Owning a company abroad: what US owners file

Do I have to file Form 5471 for my company abroad?

If a business is a foreign corporation for US tax, a US citizen or resident may need Form 5471 when they acquire or own at least 10% of its vote or value, control it, or serve as an officer or director when another US person makes a qualifying acquisition. Family or entity attribution can bring a smaller direct stake into the filing test. No dividend or US tax due is required to trigger filing.

Start with the company's US tax classification, not its local name. Then list direct shares, indirect shares held through other entities, family holdings, voting rights, and share value. A US corporation that owns the foreign company follows the same Form 5471 category framework. Complete a separate form for each foreign corporation that meets a filing category; the schedules depend on the categories that apply. The IRS category rules and schedule chart govern the details.

Which Form 5471 category applies to me?

Your Form 5471 category describes why you file; one owner can fit several categories in the same year. The IRS filing chart lists the exact schedules for each category, including subcategories of Categories 1 and 5.

Category 1 is a continuing section 965 reporting rule, not a general category for every foreign company. Category 3 can apply in the year you become a US person while already holding a qualifying stake. Category 5a is the usual subcategory. The published 5b and 5c rules concern foreign-controlled CFCs, but the restored limit on downward attribution can change that classification for foreign corporation years beginning after 2025. Some constructive owners qualify for filing exceptions or may rely on a form filed by another US person; check the IRS conditions and schedule chart.

Do my parents' or spouse's shares count toward my ownership?

Shares owned by a spouse, parents, children, or grandchildren can be attributed to you under the family rule, even when you did not buy those shares. A key exception prevents shares owned by a nonresident alien individual from being attributed to a US citizen or resident alien for the US-shareholder and CFC tests. The exception does not erase shares you own directly or through an entity. Sections 318 and 958 set these rules.

Family attribution can affect Form 5471 filing, but by itself does not make you report income from shares you do not own directly or through an entity. Section 958.

Ownership through corporations, partnerships, trusts, and estates also needs a separate calculation. For foreign corporation tax years beginning after December 31, 2025, section 958 again limits certain downward attribution of shares from a foreign owner to a US entity. This can change whether a foreign-controlled company is a CFC; it does not settle every Form 5471 category. See section 958(b). A separate section 951B rule can still require current income inclusions for certain foreign-controlled US shareholders when the company is not a CFC.

If your parents gave or left you shares, the transfer may have separate reporting consequences; see gifts and inheritances from abroad.

Is my company a controlled foreign corporation?

A foreign corporation is generally a CFC if US shareholders together own more than 50% of its voting power or value on any day of its tax year. A US shareholder generally is a US person who owns at least 10% of voting power or value, counting applicable direct, indirect, and constructive ownership. Exactly half US shareholder ownership is not enough under the general CFC test. Section 951(b); section 957.

First identify each US shareholder; then add the shares attributed to those shareholders for the CFC test. Ownership for taxing income is a further question: a person generally needs a direct or indirect interest under section 958(a), not only constructive ownership. For foreign corporation years beginning after 2025, ownership on any day while the company is a CFC can create a prorated subpart F or net CFC tested income inclusion even if the shares are sold before year-end. The published Form 5471 Category 5 instructions still use a last-CFC-day filing test. Sections 951 and 951A; IRS instructions. Special insurance rules can change the general CFC test. Section 957.

What income can be taxed before I receive a dividend?

A US shareholder with a qualifying interest in a CFC may have current US income from subpart F, net CFC tested income, or certain CFC investments in US property under section 956, even without a dividend. Subpart F includes many passive items and certain related-party sales or services. Net CFC tested income generally nets remaining tested income and losses across the shareholder's CFCs. A CFC loan to a US person can require a section 956 calculation; exceptions may apply. Sections 951, 951A, 954, and 956.

The company being an active business does not by itself eliminate a current inclusion. Previously taxed earnings are tracked so a later distribution is generally not taxed again under the ordinary inclusion rule, subject to exceptions such as a section 962 election. Section 959; section 962. Salary, dividends, and individual foreign tax credits are handled in foreign income on a US return.

What changed for GILTI in this tax year?

The statute now calls the inclusion net CFC tested income. Its old GILTI calculation subtracted a deemed return on certain tangible business assets; that asset-based reduction is gone. Tested income and tested losses still matter. Section 951A.

A domestic corporation can generally deduct 40% of its net CFC tested income and related section 78 amount, subject to the taxable-income limit. An individual does not receive that corporate deduction merely by owning the foreign company. Section 250. The published Form 8992 instructions still describe the older GILTI and tangible-asset calculation; check the form and instructions available when filing.

Could a high-tax exception or section 962 election change the tax?

