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Does a Saudi business owner with US citizenship need to file a US foreign corporation tax return?

Yes, if you own or control a significant portion of a foreign corporation, you are required to file Form 5471 to report your interest and comply with US tax laws.

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What is Form 5471 used for?

Form 5471 is used by US citizens who are officers, directors, or shareholders in foreign corporations to report their transactions and activities.

When do you need to file Form 5471?

  • 10% or More Ownership: You must report on Form 5471.
  • Less Than 10% Ownership: Typically not required unless combined family ownership exceeds 10%.

What if you own more than 50% of the foreign corporation?

If you own more than 50%, it becomes a Controlled Foreign Corporation (CFC). This means the corporation’s net income is taxable to you, even if no distributions are made.

What should you do before establishing a foreign corporation?

Consulting a tax professional before setting up a foreign corporation is crucial to understand the tax implications and reporting requirements, helping to prevent future issues.

What if you’re an existing shareholder who forgot to file?

If you forgot to file, contact a tax professional to explore options such as the Streamlined Filing Compliance Procedures to correct past non-compliance without severe penalties.

What else should you know?

If you have signature authority over the corporation’s bank account, you must report it on your Foreign Bank Account Report (FBAR).

Why partner with a specialist Expat accountant?

Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in Germany. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.


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