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1120f Tax Form

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Level 2

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?

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.

We are currently applying for EIN for the foreign corporation that is the shareholder in the US Corp, and filing their 4-8BEN-E with the US Corp.

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Level 15

NP, @anepcar.  If a response above solved your problem, please consider marking that a solution to help others who may have similar questions.

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Still an AllStar

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Level 15
I do not see 1120-F as a ProSeries offering. You will need to look to Lacerte or ProConnect https://lfs.intuit.com/#/s/US/C

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Level 15

@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?


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.


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.

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

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Still an AllStar
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Level 2

The foreign corporation owns 50% of the new US Corp that is starting in 2020, and all revenue is US-ECI , also the liabilities on the  FDAP will be withheld by the US Corp at the 5% based on the US Mexico treaty. The foreign corporation has already submitted w8-BEN-E to the us corporation. The 5472 will be filed by the US corporation with their 1120.

I had read that if a foreign corporation is claiming a reduction in taxes it must file a 1120f rather they owed taxes or not since their dividends is US-ECI?

Appreciate all feedback .

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Level 2

Agreed with itoneweb.  Foreign SH should not have to file 1120F for the US Corp.   

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Level 15

@anepcar wrote:

The foreign corporation owns 50% of the new US Corp that is starting in 2020, and all revenue is US-ECI ...


The US-ECI is that of the domestic C-corp.  If the foreign corp has its own US-ECI, that would trigger a filing requirement for 1120F but this may have implications to the applicability of Article 10.


I had read that if a foreign corporation is claiming a reduction in taxes it must file a 1120f rather they owed taxes or not since their dividends is US-ECI?

It is not consistent with Article That's not exactly what it says, you may like to read the instructions again.


... since their dividends is US-ECI?

Are you sure the dividends to be paid to the foreign shareholder are US-ECI?  Dividends, as they are defined, are generally FDAP.  If the character is really US-ECI, the substance of that may make them ineligible for Article 10.

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Still an AllStar
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Level 2

You are correct after reading the instruction again they are considered  FDAP. Thank You

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NP, @anepcar.  If a response above solved your problem, please consider marking that a solution to help others who may have similar questions.

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Still an AllStar

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