Source: http://slideplayer.com/slide/4257545/
Timestamp: 2017-07-21 10:11:48
Document Index: 410165464

Matched Legal Cases: ['§ 482', '§ 332', '§ 721', '§ 267', '§ 267', '§ 301', '§ 164', '§ 6038', '§ 6038', '§ 6038', '§ 6046', '§ 6046', '§ 6046', '§ 6038', '§ 901', '§ 6038', '§ 6038', '§ 6046', '§ 6046', '§ 6679', '§ 7203', '§ 6501', '§ 6501', '§ 6038', '§ 6501', '§ 6501', '§ 6038', '§ 6501', '§ 301']

TAX NASC Far Western Chapter Annual Conference International Tax Update and Reporting Monterey, California May 27, ppt download
TAX NASC Far Western Chapter Annual Conference International Tax Update and Reporting Monterey, California May 27, 2010.
Published byBrendan Greene
Presentation on theme: "TAX NASC Far Western Chapter Annual Conference International Tax Update and Reporting Monterey, California May 27, 2010."— Presentation transcript:
TAX NASC Far Western Chapter Annual Conference International Tax Update and Reporting Monterey, California May 27, 2010
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 2 ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 3 DATED MATERIAL The material contained in these course materials is current as of the date produced. The materials have not been and will not be updated to incorporate any technical changes to the content or to reflect any modifications to a tax service offered since the production date. You are responsible for verifying whether or not there have been any technical changes since the production date and whether or not the firm still approves any tax services offered for presentation to clients. You should consult with Washington National Tax and Risk Management-Tax as part of your due diligence.
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 4 Objectives Discuss the tax compliance activities for cooperatives relating to international operations or transactions Identify common issues, elections, and planning opportunities that may arise when dealing with multinational cooperatives
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 5 Agenda Part I: U.S. Reporting Overview Part II: Forms and Schedules Part III: Other Items of Importance
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 6 Part I: U.S. Reporting Overview
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 7 U.S. Reporting Overview US COOPERATIVE FOREIGN ENTITY Form 1120-C (and Form 1118 if elected)
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 8 U.S. Reporting Overview Forms 5471 and 5472 US CO-OP Form 5471 51% FOREIGN 49% Controlled Foreign Corporation CFC US CO-OP Form 5472 FOREIGN From 1120F if: U.S. trade or business, regardless whether or not it had U.S. source income or exemption under a treaty Income effectively connected to a U.S. trade or business U.S. source income Claiming treaty benefits with respect to the items listed above FOREIGN ENTITY (income effectively connect to a USTB) FOREIGN Form 5472
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 9 U.S. Reporting Overview Forms 8865 and 1065 US CO-OP Form 8865 ForeignPartnership 51% FOREIGN 49% US CO-OP 25% FOREIGN 75% Form 1065* ForeignPartnership If ECI or U.S. Source FDAP If a reportable event Form 8865 *K-1s required for U.S. partners and passthrough U.S. partners only
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 10 U.S. Reporting Overview Form 1065 Form 1065 is used by both U.S. and foreign partnerships Generally, a foreign partnership files Form 1065 if it has gross income: Effectively connected to a trade or business within the U.S. or Derived from sources within the U.S. A foreign partnership required to file Form 1065 generally must report all of its foreign and U.S. source income A foreign partnership filing Form 1065 solely to make an election need only provide its name, address, and EIN on page 1 and attach the appropriate statement
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 11 U.S. Reporting Overview Form 1065—Exceptions Exceptions to Filing Foreign partnerships that has U.S. source income equal to or less than $20,000 and has no ECI And only if: Less than 1% of any partnership item of income, gain, loss, deduction, or credit was allocable to direct U.S. partners Less than 1% of any partnership item of income, gain, loss, deduction, or credit was allocable to direct U.S. partners Foreign partnership that has U.S. source income, but has no ECI and no U.S. partners All required Forms 1042 and 1042-S were filed, The tax liability of each partner was withheld at the source (if applicable), and Not a withholding foreign partnership Other foreign partnerships with no ECI may have modified filing obligations
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 12 U.S. Reporting Overview US CO-OP 51% FOREIGN 49% Disregarded Entity FDE Form 8858 Form 5471 Foreign Reverse Hybrid F—PtnrUS—Corp US CO-OP 51% FOREIGN 49% Hybrid Foreign Entity F—CorpUS—Ptnr Form 8865 Form 1120F Form 1065 If USTB, ECI or U.S. Source FDAP If ECI or U.S. Source FDAP
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 13 Part Ii: Forms and Schedules
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 14 Forms and Schedules Form 5471, CFC Information Return Form 5472, 25% Foreign-owned U.S. Corp or Foreign Corp with ETB Form 926, Transfer of U.S. Property to a Foreign Corp Form 1120F, Foreign Corp Tax Return Form 8865, CFP Information Return Form 8858, FDE Information Return Form 1118, Foreign Tax Credit
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 15 Form 5471—Annual Accounting Period Except for Schedule O report information for the tax year of the foreign corporation that ends with or within your tax year Example For Schedule O, report acquisitions, dispositions, and organizations or reorganizations that occurred during the U.S. person’s tax year 1/112/31 6/30 Foreign Corporation U.S. Person The U.S. Person would report the foreign corporation’s activity for the annual year ended 12/31.
