A constructive owner is an individual or entity that, although not holding the legal title to the stock, is treated as the owner of the stock for U.S. tax purposes due to their control or economic interest in the foreign corporation. A direct owner is an individual or entity that holds the legal title to the stock of the foreign corporation. The difference lies in the reporting and taxation of the ownership, as constructive owners are required to report their ownership on Form 8865, while direct owners may not be required to do so if they are U.S. citizens or resident aliens and meet certain other requirements.