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May 7, 2020

BE-10 Benchmark Survey of US Direct Investment Abroad

Posted by Armanino Tax Team

NOTE: Armanino works with a significant number of individuals and business owners who converse in Japanese. As a service to these clients, we have translated a recent BE-10 Tax Alert.

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BEA collects financial and operating data on US-owned business activities abroad, which is used to compile a number of different economic and statistical reports on the scale and effects of those US-owned business activities. Business leaders use these statistics to inform decisions about hiring and investing. Policymakers and researchers use them to analyze the impacts of direct investment on jobs, wages, productivity and taxes. Information submitted to BEA is confidential and is to be used for such economic and statistical reporting purposes only.

What is the Purpose of the Survey?

BEA collects financial and operating data on US-owned business activities abroad, which is used to compile a number of different economic and statistical reports on the scale and effects of those US-owned business activities. Business leaders use these statistics to inform decisions about hiring and investing. Policymakers and researchers use them to analyze the impacts of direct investment on jobs, wages, productivity and taxes. Information submitted to BEA is confidential and is to be used for such economic and statistical reporting purposes only.

Who is Required to File?

Any US person that had a foreign affiliate at the end of the person’s 2019 fiscal year is required to file a BE-10.

This applies to:

  • Individuals who were resident in the U.S. for 2019,
  • And U.S.
    • corporations,

who either had a 10% or more direct or indirect ownership in a foreign corporation, a foreign branch or foreign rental property.

A US person includes any person resident in the United States or subject to the jurisdiction of the United States. Determining if an individual is a “US person” depends on the individual’s county of residence, not their citizenship, tax or immigration status. An individual who has resided in the United States for all of 2019 likely would be treated as a US person. An individual who is not a US citizen and has resided in the United States for less than one year likely is not treated as a US person. Determining the residence of an individual in other situations is not as straightforward and the BEA’s rules for determining residence will need to be applied to each situation.

A US person has a foreign affiliate if the person has “direct or indirect ownership or control of at least 10% of the voting stock of an incorporated foreign business enterprise, or an equivalent interest in an unincorporated foreign business enterprise, including a branch.”

A foreign affiliate includes foreign rental real estate property. This includes a single unit rental property used by the owner for part of the year and rented out the rest of the year unless the property is the US owner’s primary residence and leased while the owner is out of the foreign country. Foreign real estate held by a corporation for the personal use of the corporation’s owners is not a foreign affiliate.

As a general rule, for most of our clients, if they were required to file IRS Forms 5471, 8865, 8858 or 8938 with their U.S. tax return or own or manage rental real estate in a foreign country, there will be a Form BE-10 filing requirement.

A US person meeting the filing requirement must file, even if not contacted directly by the BEA. For a US person that has been contacted by BEA about filing a BE-10, if the US person had no foreign affiliates during its 2019 fiscal year it would need to file “BE-10 Claim for Not Filing”.

What Forms Must be Filed?

A US person subject to the filing requirements must file Form BE-10A, which covers the US reporter, along with Form BE-10B, BE-10C or BE-10D, for each of the foreign affiliates depending on the percentage of ownership and size of the foreign business enterprise. Although US reporters that do not meet certain thresholds have abbreviated filing requirements, there is no de minimis exception from filing.

When is the BE-10 Report Due?

The deadline to file the BE-10 report depends on how many Form(s) BE-10B, BE-10C, and/or BE-10D (in total) the person is required to file. For those filing fewer than 50 Forms, the deadline for the fully completed and certified BE-10 report is May 29, 2020. For those filing 50 or more Forms, the deadline is June 30, 2020. BEA will consider “reasonable requests” for an extension of the filing deadline. The requests must be received by BEA no later than the original due date of the report and enumerate substantive reasons necessitating the extension.

What if I don’t submit the form?

Failure to file a BE-10 Report with BEA can lead to civil penalties and/or criminal penalties (for willful violations).

Up to $10,000 can be fined on purpose, and for individuals less than a year in prison, or both.

An officer, director, employee, or agent of a company who knowingly participates in such a violation may be punished with similar fines, imprisonment, or both if convicted.

What To Do Now

The International Tax Department of ARMANINO LLP has professionals who are familiar with BE-10 and will analyze each customer’s case and show how they can assist in submitting the BE-10 form. If you would like to know more about BE-10, please do not hesitate to contact the ARMANINO LLP Japanese staff.

We can help

Armanino carefully monitors the changing tax laws and will send updates when new information becomes available. If you would like more information on this topic, please contact our experts.

Miho Ikeda 池田 美保

Miho.Ikeda@armaninoLLP.com

310 745 5851

Jun Tamahashi 玉橋 準

Jun.Tamahashi@armaninoLLP.com

310 745 5766

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