Form 5472: Instructions, Examples, and More

Are you required to file IRS Form 5472? For many expat business owners, the answer is yes. In this guide, we’re looking at the instructions for Form 5472—and everything else you may need to know about this complex issue.

What Is Form 5472?

Form 5472 is an IRS tax form that certain foreign-owned businesses, including foreign corporations and partnerships, must file. These entities are required to file Form 5472 annually and provide information about their ownership structures and transactions, including changes made to the ownership of the business.

Who Should File Form 5472?

The IRS requires each of the following types of businesses to file Form 5472:

• A US corporation with at least 25% of its stock owned by a foreign person or entity
• A US disregarded entity with at least 25% of its stock owned by a foreign person or entity
• A foreign corporation engaged in a trade or business inside the US

In addition, various other “related parties” may be required to file their own copy of Form 5472 if they engage in any reportable transactions with the corporation. Those reportable transactions include:

• Sale of stock
• Purchase of stock
• Sale of tangible property
• Purchase of tangible property
• Sales leases
• Consideration for services
• Loans
• Loan guarantees
• Interest paid
• Premiums paid for insurance or reinsurance

The rules for what qualifies as a “related party” can be tough to interpret. The same is true for determining whether a corporation is 25% foreign-owned.

Exceptions from Filing Form 5472

Most businesses that fit the above categories are required to file Form 5472 every year. However, there are some exceptions, such as if:

• The corporation has no reportable transactions in a given tax year
• The corporation is considered a foreign sales corporation and files Form 1120-FSC
• The corporation is based in a country with a US tax treaty, has no permanent establishment in the US, and files Form 8833
• The corporation has a gross income exemption under section 883 and has fully complied with the reporting requirements of sections 883 and 887

Those aren’t the only exceptions—just a few common ones. Consult a qualified tax professional for further information.

IRS Form 5472 Examples

To better understand what businesses should file Form 5472, let’s look at some examples.

Example 1

Matt, Sarah, and Jack each own an equal stake in Company A, a US domestic corporation. Matt and Sarah are both US citizens, while Jack is an Australian citizen.

Because Jack is a foreign owner who owns more than 25% of the company (roughly 33%), Company A would be required to file Form 5472.

 Example 2

Company B is a US-based LLC that has elected to be taxed as a disregarded entity. Company B is owned by Company C, a foreign corporation based in Mexico.

Because Company B is a disregarded entity owned by a foreign company, it would be required to file Form 5472.

Example 3

Company D is a corporation based in South Korea that has a presence in the US and sells products primarily to the US market.

Because Company D is a foreign corporation deemed to be “engaged in a trade or business inside the US,” it must file Form 5472.

What Information Is Required on Form 5472?

Form 5472 is used to disclose a range of information about the reporting company and its transactions, including:

• Articles of organization or incorporation
• Principal business activity for the company
• Details of all reportable transactions
• Foreign shareholders’ names
• Foreign shareholders’ countries of citizenship
• Foreign shareholders’ addresses

Form 5472 Due Date

The Form is due at the same time as your company’s income tax return (Form 1120). For the 2022 tax year, that would mean April 18.

However, if you file a six-month extension for your Form 1120, Form 5472 will also be postponed to the same date—October 16 for the 2022 tax year. The consequences of filing your taxes late can be severe.

You must file a new Form 5472 every year your company meets the filing requirements.

Form 5472 Penalties

The standard penalty for failing to file a Form 5472 on time is a $25,000 fine. There is an additional fine of $25,000 if you fail to file a Form 5472 within 90 days of being notified by the IRS.

How to File Form 5472

Filing Form 5472 is a complicated process with plenty of opportunities to make mistakes. Even deciding whether you’re required to file Form 5472 can be complex. We recommend enlisting a qualified tax professional to help you rather than attempting to file Form 5472 alone.

To learn more about how to file Form 5472, see the Form 5472 instructions provided on the IRS website.

Filing Form 5472 Doesn’t Have to Be Complicated

We hope this guide has helped you understand the requirements and instructions for Form 5472. However, if you still have questions, we have answers. In fact, we can even fill out and file your expat tax return on your behalf.