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 16 Form 5471—Benefits of Good Reporting Benefits of Reporting Accurate and Complete Information on Form 5471 Earnings and profits history—minimizes the complexity and cost of a study History of foreign income taxes paid—facilitates calculation of dividend income and deemed paid credit Source of information regarding foreign financial statements, subpart F income, distributions, foreign taxes paid or accrued, etc. Information may be needed for future restructurings and reorganizations Minimizes costly and time-consuming examinations Avoids penalties ILM 200748006—Form 5471 Reasonable Cause May Apply Changes in HIRE ACT
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 17 Form 5472—Purpose Generally, a reporting corporation must file Form 5472 if it had a reportable transaction with a foreign or domestic related party Form 5472 is used by the IRS to obtain information about transactions between the related parties to conduct a proper audit The IRS’ procedures relate directly to possible adjustments under § 482 and all other Code sections that affect the tax treatment of transactions between related parties
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 18 Form 926, Transfer of Property to a Foreign Corp
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 19 Form 926—Purpose Transfers of property offshore creates the possibility of tax avoidance when nonrecognition provisions would normally render the transaction tax-free Form 926 provides the IRS with detailed information on transfers by U.S. persons of property to a foreign corporation.
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 20 Form 926—Who Must File U.S. persons that make certain outbound transfers of property to foreign corporations pursuant to the corporate liquidation, organization and reorganization provisions of the Internal Revenue Code (§§ 332, 351, 354, 355, 356, or 361) Note: A U.S. person who transfers property to a foreign partnership in a contribution described in § 721 reports this transfer on Schedule O, of Form 8865
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 21 Form 8865 CFP Information Return
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 22 Form 8865—Purpose Reporting rules similar to those applicable for controlled foreign corporations Used by the IRS to monitor transactions between U.S. persons and foreign partnerships, including: Contributions of property by U.S. 10% or greater partners to the foreign partnership Acquisitions, dispositions and substantial changes of proportional interests of U.S. partners in the foreign partnership
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 23 Form 8865—Categories of Filers Category 1 A U.S. person who controlled the foreign partnership at any time during the partnership’s tax year Control = 50% or more direct or constructive interest in the partnership A 50% interest is equal to: 50% of capital, 50% of profits, or 50% of the deductions of losses For determining constructive ownership refer to the rules under § 267(c) (excluding § 267(c)(3)) There may be more than one Category 1 filer for a partnership for a particular partnership tax year
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 24 Form 8865—Categories of Filers Categories 2 and 3 Category 2 Filer A U.S. person who owned 10% of the partnership during the year while the partnership was controlled by 10% or greater U.S. partners If the partnership had a Category 1 filer, no partner will be considered a Category 2 filer Category 3 Filer A U.S. person who contributed property to a foreign partnership in a section 721 transaction if the U.S. person: Owned 10% of the partnership, directly or constructively, or The value of the property contributed exceeds $100,000
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 25 Form 8865—Categories of Filers Category 4 A U.S. person that had a reportable event under section 6046A during the year, including: Certain acquisitions of interests in the foreign partnership where either: The U.S. persons direct interest in the partnership increased to 10% (e.g., from a 9% interest to a 10% interest), or The U.S. persons direct interest in the partnership increased by 10 percentage points (e.g., from 11% to 21%) Certain dispositions of foreign partnership interests Certain changes in proportionate interest in the foreign partnership
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 26 Form 8858, FDE Information Return
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 27 Form 8858—Definitions Foreign Disregarded Entity (FDE) A business entity that is not formed in the U.S. and is treated for U.S. tax purposes as disregarded as an entity separate from its owner pursuant to a CTB election (Treas. Reg. § 301.7701-2 and 3) Form 8858 does not apply to a “true branch” (unincorporated operation) Tax Owner of the FDE Person that is treated as owning the assets and liabilities of the FDE for U.S. federal tax purposes Direct Owner of the FDE Legal owner of the FDE
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 28 FDE(Germany) Form 8858—Definitions Tax Owner and Direct Owner Example 1 CFC is a tax owner of the FP and FDE CFC is a direct owner of FP CFC is a direct owner of FP FP is a tax owner and direct owner of FDE FP is a tax owner and direct owner of FDE U.S. CO-OP CFC(Canada) FP(France)
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 29 Form 1118, Foreign Tax Credit
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 30 Foreign Income Taxes Credit vs. Deduction Foreign Tax Credit Annual Election Dollar for dollar credit against U.S. tax payable. Subject to limitation Available for creditable foreign income taxes and for any taxes paid in lieu of an income tax File Form 1118 to claim the credit Deduction to Taxable Income Deduction may be taken in lieu of credit (§ 164(a))
