US 9 | Australian Companies in US Returns

US Tax

You either just show dividends paid or you have to use a look-through approach for Australian companies in US returns.

How are Australian companies picked up in US returns? So-called 1040s? Do you just record the dividend as income when paid? Or is it a look-through approach and you recognise income based on attribution?

These are just some of the questions Seth Hertz of Expat US Tax will discuss with you in this episode.

Here is what we learned but please listen in as Seth Hertz explains all this much better than we ever could.

Australian Companies in US Returns

There are two ways to show Australian companies in US returns, so-called 1040’s. You either just show dividends when and as you receive them. Or you use a look-through approach and disclose their financial statements in Form 5471.

Of course, you would prefer to just show dividends paid. But unfortunately, you don’t have a choice.

Control

It all depends on whether you have control or not.

If you have control and hold – either directly or indirectly – more than 50% and hence control the company, then you prepare and attach Form 5471 to your 1040 and the income is attributed to you on an accrual basis. And watch out for GILTI – Global Intangible Low Taxed Income.

But if you don’t control the Australian company, then you just pick up dividends on a cash basis in your 1040.

Filing Obligations in the US

An Australian company usually doesn’t have a filing obligation in the US. Usually. But there is a long list of scenarios that would trigger a filing obligation for your Australian company in the US. Doing business in the US through a permanent establishment (PE) would be one example.

This is just a very short summary. Seth Hertz covers a lot more in this episode. Please listen in since we only touched the surface here.

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