International Tax Information Due Soon for US-Based Companies with Foreign Investments
US companies having cross-border relationships or engaging in cross-border transactions are required to participate in a benchmark survey to report on their foreign affiliate holdings to the Bureau of Economic Analysis (“BEA”) every five years. The BEA is part of the US Department of Commerce, and the survey is conducted through a series of forms known as the BE-10.
The BE-10 generally applies to any US Person that had a direct or indirect ownership or control of 10 percent or more of the voting stock (or its equivalent) of a non-US business enterprise at any time during its 2019 taxable year. A US Person for this purpose is defined as an individual, corporation, partnership, estate or trust, including non-profit organizations. If the filer is a corporation, reports must cover the fully consolidated US domestic business enterprise.
The deadline for filing the 2019 forms is May 29, 2020.
Participation in the survey is required regardless of whether a US company has securities registered with the Securities and Exchange Commission or whether it has been contacted by BEA staff to make a filing.
The BE-10 Benchmark Survey collects a variety of information about US investments abroad, such as:
- Revenues, by industry segment
- Gains and losses
- Costs of goods sold
- Balance sheet items, such as cash, intangibles, liabilities, and equity
- Number of employees by foreign jurisdiction
- Research & development spend and activities
- Interest and royalty expenses
- Foreign taxes
- Imports and exports activity
The government recognizes the sensitivity inherent in the information required to be provided and therefore treats such as confidential, similar to US tax reporting requirements with respect to foreign and domestic operations. Moreover, there is substantial similarity between the information required to be provided in BE-10 forms and that which is required in US tax returns for such multinational groups, although the reporting thresholds are lower for BE-10 forms in comparison to annual reporting to the Internal Revenue Service, which may lead to greater resource requirements for the Benchmark Survey.
It is important to note that foreign real estate held by US persons is also subject to BEA reporting, as it is considered a foreign enterprise. An exemption from reporting is provided to the extent that foreign real estate is used exclusively for personal use. Thus, the rental of foreign real estate is required to be reported to the BEA, unless the rental is one’s primary residence and only leased when the owner is not resident in the foreign country.
The BEA has indicated that extension requests are available in light of the recent COVID 19 crisis. However, given the impending deadlines, and the amount of information required to comply, US persons with 10 percent or more ownership stakes in foreign entities and real estate are urged to begin the reporting process as soon as possible.
Cherry Bekaert can assist in determining if there is a BEA filing requirement along with completion of the applicable BEA forms, if required. If you have questions or concerns on how the reporting process affects you, please contact a member of the ITAX team or your trusted Cherry Bekaert professional.