Instructions For Schedule H (Form 1120-F) - 2017 (Page 5 of 6) in pdf

deductions to ECI for purposes of

allocations to ECI or non-ECI are

sets of books must be eliminated in

line 11, 16, or 19, enter the worldwide

estimated and documented by

the combined reports.

assets used in that ratio. If a

questionnaires or home office

Line 30. Enter on line 30 the total of

worldwide asset ratio is not available

department interviews (e.g.,

the adjustments necessary to conform

from either Schedule I (Form 1120-F),

estimated percent of time spent by

the amounts on line 29 to the amounts

line 6b, or Schedule H, line 11, 16, or

employees of particular home office

that are deductible for U.S. tax

19, leave line 22b blank.

departments or sub-departments on

purposes. See the instructions for Part

U.S. trade or business activities).

Line 22c. If an amount is entered on

I, line 2, for a general description of

line 22b, divide line 22a by line 22b to

Lines 26 Through 28.

the types of temporary and permanent

determine the asset ratio and enter

differences that are reportable as

Identification of Financial

the percentage on line 22c. If line 22b

adjustments to the book expenses in

Records Used

is blank, leave line 22c blank.

determining current year tax

Check the “Yes” or “No” box to

deductions under U.S. tax principles.

Line 23a. Enter on line 23a the

indicate whether the types of financial

However, do not include on line 30

number of personnel who worked in

books and records indicated were

any adjustments that are otherwise

the corporation's U.S. trade or

used to complete Parts I and II of

reportable on lines 32a through 35.

business during the tax year. The

Schedule H.

Specifically, third-party interest

corporation may use any reasonable

expense and interbranch interest

Line 28. If the “Yes” box is checked,

method to determine the number of

expense included on line 29 is

attach a statement listing the other

personnel, including data that is

adjusted on lines 32a and 32b,

documentation used to complete

already prepared and used by the

instead of line 30. Bad debt expense

Parts I and II of Schedule H (e.g.,

corporation for a non-tax business

included on line 29 is adjusted on

home country regulatory reports or

purpose. For example, if the

line 33, instead of line 30. Other

functional analyses).

corporation maintains headcount data

third-party deductible expenses not

(such as weighted average headcount

Part IV – Allocation and

allocated or apportioned to ECI and

data) in its personnel records or for

non-ECI under Regulations section

Apportionment of

other purposes such as budgeting,

1.861-8 are adjusted on line 34,

Expenses on Books and

planning, and control, such numbers

instead of line 30. Interbranch

may be used in the numerator.

Records Used to Prepare

expenses (other than interest

Form 1120-F, Schedule L

Line 23b. If the corporation used a

expense) included on line 29

ratio based on number of personnel to

(including interbranch book charges

Use Part IV of Schedule H to report

apportion deductions on line 11, 16,

for home office services provided to

the allocation and apportionment of

or 19, enter the worldwide personnel

the U.S. trade or business) are

deductions recorded on the

count used in the denominator of such

adjusted on line 35, instead of line 30.

corporation's Schedule L books, other

ratio on line 23b. If the corporation

However, if the corporation is a

than interest and bad debt expense,

does not apportion deductions using a

foreign bank that charges its U.S.

to ECI and non-ECI under Regulations

number of personnel ratio, leave

branch office cost reimbursements for

sections 1.861-8 and 1.861-17 and

line 23b blank.

services and overhead which are

Temporary Regulations section

booked by the branch in the

1.861-8T.

Line 23c. If an amount is entered on

third-party category of expense

line 23b, divide line 23a by line 23b to

Line 29. Enter on line 29 the total

actually incurred rather than as a lump

determine the number of personnel

expenses recorded on the Schedule L

sum interbranch amount, the

ratio and enter the percentage on

books.

interbranch amounts charged and

line 23c. If line 23b is blank, leave

recorded by the U.S. branch

line 23c blank.

Note. The Schedule L books may be

Schedule L book should not be

maintained using GAAP, or other

Line 24. If the corporation used any

reported on line 35 as interbranch

applicable accounting standards,

other ratio-based method to allocate

expenses, but should be left in the

other than U.S. GAAP. The

and apportion deductions to ECI and

third-party categories to which they

Schedule L books may include more

non-ECI on line 8, 9, 10, 11, 16, or 19

are assigned on the U.S. books and

than one set of books, including the

of Schedule H, attach a statement

records. If any such amounts require

set(s) of books of disregarded

describing the ratio used on each line.

adjustment for U.S. tax principles

entities. See the Instructions for

Include the numerator and

(e.g., meals and entertainment at

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

denominator of the ratio used for each

50%), then such adjustment should

lines 4 and 5, for the Schedule L

applicable line.

be shown on line 30.

treatment of disregarded entities and

Line 25. If the corporation used a

Attach a statement detailing the

the combined reporting of multiple

non-ratio-based method to allocate

items adjusted and amounts of each

sets of books. These rules apply to

and apportion deductions to ECI and

adjustment.

both banks and non-banks for

non-ECI on line 8, 9, 10, 11, 16, or 19

purposes of determining the

Line 32a. Enter on line 32a the

of Schedule H, attach a statement

expenses reportable on Schedule H,

amount of third-party interest expense

describing each such method and the

line 29. Interbranch income and

(whether owed to unrelated or related

percentage used, if any, for each

expenses recorded between separate

parties) that is included in the amount

applicable line. These may include

reported on line 31. Interest expense

methods for which percentage

Instructions for Schedule H (Form 1120-F)

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Instructions For Schedule H (Form 1120-F) - 2017 Page 5

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