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@anepcar wrote:

I have a client who is converting his LLC in to a C Corp by checking the box for tax purposes only. New share holders will be foreign corporation . If the company does not have any dividends in the current year will the foreign shareholder need to file an 1120f?

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Assuming the new C corp goes live in 2020, question is whether the foreign corporate shareholder has any US-ECI, whether all tax liabilities on FDAP have been fully satisfied by taxes withheld at source, etc.  Being paid dividends is not a criterion for filing 1120F.  F.5472 may also be required if foreign ownership amounts to 25% or more.

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They are under the US and MX treaty so their dividends would be taxed @5% instead of 30% once there are any dividends to report. The US Corp will be the withholding agent once there are any dividends to distribute, and file all 1042s forms as need.

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5% is not default.  It depends on the level of ownership and there are various other exception under Article 10.