Do I need to file Form 5471 for my Canadian company?
If you are a US person with an interest in a company incorporated outside the United States, then a Canadian company is a foreign corporation for this purpose and the question is live. The obligation attaches to ownership and to influence over the company, not to whether it paid you anything. People are caught by it most often in the year they incorporate, the year they acquire shares, and the years in which the company simply sits there doing very little. What decides the answer is the shareholder register and any agreement affecting control, so start with those rather than with the accounts.
My foreign company made no profit, is there still a filing?
Yes, and that is the part clients find hardest to accept. This is an information return: it reports the existence, the ownership and the financial position of the company, and it is due on those facts whether or not there is any tax to pay. A dormant company with a bank account and a small loss still has to be described, and described in the language of US tax rather than in the words its local accountant used. The cost of the filing is not the tax, it is the restatement work, which is why a company kept open for convenience is rarely a cheap one to keep.
Why does my accountant want my foreign company's full accounts?
Because the return is built from the company's books, not from its foreign tax return. The figures have to be restated to US principles, which is a different exercise from translating them: depreciation is computed differently, some items are recognised in different periods, reserves that are ordinary in one system do not exist in the other, and the whole thing has to be expressed in a currency the return can work with. A signed local tax return tells you what the other country taxed. It does not tell you the amounts this form asks for, which is why the ledger is the starting point.
What happens if I have never filed this form for my company?
Two things, and the second is the one people underestimate. There is a penalty attaching to the return itself, charged per form and per year, independent of whether any tax was owed, so a loss-making company can generate a real exposure. And a missing information return can stop the year closing, which means a tax year the client believed was long settled remains open to examination. That combination is why the work is usually to establish the whole history first, decide on a route for bringing it in, and file the years as a set, rather than starting with the most recent one and hoping.
Do my business partner and I both file for the same company?
Possibly. The obligation is personal to each US person with an interest, so one company can generate several filers, each reporting the same corporation from their own position. There are circumstances in which one person's filing can satisfy the others, but that has to be identified deliberately, with the arrangement recorded and each person named where the form expects it, not assumed because somebody said they were handling it. The common failure is two shareholders each believing the other filed. Decide who files, record the decision, and have everyone keep a copy of what went in.
Is this the same as reporting my foreign bank accounts?
No, and doing one does not discharge the other. The account-reporting forms describe accounts you hold or can sign for. This return describes a company: who owns it, what it owns and owes, what it earned and what tax it paid. A company with a bank account can put you inside both systems at once, for the same money, on different forms with different tests and different deadlines. People who have reported their accounts carefully for years are often surprised by this one, because nothing in that process ever asks about a shareholding.
How is a GILTI inclusion calculated, in outline?
Start at the foreign company: its tested income or loss for the year, computed under US principles. Aggregate those across all your controlled foreign corporations, net the losses, then reduce by a return on qualifying tangible business assets less certain interest expense. What remains is your inclusion, brought into your own return, where the deduction and any credit are applied. Every one of those percentages has been amended, so the mechanism is stable and the arithmetic is year-specific. See the GILTI inclusion and Form 8992.
Do I have to file in both countries?
Frequently yes, and the two filings do different jobs. The country where the income arises taxes it at source; the country where you are resident taxes your worldwide income and then gives credit for the tax already paid. Filing only one side is what leaves relief unclaimed — the credit has to be asked for on a return. We prepare both sides so the numbers agree. See dual filing.
