As explained by the Internal Revenue Service (IRS), form 5472 should be used to provide the information required under Section 6038A and Section 6038C when reportable transactions occur during the relevant tax year of a reporting corporation with a foreign related party or a foreign corporation engaged in a US Trade or Business. Needless to say, the official IRS explanation of this form is not a very clear one. IRS form 5472 is challenging to complete and file and, if it is not done correctly, it could lead to serious problems. In this article, I explain what IRS form 5472 is, why you need to file it, and how it should be completed. What is IRS Form 5472? Foreign taxpayers and those involved in international business or global trade often ask: What is form 5472? The most straightforward answer is that IRS form 5472 is fundamentally designed to prevent tax evasion. The U.S. government is concerned that companies with substantial foreign ownership could potentially evade American taxes through disguising transactions.IRS form 5472 is used by the federal government to ensure that companies with substantial foreign ownership accurately report comprehensive financial information. IRS Form 5472: Understanding the Requirements As a starting point, you need to know whether or not you have a duty to submit form 5472 at all. To do this, you must determine if your company is a ‘reporting corporation’ for the purposes of United States tax law. Reporting corporations are U.S. corporations that are 25% owned by a foreign person or foreign entity or a foreign corporation that is engaged in a trade or business within the United States. For reporting corporations, the form 5472 disclosure requirements are broad. Transactions that may need to be reported include: Sales or purchases of investors; Sales or purchases of real property; Royalty payments and licensing agreements; Commission paid or obtained; Borrowing or lending arrangements; and Any other consideration offered for goods or services. More simply, if a transaction with a related foreign entity affects the U.S. tax obligations of the reporting corporation — meaning it resulted in an increase in revenue or an increase in expenses — it is likely that the transaction should be reported using IRS form 5472. With very limited exceptions, the IRS requires the reporting of all related party transactions with international entities. Penalties There are strict penalties for failure to properly file IRS form 5472. In fact, among many other things, the Tax Cuts and Jobs Act of 2017 enacted increased sanctions for violating this tax law. As of December 31st, 2017, the failure to file form 5472 could result in a $25,000 fine. Do not ignore form 5472. If you do not know what to do, get professional help. Instructions for Completing IRS Form 5472 Given the industry-specific terminology and language the IRS uses in its official documents, completing IRS form 5427 can be a complicated endeavor. You will find that the IRS 5472 instructions contain eight sections. This includes: Part I: Reporting companies must give the IRS sufficient identifying information, including the name, address, and a description of principal business activities. Part II: In addition, 25% or more foreign-owned corporations and LLCs must provide basic information identifying the foreign owner(s). Part III: This section is for identifying the related party with which the reporting corporation had reportable transactions during the relevant tax period. Part IV, Part V, Part VI: These sections are all for the reportable transactions. What specific information should be provided will depend on a number of different factors. Part VII: Part VII asks for additional financial information and offers guidance on certain deductions. Part VIII: Finally, the last section is for matters of base erosion and related tax issues. Once again, the process of completing and submitting IRS form 5472 can be confusing and overwhelming. As there are strict penalties for non-compliance, it is crucial that any and all errors are avoided. If you have any questions or concerns regarding your company’s responsibility to submit this form or about how the form should be completed, an international tax attorney will be able to offer actionable guidance. Get Help from an International Tax Attorney I am an experienced international tax law attorney. With an office in Miami, FL, I represent clients from the United States and from German-speaking regions. To schedule a fully confidential consultation, contact me today.Read More
Timo A. Becker, Esquire & Founder
I’m an international attorney in Miami, Florida.
I work with U.S. business owners throughout America and overseas, and I also assist people from German-speaking countries looking to invest or start a business in the United States.
After studying business and tax law in Germany, I practiced internationally for several years before deciding to settle in the United States in Miami, Florida. I come from a family of accountants, tax lawyers, and international merchants. Practicing international business law allows me to draw on all aspects of my background in business, tax, and finance so that I can best help my clients at home or abroad.
My philosophy in work and life stems from the German word “mensch”, meaning a person of integrity and high honor. Menschkeit implies ethical, fair, and noble behavior that earns the admiration, respect, and trust of others.
I always make the best ethical decisions that I can, and that applies to our work together.Learn More About My Practice
If you are considering doing business in the United States or abroad, there are a lot of things to consider.
I consult and provide services in the following areas of law.
Start working on your business today.
Download pre-made contracts that suit your business’ needs.
I offer a variety of pre-made contracts that are ready to download.
Do you need further customization?
Reach out and we will solidify the details together.let's get started
Do you have legal questions about business in the United States and abroad?
Read through my blog to learn more about subsidiaries, intellectual property, visas, and more.