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 31 Part III: Other Items of Importance
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 32 Other Items of Importance Relevant Information Reporting Code Sections Penalties for failure to submit information Statute of Limitations Withholding Tax Making an Initial Entity Classification Election Form 1120-C, Schedule N, Foreign Operations of U.S. Corporations Form 8621, Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund List of other relevant forms
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 33 Relevant Information Reporting Code Sections For your reference below is a list of the Internal Revenue Code sections that require information reporting with respect to Forms 5471, 5472, 926, 8865, and 8858. Further guidance is available in the regulations under these Code sections § 6038 requires U.S. persons that control certain foreign corporations and/or partnerships to report certain transactions of the foreign corporation and/or partnership Form 5471, 8858, and 8865 § 6038B requires U.S. persons to report certain transfers of property to foreign corporations and foreign partnerships, as well as certain liquidation distributions to non-U.S. persons Forms 8865 and 926
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 34 Relevant Information Reporting Code Sections (Cont’d) § 6038A and 6038C requires a 25% foreign owned U.S. corporation or a foreign corporation engaged in a USTB to report certain transactions with a foreign or domestic related party Form 5472 § 6046 requires a return to be made by certain U.S. persons who are or become officers or directors of foreign corporations, or make certain acquisitions of the stock of foreign corporations; Form 5471 § 6046A requires U.S. persons to report certain acquisitions and dispositions of interests in foreign partnerships, along with substantial changes in the proportional interests in foreign partnerships § 6046A requires U.S. persons to report certain acquisitions and dispositions of interests in foreign partnerships, along with substantial changes in the proportional interests in foreign partnerships Form 8865
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 35 Penalties for Failure to Submit Information
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 36 Civil Penalties § 6038 Information Reporting Applies to Forms 5471, 8865, and 8858 $10,000 penalty for failure to furnish required information for each annual accounting period for each entity If failure-to-file continues for more than 90 days after IRS notice, IRS may impose an additional $10,000 penalty for each 30-day period (or fraction thereof), up to $50,000 maximum additional penalty for each entity FTC reduction penalty: Potential loss of a portion of foreign taxes available for credit under §§ 901, 902, and 960
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 37 Civil Penalties § 6038A Information Reporting Applies to Form 5472 $10,000 penalty for failure to furnish required information for each annual accounting period for each entity Each member of a group of corporations filing a consolidated information return is a separate reporting corporation subject to a separate $10,000 penalty If failure-to-file continues for more than 90 days after IRS notice, IRS may impose an additional $10,000 penalty for each 30-day period during which the failure continues after the 90-day period ends
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 38 Civil Penalties § 6038B Transfers to Foreign Persons Applies to Forms 926 and 8865, Sch. O A penalty equal to 10% of the FMV of the property at the time of the transfer Limited to $100,000, unless the failure is due to intentional disregard The transferor must recognize gain on the contribution as if the contributed property had been sold for its FMV
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 39 Civil Penalties §§ 6046 and 6046A Reportable Transactions Applies to Forms 5471 and 8865 $10,000 penalty for each failure to file for each reportable transaction If failure-to-file continues for more than 90 days after IRS notice, IRS may impose an additional $10,000 penalty for each 30-day period (or fraction thereof), up to $50,000 maximum § 6046 penalties implemented by § 6679
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 40 Criminal Penalties Criminal penalties under § 7203, 7206, and 7207 may also apply for failure to submit information or for filing false or fraudulent information
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 41 Recent Developments for Forms 5471 IRS LMSB Letter Concerning Form 5471 “Beginning January 1, 2009, the Internal Revenue Service Center will automatically assert appropriate penalties on late filed Forms 1120 with Forms 5471 attached” This will not preclude the IRS from assessing penalties prior to January 1, 2009 The penalty for a late filed or incomplete Form 5471 applies even if no tax is due
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 42 Statute of Limitations
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 43 Statute of Limitations § 6501(c)(8) § 6501(c)(8) provides rules for failure to report information under IRC §§ 6038, 6038A, 6038B. 6046, 6046A, and 6048 Similar to other U.S. income tax returns the statute of limitation is limited to three years The three-year statute of limitation begins to run when the form is timely filed and complete E.g. A taxpayer timely files Form 1120-C for its year end 1999, but fails to attach Form 5471. In 2002, this taxpayer files the Form 5471 to report its 1999 transactions, which was originally due in 2000 with its 1999 Form 1120-C. In this case the statute of limitations runs from 2002–2005 FORMER LAW: This extension of the statute of limitations does not apply to the entire income tax return. In the above example, the statute of limitations for the Form 1120 is not affected by the late filing of the Form 5472