Possibly, but both require a calculation before an owner chooses them. The high-tax rules can exclude qualifying CFC income from subpart F or tested income when the relevant income bears an effective foreign tax rate greater than 90% of the US corporate rate. The foreign company's headline tax rate alone does not establish eligibility; income grouping, deductions, taxes, and election rules matter. The controlling US shareholders elect for subpart F income on a statement with an original or amended return. For tested income, the controlling US shareholders file the statement with a timely original return or an amended return within 24 months of the unextended original due date; amended elections also require coordinated filings by affected US shareholders. Section 954(b)(4); high-tax election regulations; subpart F election regulations.

Separately, an individual may elect under section 962 to have qualifying CFC inclusions taxed as if received by a domestic corporation and to use the associated deemed-paid foreign tax credit rules. This can also permit the corporate section 250 deduction on net CFC tested income. The individual makes the election by filing a statement with that year's return; it applies to all CFCs with qualifying inclusions for that year. The election may create US tax again when those earnings are actually distributed, and an election for a year cannot be revoked without IRS consent. The comparison includes tax on the current inclusion and a later distribution. Section 962; election regulation; Form 8993 instructions.

What if the business abroad is an LLC, partnership, or sole proprietorship?

A local label does not decide the US form. The IRS may classify a foreign entity as a corporation, partnership, or disregarded entity; a business you run personally may instead be a foreign branch. Some named foreign entity types must be corporations for US tax. The IRS Form 8832 list names Canada “Corporation and Company” and China “Gufen Youxian Gongsi.” The regulation excepts certain Canadian unlimited-liability entities. A Chinese Youxian Gongsi needs its own classification review rather than treatment based on the similar name.

If you operate in your own name as a sole proprietor, you generally report business income and expenses on Schedule C of Form 1040, not Form 5471. Form 8858 may also apply if the activity is a foreign branch; separate books and records can affect that test.

For an eligible foreign entity, the default classification depends on owner count and whether owners have limited liability; a Form 8832 election can change it. Owners or an authorized officer or manager sign the election; former owners may also need to sign a retroactive election. Its effective date generally cannot be earlier than 75 days before filing or later than 12 months after filing. Check the entity's governing law, owners' liability, and any prior election before choosing a return. One-owner foreign entities are not automatically disregarded. IRS Form 8832 and instructions.

Which other forms can come with foreign company ownership?

Form 5471 is often only one part of the US filing. The other forms depend on transfers, the company's US classification, its income, and the owner's financial accounts. The IRS Form 5471 instructions point to related reporting.

When is Form 5471 due, and what happens if I miss it?

Attach Form 5471 to the owner's income tax return and file it by that return's due date, including extensions. There is no separate Form 5471 deadline for an individual owner. IRS filing instructions.

A missing or incomplete Form 5471 can bring an initial $10,000 penalty per foreign corporation and annual accounting period under section 6038. Required ownership-change information under section 6046 has a separate initial penalty of $10,000 per failure for each reportable transaction, unless reasonable cause is shown. Additional penalties can follow an IRS notice if a failure continues. The tax assessment period can remain open for three years after the required foreign information is furnished; if the failure had reasonable cause and was not willful, this extension applies only to related items. IRS penalties; section 6679; section 6501(c)(8).

Gather the share register and transaction dates, the company's local-currency financial statements and tax returns, foreign taxes paid, distributions, loans, ownership through other entities, and family members' holdings. These records decide the category, income inclusion, and whether an exception or election is supportable.

Example

Illustrative amounts in US dollars. A US resident owns 100% of a foreign corporation throughout the year. Assume the corporation has $100,000 of active business income under US tax rules, pays $20,000 of deductible foreign corporate income tax, and has $80,000 of tested income after allowable deductions. It pays no dividend. Assume no subpart F income, other CFCs, tested losses, or special adjustments.

The owner meets the Category 4 and 5a conditions but checks only the Category 4 box on Form 5471 and completes all applicable schedules. Without a high-tax election, the owner's net CFC tested income is $80,000 even though the dividend is $0. The company's $20,000 tax is not automatically a personal foreign tax credit. If this is one tested income item and all the tax is eligible, $20,000 on $100,000 of pretax income clears the high-tax rate test; a valid election would exclude the $80,000 from tested income. The company books and foreign tax computation must confirm those assumptions. A section 962 election could change the US tax instead.

Different for you?

• You missed prior Forms 5471 or received a penalty notice: see catching up on missed foreign reporting.
• You live in Canada and own a Canadian corporation: the two countries' company and owner taxes need a joint review; see American owners of Canadian corporations.
• You became a US resident during the year: your first-year ownership and filing dates can change; see first year as a US tax resident.
• You live abroad outside Canada: see filing while living abroad.
• You control the company, are considering an entity classification or section 962 election, or need to reconcile company and individual returns: bring the ownership and tax records to cross-border tax.