As if individuals and entities with foreign investments do not have enough reporting to do already, they are now required by the Bureau of Economic Analysis under the US Department of Commerce to fill out mandatory surveys about their foreign affiliates. The key here is that it is mandatory and the only incentive for filling it out is not to incur a penalty that may range from $2,500 to $25,000. Looks more like a stick to me than a carrot…
The survey covers US persons owning 10 percent or more interest in a foreign affiliate (incorporated or not). US person means any person (i.e. individuals, trusts, estates, businesses) resident in the United States or subject to the jurisdiction of the United States. It is important to refer to the definition of residency listed in the instructions to the survey as it is interpreted slightly differently than under the tax law.
Determining existence of a foreign affiliate has to account for all facts and circumstances. In general, a U.S. person’s foreign operation or activity is considered a foreign affiliate if it is legally or functionally separable from the domestic operations or activities of the U.S. person. For example, if the operation or activity is incorporated abroad – as most are – it is always considered a foreign affiliate. Even if it is unincorporated, such as a branch or a foreign partnership, the foreign operation or activity is usually legally or functionally separable from the U.S. person’s domestic operations or activities.
What I have found surprising is that rental of foreign real estate also qualifies as a foreign affiliate and, therefore, should be disclosed in the survey. There is a minor exception to the rule for foreign primary residencies owned by US individuals that are intended to be reoccupied in the future.
The instructions to the survey contain various definitions of what falls under a category of a foreign affiliate and they should be referred to when making a final determination of what applies to your circumstances.
The survey consists of several forms: BE 10A that is to be filled out about a US owner and BE10B, 10C and/or 10D that is to be completed for a foreign affiliate. The difference among 10B, 10C and 10D is the threshold for assets, revenues and net income for a foreign affiliate and depending on which category your affiliate(s) falls under, you may fill out only one of the three or all three of them if you own multiple foreign affiliates meeting different thresholds.
The filing due date is May 29th, 2015, but you can request an extension by filing it before the due date. The survey can be faxed, mailed or electronically filed if you set up an account with the BEA.
The time is running out so make sure your due date list has one more task added…