Do I file Form 926 even if no tax is owed?
Information return obligations of this kind are generally required on the facts rather than on the tax result, so a nil position does not remove one. US transferors who contribute property to a foreign corporation on formation or afterwards, above the reporting level.
What happens if I have missed Form 926 for several years?
Missed years are dealt with as a package rather than one at a time, because the route chosen for the first year affects the relief available for the rest. We map the years and the obligations before anything is filed.
Is Form 926 the same as the other reports I already file?
No. Reports a US person's transfer of property — cash, shares, intangibles — to a foreign corporation. Satisfying a different obligation, even one covering the same accounts or entity, does nothing for this one.
Do I report cash I put into my own foreign company?
Yes, that is exactly the transaction this report is aimed at. A US person who transfers property to a foreign corporation reports it, and cash is property for this purpose. The reason people miss it is that capitalising a company you have just formed does not feel like a transaction at all; it feels like an administrative step in setting the company up. There is no counterparty pressing you for paperwork and nothing arrives in the post to prompt it. If you have funded a foreign company you control, treat the funding itself as a reportable event and check the position for the year it happened.
I set up a company abroad — do I report the shares I received?
The reportable event is your transfer of property to the foreign corporation, not the shares that come back to you. So the question to ask is what went in: cash, existing shares in another company, equipment, intellectual property, or a business. Whatever you contributed on formation is the thing to test, and the shares you hold afterwards are the consequence rather than the trigger. People reverse this and conclude that because they simply own a foreign company, there is nothing to report about the year they created it. The year of formation is usually the year the reporting arises.
What is the penalty for missing this form?
The penalty is computed as a percentage of the value transferred, which is what makes this filing different in character from the ordinary flat-rate information returns. A single sizeable contribution of capital can therefore carry an exposure out of all proportion to the effort the report would have taken, and the exposure scales with the transaction rather than with the number of years missed. This is the practical reason to establish the position for any year in which you moved property into a foreign company, even if nothing else about that company's affairs is troubling you.
Does transferring intellectual property to my foreign company count?
Intangibles are within the property this report covers, alongside cash and shares. In practice this catches founders who form a company abroad and assign to it software, designs, trade marks or other rights developed beforehand, often treating the assignment as tidying up ownership rather than as a transfer of anything. It is a transfer, and because the penalty is measured against value, an intangible with real worth carries real exposure. Anything you moved into the company, including rights that were never on a balance sheet, belongs in the analysis for the year the assignment took effect.
Do I file this every year or only once?
It follows transfers rather than the calendar. Reporting arises for a year in which you transferred property to the foreign corporation, whether that was on formation or at any point afterwards, so a year with no transfers into the company may require nothing under this heading. That is why the analysis has to be a transaction history rather than a status check. Working capital injected in a later year, a further contribution of shares, or property assigned as the business develops each raise the question again, independent of whatever else you file each year about the company itself.
Does a later top-up of capital need reporting as well?
It can. The obligation attaches to transfers made on formation or afterwards, above the reporting level, so a company that was correctly reported at incorporation does not carry a permanent exemption for everything that follows. Founders who put money in as the business needs it, in several instalments across different years, are the ones most likely to report the first contribution and nothing else. The workable approach is to keep a running record of what has gone into the company and when, and to test each year's transfers against the reporting level rather than remembering the first one.
Should I use a branch or a subsidiary abroad?
A branch is the same legal entity operating in another country, so its profits and losses sit with the parent and it is taxed there as a permanent establishment. A subsidiary is a separate company, taxed in its own right, with dividends and withholding on the way home. Losses, repatriation cost and liability usually decide it, and the answer differs by country pair. See branch vs subsidiary.
Why are corporations double taxed?
Corporate double taxation happens because the company and its owners are separate taxpayers. The company pays tax on its profit; when the after-tax profit is distributed, the shareholder pays tax on the dividend. Canada softens this with the dividend gross-up and credit, which is meant to leave a shareholder roughly where they would have been earning the income directly. The United States taxes the C corporation and then the dividend, with no equivalent integration. See dividends to a foreign parent.
