In December 2016, new regulations were issued that require any U.S. entity that is both (i) wholly owned (whether directly or indirectly) by a foreign person and (ii) treated as a disregarded entity for U.S. tax purposes to file Form 5472 whenever a “reportable transaction” occurs. The most common of theseentities used by foreign persons is the single-member limited liability company, formed in Delaware or in another state, and often used to hold U.S. assets and investments, such as real property in the United States. Under the new regulations, for example, the funding of a limited liability company by its owner would be a “reportable transaction” triggering the filing requirement.
Form 5472 requires the entity to identify its beneficial owner. It also requires the entity to have a U.S. tax identification number, since such a number is needed to properly complete Form 5472. The regulations also require the entity to properly maintain books and records sufficient to establish the correctness of any U.S. tax filings, including any records relating to transactions with related parties. These rules are effective for any tax years beginning Jan. 1, 2017. The due date for Form 5472 depends on whether the foreign owner has a U.S. tax return filing obligation. If so, the entity is deemed to have the same taxable year as its owner and the same filing date. If the foreign owner of the entity does not have a U.S. tax return filing obligation, then the entity is generally required to use the calendar year as its taxable year for this purpose.