Instructions For Schedule H (Form 1120-F) - 2017 printable pdf download

2017

Department of the Treasury

Internal Revenue Service

Instructions for Schedule H

(Form 1120-F)

Deductions Allocated to Effectively Connected Income Under Regulations Section

1.861-8

the rules provided in Regulations

1.861-17 and Temporary Regulations

Section references are to the Internal

Revenue Code unless otherwise noted.

section 1.882-5 and is reported on

section 1.861-8T. This treaty-based

Schedule I (Form 1120-F). See

reporting is permitted only if the

Future Developments

Regulations section 1.882-5(a)(2).

applicable income tax treaty and

For the latest information about

Bad debt expense allocated to ECI is

accompanying documents (such as

developments related to Schedule H

reported directly on Form 1120-F,

Exchange of Notes) expressly provide

(Form 1120-F) and its instructions,

Section II, line 15.

that attribution of business profits to a

such as legislation enacted after they

U.S. permanent establishment is

Purpose of Schedule

were published, go to

determined under OECD Transfer

IRS.gov/Form1120F.

Pricing Guidelines applied by analogy.

Schedule H (Form 1120-F) is used by

See the Instructions for Schedule M-3

a foreign corporation that files Form

General Instructions

(Form 1120-F) for the reporting of

1120-F to report the amount of the

book-tax differences in Parts II and III

foreign corporation's deductible

Regulations section 1.861-8.

of that schedule under a treaty-based

expenses that are allocated and

Under section 882(c), a foreign

return position pursuant to OECD

apportioned under Regulations

corporation's expenses are deductible

Transfer Pricing Guidelines. See also

sections 1.861-8 and 1.861-17 and

against its U.S. taxable income only if

Form 8833, Treaty-Based Return

Temporary Regulations section

they are connected with income

Position Disclosure Under Section

1.861-8T between ECI and non-ECI.

effectively connected with the conduct

6114 or 7701(b).

The results reported on Schedule H

of a trade or business in the United

are included on Form 1120-F,

States (“ECI”). The proper allocation

Specific Instructions

Section II, line 26; and, for banks only,

and apportionment of deductions for

on Schedule M-3 (Form 1120-F), Part

this purpose is generally determined

III, line 31.

Part I – Home Office

under the provisions of Regulations

Deductible Expenses

section 1.861-8 and Temporary

Who Must File

Regulations section 1.861-8T, with

Definitely Related Solely

Any foreign corporation that is

special rules for the allocation and

to ECI or Non-ECI

required to file Form 1120-F and is (or

apportionment of research and

is treated as) engaged in a trade or

Part I is used to identify the total

experimentation expenses at

business within the United States at

expenses, including interest expense

Regulations section 1.861-17. Under

any time during the tax year must

and bad debt expense, recorded on

these regulations, a taxpayer must

complete Schedule H and attach it to

the corporation's home office books;

allocate deductions to the class of

its Form 1120-F.

to report adjustments made to

gross income to which the deduction

determine the amounts that are

is definitely related and then, if

Protective returns. If the foreign

deductible for U.S. tax purposes; and

necessary, apportion deductions

corporation files a protective Form

to report the portion of the adjusted

among the groups of income included

1120-F under Regulations section

expenses that are definitely related to

in the class. Generally, deductions are

1.882-4(a)(3)(vi), Schedule H need

ECI and non-ECI. To the extent

allocated and apportioned on the

not be completed or attached to the

included in the home office records

basis of the factual relationship

protective Form 1120-F.

used to report total home office

between the deduction and gross

Treaty-based return reporting of

expenses, interest expense and bad

income. (Under section 882(c)(1)(B),

business profits attributable to a

debt expense are also identified on

charitable contributions that are

U.S. permanent establishment. Do

Schedule H and removed from

deductible under section 170 reduce

not complete Schedule H if the

expenses allocated and apportioned

ECI whether or not connected with

corporation files Form 1120-F

under Regulations sections 1.861-8

such income.) Use Schedule H (Form

pursuant to an income tax treaty to

and 1.861-17 and Temporary

1120-F) to report expenses, other

report business profits attributable to

Regulations section 1.861-8T.

than interest expense and bad debt

a U.S. permanent establishment and

Deductions reported on home office

expense, allocated and apportioned

applies OECD Transfer Pricing

books may include expenses incurred

to ECI and non-ECI. Interest expense

Guidelines in lieu of the ECI and

outside the foreign corporation's

of a foreign corporation is allocated to

expense allocation and apportionment

home country (other than in the

ECI exclusively (except to the extent

rules of section 882(c) and

United States). Home office

provided in certain tax treaties) under

Regulations sections 1.861-8 and

Nov 02, 2017

Cat. No. 50605P

Instructions For Schedule H (Form 1120-F) - 2017

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