A distributor agreement is a commercial contract between a supplier of goods and a distributor of goods. The supplier may be a manufacturer, or it may be a reseller of the products. In the modern business world, more and more companies are involved in distribution arrangements that cross international boundaries. According to data provided by The World Bank, international trade accounted for nearly one third of U.S. gross domestic product (GPD) in 2017. Companies engaged in this type of cross-border business need well-structured international distributor agreements. Key Clauses in an International Distribution Agreement An international distribution agreement is essentially a contract that creates a framework for a business relationship between global parties. To ensure effective and efficient transactions, an international distribution agreement should be comprehensive. Among other things, some of the main clauses that you typically will find in an international distribution contract include products and territory, obligations of the parties, exclusivity provisions, renewal/termination, and dispute resolution. Products and Territory As a starting point, international distribution agreements will generally provide details regarding the specific products and the specific territory that will be covered by the contract. Obligations of the Parties Similar to other commercial agreements, it is imperative that an international distribution contract clearly outlines the responsibilities of each party. Both the supplier and the distributor must have clarity regarding their duties to perform under the terms of the deal. Exclusivity Provisions Some international distribution agreements include exclusivity provisions. While not all of these agreements are exclusive, this is an issue that should be addressed within the contract negotiations. Renewal/Termination The agreement should also define the length of the commercial relationship. In addition, procedures should be created to deal with issues related to renewal and termination. Dispute Resolution Finally, distributor agreements should include dispute resolution provisions. No matter how good the relationship between the supplier and the distributor, there is always a risk of dispute. With international business contracts, it is often advisable to include an arbitration provision. Arbitration offers many advantages compared to handling disputes under local laws. Of course, this list is just a brief sampling of the important contract terms that you will find in an international distributor agreement. These agreements should always be customized to meet the unique needs of each party. Get Help From an International Business Attorney Today If your company is considering entering into an international distributor agreement, it is essential that you seek professional guidance. As these are complex agreements, there are a number of different unique issues that need to be addressed. I will make sure that the agreement is properly drafted and that it protects the rights and business interests of your company. I frequently represent American clients doing business abroad and German speaking clients doing business in the United States. If you have questions about international distributor agreements, I’m happy to help. To schedule a fully confidential consultation, please contact me today.Read More
If you are considering an international real estate investment, there are some things you should know before moving forward with buying international property. Whether you are currently a resident of the EU and considering a foreign real estate investment in the US, or you are a U.S. citizen and thinking about purchasing property in Europe or elsewhere in the world, the process can be complicated and confusing if it is your first time buying property in another country. Here are some tips for handling your first international real estate investment. Identify Your Goals in Investing in International Real Estate There are many different kinds of real estate, and it is important to consider your own goals—both short-term and long-term—when making a decision about the type of property in which you want to invest. For example, do you want to invest in residential property that you can use as a vacation home but also as a source of rental income when you are away? Or, do you want to invest in commercial real estate that will be rented out to a business in the country where you are investing? And, are you willing to invest more time and money up front to see a bigger return later on in the future, or do you need to begin seeing profits immediately? An article in Forbes emphasizes that you should have specific goals when you decide to invest in real estate. The answers to some of the questions above can help you as you get started. Determine Where You Want to Buy Property As you think about where in the world you want to invest in property—and then in which city and neighborhood specifically—you will want to consider a number of different factors. For example: How much does the type of property cost, on average, in the area where you want to buy? Is it a buyer’s market or a seller’s market? Will you be able to turn a profit if you decide to sell in the near future? What is the long-term economic outlook for the area where you are considering a property investment? Space and Budget: Decide What You Need in a Specific Property Once you identify your large-scale goals and the area where you want to invest in international real estate, your next step should be deciding about the type of property you want and its specifications. For example, you might ask yourself: how large or small do I want the property to be? If you are considering a residential real estate investment, are you willing to invest in a property that will require you to rent it out? What is your ideal budget, and what is the maximum amount you are willing to pay? Additionally, when considering your budget, keep taxation in mind. Every country has unique property tax laws. Learn About Your Options for Financing As an article in The Washington Post explains, bank financing often is not an option for people buying foreign property. While many people invest with cash, you may be able to borrow from “a local lender,” or you may be eligible to get financing from the seller or a real estate developer. Contact an International Real Estate Investment and International Taxation Lawyer Investing in international real estate comes with many complications, but an international investment attorney can help. Contact me to discuss your investment plans.Read More
Mr. Becker assisted us with our international estate planning. His advice was prudent and effective. He is a proven expert on German/American estate tax. Mr. Becker really helped us.Dr. Theodor Weimer
Mr. Becker assists our company regularly in U.S. contractual matters. Additionally, Mr. Becker has excellent knowledge of international taxation and U.S. business immigration. We would like to thank Mr. Becker for his great work so far and wish him lots of success.Christian Rychly & Imme-Marie Claussen, LLM
Managing Director, MPC Maritime Holding, GmbH & Legal Counsel, MPC Capital, AG
Thanks to the assistance of Mr. Becker we were able to realize our dream of having our own property in Florida. Finding the right property wasn’t easy, but dealing with the intricacies of property, estate, and tax law in a foreign legal system certainly posed a challenge to us. All legal aspects have to be well thought trough in order to prevent unwanted surprises in the future. We couldn’t have found a more competent partner than Mr. Becker to guide us through the whole process. Mr. Becker operates in both the German and American legal system confidently. He is able to explain complex legal issues clearly and guarantees for a smooth and swift execution of all necessary tasks.Prof. Dr. Hans-Joerg Schmidt-Trenz
President, Hamburg School of Business Administration (HSBA)