Global Intangible Low-Taxed Income (GILTI) is a tax on certain income earned by CFCs that exceeds a 10% return on tangible assets. US shareholders must include their pro-rata share of GILTI in their gross income. GILTI is taxed at ordinary rates, but a Section 250 deduction allows a 50% deduction for corporate shareholders (37.5% for individuals making a Section 962 election).

What is Subpart F income?

Subpart F income is passive or easily movable income earned by a CFC that is attributed to US shareholders currently, regardless of whether distributions are made. It includes dividends, interest, rents, royalties, foreign base company sales and services income, and insurance income.

What is the penalty for not filing Form 5471?

The penalty for failure to file Form 5471 is $10,000 per form per year. Additional penalties of $10,000 per month (up to $50,000) apply if the failure continues after IRS notice. Criminal penalties may apply for willful failure to file. The statute of limitations on your entire return is also suspended until the form is filed.

Form 5471: Information Return of U.S. Persons with Respect to Certain Foreign Corporations

Form 5471 is the disclosure form that strikes fear into every American business owner abroad. If you own a foreign corporation, a foreign LLC treated as a corporation, or even a significant stake in one, Form 5471 is how the IRS tracks your overseas business interests. Get it wrong, and the penalties start at $10,000 per year. This guide explains who must file, what information is required, and how to navigate the complex attribution rules.

Who Must File Form 5471?

Form 5471 is required for "US persons" (citizens, residents, domestic corporations, partnerships, trusts, or estates) who fall into any of these categories:

Category 1: Section 965 Specified Foreign Corporation

Category 1 generally covers a U.S. shareholder of a section 965 specified foreign corporation, with subcategories 1a, 1b, and 1c in the current instructions. This is a specialized category; do not substitute it for Category 5 merely because the company is foreign.

Category 2: Officer or Director

You are a U.S. citizen or resident who is an officer or director of a foreign corporation in which a U.S. person acquired stock meeting the applicable 10% ownership threshold, or acquired an additional 10% or more in value or voting power.

Category 3: Acquisition/Disposition

You are a U.S. person involved in acquisitions or dispositions that meet the current Category 3 ownership and reporting rules, including transactions that reach or change the applicable 10% stock ownership threshold. Direct, indirect, and constructive ownership, attribution, and the Schedule O instructions must be reviewed.

Category 4: Controlling US Person

A U.S. person who had control of a foreign corporation during the corporation's annual accounting period. Current instructions generally define control as more than 50% of voting power or value, including certain indirect ownership chains.

Category 5: US Shareholder of a CFC

A U.S. shareholder who owned stock in a foreign corporation that was a CFC during the relevant accounting period and who owned the stock on the last day the corporation was a CFC. The current instructions include subcategories 5a, 5b, and 5c and special exceptions.

What Is a Controlled Foreign Corporation (CFC)?

A CFC is a foreign corporation where:

US shareholders collectively own more than 50% of the total combined voting power or total value
Each US shareholder owns at least 10%

Example: You and two American partners each own 20% of a Costa Rican corporation. Because US persons own 60% collectively, and each owns at least 10%, the corporation is a CFC. All three of you must file Form 5471.

Constructive Ownership Rules

The IRS looks through family relationships and entity ownership:

Stock owned by your spouse, children, parents, or siblings is attributed to you
Stock owned by a corporation, partnership, or trust you control is attributed to you
These attribution rules can create CFC status unexpectedly

What Information Does Form 5471 Require?

Form 5471 is lengthy (up to 28 schedules) and requires detailed corporate information:

Basic Information (Schedule A)

Identification of all US shareholders and their ownership percentages
Stock ownership changes during the year
Information about the foreign corporation's officers and directors

Income Statement (Schedule C)

Full income statement translated to US dollars
Reconciliation to local-country financial statements
Adjustments for US tax principles

Balance Sheet (Schedule F)

Opening and closing balance sheets in USD
Reconciliation of retained earnings
Currency translation methods

Subpart F Income (Schedule I)

Passive income (dividends, interest, rents, royalties)
Foreign base company sales income
Foreign base company services income
Insurance income

Other Schedules

Related-party transactions
Cost sharing arrangements
Transfer pricing documentation
Foreign tax credit computations

Section 951A and Other CFC Income Questions

For tax years beginning after December 31, 2025, Public Law 119-21 amended section 951A and replaced the prior GILTI/QBAI framework with a "net CFC tested income" framework. Currently available 2025 forms and prior-year guidance still use GILTI and QBAI terminology. Filing work must compare the corporation's tax year with the controlling effective dates and current IRS guidance, not freeze a pre-2026 example as current advice.

Current Inclusion Is Separate From a Distribution

A filing category may exist without current section 951A or Subpart F income, and current income can arise without a cash distribution. Required schedules differ by category and facts; all-zero amounts do not necessarily eliminate a required schedule.

Section 962 Election Is a Separately Modeled Annual Choice

An individual can elect under section 962 to be taxed at corporate rates on specified CFC inclusions and to claim indirect foreign tax credits, but it is an annual election with computation, documentation, previously-taxed-earnings, and later-distribution consequences. It is not automatic relief and should not be promoted as a routine savings step.