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 44 Statute of Limitations Recent Changes to § 6501(c)(8) Public Law No. 111-147 significantly changes the limitations period for taxpayers required to file Forms 926, 3520, 3520-A, 5471, 5472, 8621, 8858 and 8865 The period for assessment of tax for the entire return is extended until 3 years following reporting the appropriate information on those forms That is, tax may be assessed on any return, even if unrelated to the information that was not reported, for a period 3 years following the date that information was appropriately reported. Congress has called these changes a “clarification of existing law” As a result, any tax return that did not include information required under any of the relevant forms is potentially open for assessment
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 45 Statute of Limitations § 6501(c)(8) (Cont’d) Substantially Incomplete Forms The determination of substantially incomplete forms is based on the rules provided under the relevant code section (IRC §§ 6038, 6038A, 6038B. 6046, 6046A, or 6048) § 6501(c)(8) will apply as if the form had not been filed
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 46 Withholding Tax
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 47 U.S. Taxation of Investment Income Generally, the United States taxes the gross amounts of a foreign person’s U.S. source non-business investment income that is not ECI This non-business income is referred to as “FDAP” income E.g., interest, dividends, rents, royalties, etc. Generally, the person controlling the payment of income must deduct and withhold U.S. tax at 30% (or lower treaty rate) Certain FDAP items of a foreign person are not subject to gross-basis taxation E.g., short-term OID, “portfolio interest”
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 48 Withholding Forms Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons Form1042-S, Foreign Person's U.S. Source Income Subject to Withholding Form 1042-T, Annual Summary and Transmittal of Forms 1042-S
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 49 Withholding Forms (Cont’d) W-8 BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding W-8 IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding W-8 ECI, Certificate of Foreign Persons Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States Form 8804, Annual Return for Partnership Withholding Tax Form 8805, Foreign Partner’s Information Statement of Section 1446 Withholding Tax
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 50 Withholding Forms (Cont’d) Form 8813, Partnership Withholding Tax Payment Voucher From 8288, U.S. Withholding Tax Return for Disposition by Foreign Persons of U.S. Real Property Interests Form 8828-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests Form 8828-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 51 Making an Initial Entity Classification Election
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 52 Making an Initial Entity Classification Election Form 8832, Entity Classification The form of the entity may be selected upon the inception of the business or at anytime during the operation of the business A classification election, excluding an initial election, must be maintained for five years See Treasury Regulation § 301.7701-2(b)(8) for the per se entity list Due within 75 days from the date the entity was formed An election will be effective on the date specified in the Form 8832 so long as the date specified is not more than 75 days prior to the date the election is filed and not more than 12 months after the date the election is filed
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 53 Form 1120-C, Schedule N
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 54 Form 1120-C, Schedule N, Foreign Operations of U.S. Cooperatives Who Must File U.S. domestic cooperatives that, at any time during the year, had assets in or operated a business in a foreign country or a U.S. possession may have to file Schedule N Includes indirect ownership through subsidiaries, partnerships or disregarded entities
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 55 Form 8621, Return by a Shareholder of a PFIC or QEF
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 56 PFIC Overview Anti-deferral regime prohibiting the ability of U.S. persons to defer U.S. taxation on passive investments channeled through foreign entities A PFIC is generally any foreign corporation that meets either an income test or an asset test Income test—75% or more of its gross income for a taxable year is “passive income” Asset test—the average percentage of assets held by the corporation during the taxable year produce passive income or which are held for the production of passive income is at least 50% Look-through—25% (assets and income)
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 57 List of Other Relevant Forms
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 58 List of Other Relevant Forms Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts Form 8838, Consent to Extend the Time to Assess Tax Under Section 367-Gain Recognition Agreement Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)
© 2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. FOR INTERNAL USE ONLY. 59 Presenter contact Information Phil Mogen Principal KPMG International Corporate Services San Francisco, CA (415) 963-7312 pmogen@kpmg.com
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