INTRODUCTION
Creating a company in the US is extremely easy compared to other countries, it is a process that we explain in detail in our free guide. However, there are some details that must be taken into account. Ignoring them can be extremely costly.
An example is form 5472 of the US tax authority, the Internal Revenue Service or IRS, which, with few exceptions, must be completed annually by foreign companies doing business in the US, as well as US companies that have more than 25% of its capital in the hands of foreign persons (individuals or legal entities), directly or indirectly.
WHAT IS FORM 5472?
This form is used to inform the IRS of the activities in the US of foreign companies or activities of US companies with more than 25% foreign ownership. Its main purpose is to prevent tax evasion.
It is a form for information only, without payment of associated taxes, but of extraordinary importance due to the very high penalties applied, as we will explain later.
WHAT IS A FOREIGN PERSON?
In this context, a foreign person is considered to be:
- Any individual who is not a US citizen or resident
- Any individual who is a citizen or resident of the unincorporated territories of the United States (which includes Puerto Rico, Guam, American Samoa, the Northern Mariana Islands, and the US Virgin Islands) provided that they are not a citizen or resident of the United States< /li>
- Any company, partnership, or corporation that was not incorporated in or regulated by the US
- Any foreign estate or trust
- Any foreign government or agency of a foreign government
WHO MUST FILE IT?
US companies with more than 25% of their capital controlled by foreign persons, as well as foreign companies involved in business in the US must file form 5472 if they have participated in loans, payments or receipts of interest or dividends, royalties, sales of products or services, and other payments, in which the foreign owners or persons (individuals or legal entities) related to those foreign owners were involved. The obligation affects entities of different types, both corporations and LLCs.
ARE THERE EXCEPTIONS IN THE OBLIGATION TO FILE THIS FORM?
There are some exceptions in very particular cases, which should be carefully reviewed with a Certified Public Accountant (CPA) to ensure that the form can be avoided.
HOW IS IT FILED?
The form is presented attached to the tax form that the company must file annually. It is highly recommended that you use the services of a CPA when preparing both the return and the form.
As a prerequisite, the company must have a tax identification number (EIN or Employer Identification Number) and have maintained the accounting of the company’s operations in accordance with US law.
WHEN IS IT FILED?
Just like the tax form, form 5472 must be filed every year no later than April 15. It is possible to request an extension of the deadline for both the tax form and form 5472.
WHAT HAPPENS IF IT IS NOT FILED?
If Form 5472 is not filed or is incomplete, the IRS penalty is $25,000, plus an additional $25,000 per month if the error is not properly corrected within 90 days of notification of violation by the IRS. In case of continued non-compliance or if fraudulent information is provided, prison sentences could be applied to those responsible.
HOW CAN I GET HELP?
In the Markentry USA team we have Certified Public Accountants (CPAs) and lawyers who can help in everything related to this form, as well as with the fulfillment of the rest of the accounting, tax and legal obligations of your company.