Subpart F Income

Before GILTI, Subpart F was the primary anti-deferral regime. It still applies alongside GILTI:

Types of Subpart F Income

Passive Income: Dividends, interest, rents, royalties, annuities, excess gains from property sales
Foreign Base Company Sales Income: Income from sales where the CFC acts as a middleman between related parties
Foreign Base Company Services Income: Income from services performed for related parties outside the CFC's home country
Insurance Income: Income from insurance or reinsurance of US risks

Current Inclusion

US shareholders must include their pro-rata share of Subpart F income in their personal return, even if the CFC makes no distributions. This prevents deferring passive income inside the foreign corporation.

Filing Deadlines and Penalties

When to File

Form 5471 is filed with the U.S. person's income tax return. The applicable due date depends on the filer's filing status, extension position, and the company's accounting period. Verify the due date against the current Form 5471 instructions and the relevant individual or entity return instructions.

Penalties

$10,000 per form per year for failure to file required information within the prescribed time
Additional penalties can apply after IRS notice if the failure continues, subject to the current maximums and other rules
Other consequences can include foreign-tax-credit reductions and separate penalties for related reporting failures
Reasonable cause may abate penalties, but the standard is high

Special Situations

Foreign LLCs

A foreign LLC is treated differently depending on its classification:

Disregarded entity: No Form 5471 (but may require Form 8858)
Corporation (by election or default): Form 5471 required if 10%+ owned
Partnership: Form 8865 instead of Form 5471

Many Americans abroad form foreign LLCs without considering US tax classification. The default classification for a single-member foreign LLC is disregarded, but if you elect corporate status or the LLC is automatically classified as a corporation under foreign law, Form 5471 applies.

Foreign Startups with No Income

Even if your foreign corporation has no income or losses, you must file Form 5471 if you meet the ownership tests. The filing requirement is based on ownership, not profitability.

Multiple CFCs

If you own multiple foreign corporations, you must file a separate Form 5471 for each one. The $10,000 penalty applies per form, so owning 3 CFCs and failing to file costs $30,000 per year.

How to Assemble the Form 5471 Workpapers

The form is built from the corporation’s legal, accounting, ownership, and transaction records. Begin with the foreign company’s name, country of incorporation, tax identification number, functional currency, accounting period, and ownership chart. The ownership chart should show direct, indirect, and constructive ownership at the beginning and end of the year, plus any acquisitions, transfers, redemptions, or changes in voting rights. A simple percentage shown on a local share register may not capture the attribution rules used for US reporting.

Accounting records and functional currency

Gather the trial balance, profit-and-loss statement, balance sheet, general ledger, payroll records, fixed-asset schedule, shareholder loans, and local tax return. The US return may require adjustments from local books, including different depreciation, capitalization, income-recognition, expense, and foreign-currency rules. Identify the corporation’s functional currency and document the exchange rates used. Retain the reconciliation so a reviewer can trace Form 5471 amounts back to the books rather than treating the schedules as unexplained totals.

Separate Subpart F, tested income, and distributions

Do not assume that all CFC profit is treated alike. Analyze passive income, related-party sales and services, insurance income, previously taxed earnings and profits, tested income, tested loss, deductions, and distributions. The corporation may have current US inclusions even if it made no distribution. Conversely, a distribution may be paid from previously taxed earnings and profits and require a different treatment from a dividend out of untaxed earnings. The supporting schedule should identify the source of each amount and the shareholder’s pro-rata share.

Transactions that deserve a second review

Flag loans to or from shareholders, related-party payments, management fees, royalties, inventory sales, asset transfers, reorganizations, changes in accounting period, and transactions involving US persons. These facts can change a filing category, create a separate schedule, or affect Subpart F, GILTI, basis, or foreign tax credit calculations. Keep signed agreements and payment records. A bank statement alone may not establish the legal purpose of an intercompany payment.

A year-by-year remediation file

For a late or incomplete filing, create a matrix by corporation and tax year. List the ownership facts, available financial statements, prior Form 5471 schedules, missing data, income inclusions, distributions, and any penalties or notices. Then decide whether the issue is a delinquent information return, an amended income-tax return, or a broader compliance matter. This prevents a current-year filing from silently carrying forward an unresolved historical error.

When to Get Help

Form 5471 is one of the most complex individual tax filings. You should not attempt it without specialized knowledge if:

You own 10% or more of any foreign corporation
You are unsure whether constructive ownership rules make your corporation a CFC
You need to calculate GILTI or Subpart F inclusions
You are considering a Section 962 election
You have failed to file Form 5471 in prior years

The reverse structure: If you are a foreign person who owns a U.S. LLC or corporation, Form 5472 — not Form 5471 — is the relevant information return. Form 5471 covers outbound ownership (U.S. person owns foreign entity); Form 5472 covers inbound ownership (foreign person owns U.S. entity).

FileAbroad's Complex Expat Return includes Form 5471 preparation, GILTI analysis, and CFC structuring advice. To map the company, owners, books, transactions, and filing years before preparation, start with the foreign corporation consultation.