Instructions For Schedule I (Form 1120-F) - 2016 printable pdf download

2017

Department of the Treasury

Internal Revenue Service

Instructions for Schedule I

(Form 1120-F)

Interest Expense Allocation Under Regulations Section 1.882-5

section 882(c) to effectively connected

establishment pursuant to the express

Section references are to the Internal Revenue

Code unless otherwise noted.

income and for attributing interest

provisions and accompanying

expense to business profits of a U.S.

documents of an applicable treaty, then

General Instructions

permanent establishment under all

Schedule I still must be completed

income tax treaties other than treaties

based on the treaty method used

Future Developments

that expressly permit attribution of

(substituting the amount of assets,

business profits to a U.S. permanent

liabilities and interest expense

For the latest information about

establishment under application of the

determined under the treaty method for

developments related to Schedule I

OECD Transfer Pricing Guidelines, by

the amounts that would have been

(Form 1120-F) and its instructions, such

analogy. If the foreign corporation files

reported under Regulations section

as legislation enacted after they were

its tax return using a treaty-based

1.882-5) and attached to Form 1120-F.

published, go to IRS.gov/Form1120F.

method of the type provided in these

The corporation is also required to

treaties, see Treaty-based return

complete and attach Form 8833,

Purpose of Schedule

positions below for reporting

Treaty-Based Return Position

Schedule I (Form 1120-F) is used to

requirements.

Disclosure.

report the amount of interest expense

Who Must File

Exceptions from Filing

allocable to effectively connected

income (“ECI”) and the deductible

Schedule I

All foreign corporations that have

amount of such allocation for the tax

interest expense allocable to ECI under

A foreign corporation is not required to

year under section 882(c) and

section 882(c) must complete

file Schedule I if it (a) does not have a

Regulations section 1.882-5. The

Schedule I to report this allocation,

trade or business within the United

schedule discloses the basic

regardless of whether the amount

States, (b) has no worldwide interest

calculations for the year and also

allocable under Regulations section

expense for the tax year to allocate

identifies the various elections the

1.882-5 is deductible in the current year,

under Regulations section 1.882-5, or

taxpayer uses under Regulations

or is otherwise deferred or permanently

sections 1.882-5(a)(7) and (d)(5), and

disallowed under other sections of the

United States for the tax year that it

under the branch profits tax rules of

Internal Revenue Code (e.g., sections

determines do not give rise to effectively

Regulations section 1.884-1(e)(3).

163(e), 163(j), 263A, 265(a), 267(a)(3)).

connected income, or do not give rise to

The information reported on Schedule I

Note. The tax election under

a U.S. permanent establishment to

is also needed to complete Form

Regulations section 1.884-1(e)(3) is not

which business profits are attributable,

1120-F, Section III (the determination of

effectuated under the regulations by its

and the corporation files a protective

the branch-level interest tax under

identification on Schedule I (Form

income tax return under Regulations

section 884(f)). Interest expense that is

1120-F). See the requirements for the

section 1.882-4(a)(3)(vi).

treated as “branch interest” under

time, place and manner for making the

Protective elections on protective

Regulations section 1.884-4(b) may be

branch profits tax liability reduction

returns. A corporation that files a

subject to information reporting under

election under Regulations section

protective tax return on Form 1120-F

section 1461 or section 6049 and

1.884-1(e)(3).

under Regulations section 1.882-4(a)(3)

potential withholding under sections

Under Regulations section 1.882-5,

(vi) may voluntarily file Schedule I with

1441 and 1442. A foreign corporation

the amount of interest expense of a

the protective return to preserve timely

that is a reporting corporation and

foreign corporation that is allocable

elections under Regulations section

required to file Form 1120-F must

under section 882(c) to income which is

1.882-5(a)(7) if the return is filed by the

complete Schedule I and attach it to

effectively connected (or treated as

original due date (including extensions)

Form 1120-F.

effectively connected) with the conduct

of the corporation's Form 1120-F. The

Reporting corporation. A reporting

of a trade or business within the United

protective elections are not effective if

corporation is any foreign corporation

States is the sum of the interest

filed during the additional extended

that is engaged in a trade or business or

expense allocable by the foreign

period described under Regulations

treated as engaged in a trade or

corporation under the three-step

section 1.882-4(a)(3). The foreign

business within the United States

process set forth in Regulations

corporation need only complete the

directly or indirectly at any time during

sections 1.882-5(b), (c), and (d), or (e)

relevant portions of Schedule I that

the tax year.

and the directly allocated interest

identify its right to use the following

expense determined under Regulations

elections:

Treaty-based return positions. If the

section 1.882-5(a)(1)(ii). The interest

The Adjusted U.S.-Booked Liability

corporation determines its interest

allocation rules of Regulations section

method (“AUSBL”) or Separate

expense attributable to its business

1.882-5 are the exclusive rules for

profits of a U.S. permanent

allocating interest expense under

Jun 14, 2017

Cat. No. 50606A

Instructions For Schedule I (Form 1120-F) - 2016

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