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Direct Foreign Investment Into The US

Posted by James Simango, CPA
James Simango, CPA
James Simango CPA (U.S. Qualified), CPA Australia, B.Sc (Fin)(Acc) James is a
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on Saturday, 28 January 2012
in Australian Property Investors

Form BE-15 Claim for Exemption  

This report is required if foreign ownership in the U.S affiliate falls below 10 percent, the U.S. affiliate is fully consolidated or merged into another U.S. affiliate, or if all of the following three items for the affiliate are $40 million or less (positive or negative):

 Following an initial filing, the BE-15 Claim for Exemption is not required annually from U.S. affiliates that meet the stated exemption criteria from year to year.

The reporting is similar when foreigners are buying property here in Australia.  They request permission to acquire property from the Foreign Investment Review Board (the FIRB).

 Who Must Use This Form?

All U.S. business enterprises in which a foreign person (in the broad legal sense, including a company) owns directly and/or indirectly a ten-percent-or-more voting interest (or the equivalent) are subject to these reporting requirements.

This includes foreign ownership of real estate, improved and unimproved, except residential real estate held exclusively for personal use and not for profit making purposes. A U.S. business enterprise or real estate subject to these reporting requirements is hereinafter referred to as a U.S. affiliate.

A foreign person owning a ten-percent-or-more voting interest (or the equivalent) in a U.S. affiliate is hereinafter referred to as a foreign parent.

Why Report BE-15 Claim For Exemption?

If the value of your total assets is below $40 million, you eligible to obtain an exemption from   filing on an annual basis. Any exemption is obtained by filing.

Is this reported to the IRS?

No.  The report  is filed with the the Bureau of Economic Analysis (BEA). This is required pursuant to the International Investment and Trade in Services Survey Act.

Are they any other requirements?

Every 5 years the Bureau conducts a benchmark survey (Form BE-12) and any company, whether exempt or not, must file a form. The next benchmark form BE-12 is for the year 2012 and is expected sometime in June, 2012.

The BE-12 Benchmark Survey is BEAs most comprehensive survey of foreign direct investment in the United States, and is intended to cover the universe of foreign direct investment in the United States in terms of value. The benchmark survey is conducted once every 5 years (in lieu of the BE-15, annual survey. Note BE-15 is annual form. The purpose of the BE-15 Claim for exemption is so that you would not need to file an annual BE-15). The current benchmark survey covers the year 2007. A 2007 BE-12 report is required for each U.S. affiliate whose fiscal year ended in calendar year 2007.

 Why Comply? (Penalties)

Penalties – Whoever fails to report shall be subject to a civil penalty of not less than $2,500, and not more than $25,000, and to injunctive relief commanding such person to comply, or both.

These civil penalties are subject to inflationary adjustments.

Whoever wilfully fails to report shall be fined not more than $10,000 and, if an individual, may be imprisoned for not more than one year, or both. Any officer, director, employee, or agent of any corporation who knowingly participates in such violations, upon conviction, may be punished by a like fine, imprisonment, or both.

Does the Bureau of Economic and Analysis Report this information to the IRS?

Confidentiality – The reports you provide to the Bureau are CONFIDENTIAL and may be used only for analytical or statistical purposes. Without your prior written permission, the information filed in your reports CANNOT be presented in a manner that allows it to be individually identified. Your report CANNOT be used for purposes of taxation, investigation, or regulation. Copies retained in your files are immune from legal process.

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