FORM 8992
Foreign corporations that operate in the US may be subject to various US tax reporting requirements. These requirements include filing Form 8992, making a Sec 962 election, and paying the Section 965 transition tax.
What is Form 8992?
Form 8992 is a tax form that is used to calculate a foreign corporation’s global intangible low-taxed income (GILTI) and its related US tax liability. GILTI is a new category of income that was introduced by the Tax Cuts and Jobs Act of 2017.
Who needs to file?
Foreign corporations with operations in the US may be required to file Form 8992 if they have GILTI. This includes foreign corporations that are classified as C corporations for US tax purposes.
What is a Sec 962 election?
A Sec 962 election is an election that allows an individual shareholder of a foreign corporation to be taxed on their share of the corporation’s GILTI at the individual tax rate rather than the corporate tax rate. This election is available to US taxpayers who own at least 10% of a foreign corporation that has GILTI.
What is the Section 965 transition tax?
The Section 965 transition tax is a one-time tax on the accumulated foreign earnings of certain foreign corporations that are owned by US taxpayers. This tax was introduced by the Tax Cuts and Jobs Act of 2017 and is designed to encourage US taxpayers to repatriate their foreign earnings.
Who needs to pay the Section 965 transition tax?
US taxpayers who own at least 10% of a foreign corporation that has accumulated foreign earnings may be required to pay the Section 965 transition tax.
How are Form 8992, Sec 962 election, and the Section 965 transition tax reported?
Form 8992 is filed as part of the foreign corporation’s US tax return. The Sec 962 election is made by including a statement with the taxpayer’s tax return. The Section 965 transition tax is reported on the taxpayer’s tax return for the tax year in which the tax is due.
What are the penalties for failing to comply with these reporting requirements?
The penalties for failing to comply with these reporting requirements can be severe. The penalty for failing to file Form 8992 is $10,000 per year, per shareholder. The penalty for failing to make a Sec 962 election or pay the Section 965 transition tax is 5% of the unpaid tax for each month that the tax is not paid, up to a maximum of 25%.
Complying with US tax laws and regulations can be a complex process for foreign corporations with operations in the US. By understanding the reporting requirements for Form 8992, Sec 962 election, and the Section 965 transition tax, foreign corporations can avoid potential penalties and ensure that their tax obligations are met. If you have any questions or concerns about these reporting requirements, it is recommended that you consult with a tax professional at Zisman US Tax Services who can provide help with Form 8992.
Have Questions? Contact us and let us show you how our expertise can save you in the long run.
