Instructions For Schedule S (Form 1120-F) - 2010 printable pdf download

2010

Department of the Treasury

Internal Revenue Service

Instructions for Schedule S

(Form 1120-F)

Exclusion of Income From the International Operation of Ships or Aircraft Under

Section 883

•

Section references are to the Internal

grants to corporations organized in the

The activities of travel agents and tour

United States an equivalent exemption

operators,

Revenue Code unless otherwise noted.

•

(defined below) for the category of

Rental by a container leasing company

qualified income, derived by the foreign

of containers and related equipment, and

What’s New

•

corporation seeking qualified foreign

The activities of a concessionaire.

corporation status. A foreign country may

The term international operation of

T.D. 9502, 2010-46 I.R.B. 641, contains

be a qualified foreign country with respect

ships or aircraft means the operation of

final regulations under sections 883(a)

to one category of qualified income but

ships or aircraft (as defined above) with

and (c). The final regulations include rules

not with respect to another such category.

respect to the carriage of passengers or

that permit foreign corporations to take

A qualified foreign corporation is a

cargo on voyages or flights that begin or

into account ownership of bearer shares

corporation as defined in section

end in the United States, as determined in

for purposes of satisfying the stock

7701(a)(3) that is organized in a qualified

Regulations section 1.883-1(f)(2). The

ownership tests of section 883(c) when

foreign country and considered engaged

term does not include the carriage of

the bearer shares are maintained in a

in the international operation of ships or

passengers or cargo on a voyage or flight

dematerialized or immobilized book-entry

aircraft. Furthermore, to be a qualified

that begins and ends in the United States,

system. These new rules have been

foreign corporation, the corporation must

even if the voyage or flight contains a

included throughout the instructions and

satisfy one of the stock ownership tests

segment extending beyond the territorial

are effective for tax years beginning on or

described in the instructions for Parts II,

limits of the United States, unless the

after September 17, 2010.

III, and IV on pages 2, 3, and 4.

passenger disembarks or the cargo is

Note. A corporation may be a qualified

unloaded outside the United States.

General Instructions

Operation of ships or aircraft beyond the

foreign corporation with respect to one

territorial limits of the United States does

category of qualified income but not with

not constitute in itself international

respect to another such category.

Purpose of Schedule

operation of ships or aircraft.

A foreign corporation is considered

Schedule S (Form 1120-F) is used by

engaged in the operation of ships or

Equivalent Exemption. A foreign

foreign corporations to claim an exclusion

aircraft only during the time it is an owner

country grants an equivalent exemption

of income under section 883 and to

or lessee of one or more entire ships or

when it exempts from taxation income

provide reporting information required by

aircraft and uses such ships or aircraft in

from the international operation of ships

the section 883 regulations.

one or more of the following activities:

or aircraft derived by corporations

•

Carriage of passengers or cargo for

organized in the United States. Whether a

Who Must File

hire,

foreign country provides an equivalent

•

Qualified foreign corporations engaged in

In the case of a ship, the leasing out of

exemption must be determined separately

the international operation of ships or

the ship under a time or voyage charter

with respect to each category of income

aircraft that are claiming an exclusion of

(full charter), space or slot charter, or

listed on lines 2a through 2h of the

gross income under section 883 must

bareboat charter (as those terms are

schedule. See Regulations section

complete Schedule S (Form 1120-F). See

defined in Regulations section

1.883-1(h)(2) for rules for determining

1.883-1(e)(5)), provided the ship is used

Definitions below.

equivalent exemptions for each category

to carry passengers or cargo for hire, and

of income.

•

When and Where to File

In the case of aircraft, the leasing out of

An equivalent exemption may be

the aircraft under a wet lease (full

Attach Schedule S (Form 1120-F) to the

available for income derived from the

charter), space, slot, or block-seat

foreign corporation’s Form 1120-F income

international operation of ships even

charter, or dry lease (as those terms are

tax return. See the Instructions for Form

though income derived from the

defined in Regulations section

1120-F for the time, place, and manner

international operation of aircraft may not

1.883-1(e)(5)), provided the aircraft is

for filing the corporation’s income tax

be exempt, and vice versa. For rules

used to carry passengers or cargo for

return.

regarding foreign corporations organized

hire. See Regulations sections

in countries that provide exemptions only

1.883-1(e)(1) and (2) for additional

Definitions

through an income tax convention, see

information.

Regulations section 1.883-1(h)(3).

Qualified income is income derived from

Activities that do not constitute

the international operation of ships or

operation of ships or aircraft include, but

An equivalent exemption may exist

aircraft that is (a) properly includible in

are not limited to:

where the foreign country:

any of the income categories described

•

The activities of a non-vessel operating

Generally imposes no tax on income,

on lines 2a through 2h of the schedule,

common carrier,

including income from the international

and (b) the subject of an equivalent

•

Ship or aircraft management,

operation of ships or aircraft,

exemption (defined below) granted by the

•

Obtaining crews for ships or aircraft

Specifically provides a domestic law tax

qualified foreign country (defined below)

operated by another party,

exemption for income derived from the

in which the corporation is organized.

•

Acting as a ship’s agent,

international operation of ships or aircraft,

•

A qualified foreign country is a

Ship or aircraft brokering,

either by statute, decree, income tax

•

foreign country or U.S. possession that

Freight forwarding,

convention, or otherwise, or

Cat. No. 51665B

Instructions For Schedule S (Form 1120-F) - 2010

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