Form 1120-F
    1. Protective returns
    2. Treas. Reg. Sec. 1.882-4 along with Adams Challenge (UK) Ltd v. Commissioner and Swallows Holdings, Ltd. v. Commissioner
  2. Section I - Income From U.S. Sources Not Effectively Connected With the Conduct of a Trade or Business in the United States
    1. FDAP withholding and when FDAP income reporting is required
  3. Section II - Income Effectively Connected With the Conduct of a Trade or Business in the United States
    1. Engaged in a U.S. trade or business
      1. Activities conducted by a foreign corporation through a U.S. partnership
    2. Income effectively connected to a U.S. trade or business
  4. Section III – Branch Profits Tax and Tax on Excess Interest
    1. Calculating and reporting the Branch Profits Tax
  5. Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)
    1. When treaty-based return position disclosure is required and certain key exceptions to reporting
    2. Limitations on benefits article
  6. Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business
    1. Information generally required
    2. Exceptions from filing
    3. Filing obligation for foreign-owned U.S. disregarded entities

Benefits

The panel will review these and other key issues:

  • Who is required to file Form 1120-F?
  • When should an entity file an 1120-F protective claim, even though not subject to tax and possibly not required to file?
  • What methods are used to allocate and apportion ECI and non-ECI expenses on Schedule H?
  • What are examples of treaty-based positions that might require filing Form 8833, Treaty-Based Return Position Disclosure?

Faculty

Neumeyer, Daniel
Daniel J. Neumeyer, JD, LLM
Tax Manager
CLA (CliftonLarsonAllen LLP)

Mr. Neumeyer focuses his practice on international tax issues. In particular, he helps lead CLA’s delinquent...  |  Read More

Slade, Dave
Dave Slade
Senior Manager
BDO USA

Senior Manager - International Tax Services at BDO

 |  Read More

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