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

2016

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

A qualified foreign corporation is a

ships or aircraft (as defined above) with

Section references are to the Internal Revenue

Code unless otherwise noted.

corporation as defined in section 7701(a)

respect to the carriage of passengers or

(3) that is organized in a qualified foreign

cargo on voyages or flights that begin or

Future Developments

country and considered engaged in the

end in the United States, as determined in

international operation of ships or aircraft.

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

For the latest information about

Furthermore, to be a qualified foreign

term does not include the carriage of

developments related to Schedule S

corporation, the corporation must satisfy

passengers or cargo on a voyage or flight

(Form 1120-F) and its instructions, such

one of the stock ownership tests

that begins and ends in the United States,

as legislation enacted after they were

described in the instructions for Parts II, III,

even if the voyage or flight contains a

published, go to

and IV, later.

segment extending beyond the territorial

General Instructions

limits of the United States, unless the

Note. A corporation may be a qualified

passenger disembarks or the cargo is

foreign corporation with respect to one

unloaded outside the United States.

Purpose of Schedule

category of qualified income but not with

Operation of ships or aircraft beyond the

respect to another such category.

territorial limits of the United States does

Schedule S (Form 1120-F) is used by

not constitute in itself international

foreign corporations to claim an exclusion

A foreign corporation is considered

operation of ships or aircraft.

of income under section 883 and to

engaged in the operation of ships or

provide reporting information required by

aircraft only during the time it is an owner

Equivalent exemption. A foreign

the section 883 regulations.

or lessee of one or more entire ships or

country grants an equivalent exemption

aircraft and uses such ships or aircraft in

Who Must File

when it exempts from taxation income

one or more of the following activities:

from the international operation of ships or

Qualified foreign corporations engaged in

Carriage of passengers or cargo for

aircraft derived by corporations organized

the international operation of ships or

hire,

in the United States. Whether a foreign

aircraft that are claiming an exclusion of

In the case of a ship, the leasing out of

country provides an equivalent exemption

gross income under section 883 must

the ship under a time or voyage charter

must be determined separately with

complete Schedule S (Form 1120-F). See

(full charter), space or slot charter, or

respect to each category of income listed

Definitions below.

bareboat charter (as those terms are

on lines 2a through 2h of the schedule.

defined in Regulations section 1.883-1(e)

See Regulations section 1.883-1(h)(2) for

When and Where to File

(5)), provided the ship is used to carry

rules for determining equivalent

passengers or cargo for hire, and

Attach Schedule S (Form 1120-F) to the

exemptions for each category of income.

In the case of aircraft, the leasing out of

foreign corporation's Form 1120-F income

the aircraft under a wet lease (full charter),

tax return. See the Instructions for Form

An equivalent exemption may be

space, slot, or block-seat charter, or dry

1120-F for the time, place, and manner for

available for income derived from the

lease (as those terms are defined in

filing the corporation's income tax return.

international operation of ships even

Regulations section 1.883-1(e)(5)),

though income derived from the

Definitions

provided the aircraft is used to carry

international operation of aircraft may not

passengers or cargo for hire. See

be exempt, and vice versa. For rules

Qualified income is income derived from

Regulations sections 1.883-1(e)(1) and (2)

regarding foreign corporations organized

the international operation of ships or

for additional information.

in countries that provide exemptions only

aircraft that is (a) properly includible in any

Activities that do not constitute

through an income tax convention, see

of the income categories described on

operation of ships or aircraft include, but

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

lines 2a through 2h of the schedule, and

are not limited to:

(b) the subject of an equivalent exemption

An equivalent exemption may exist

The activities of a non-vessel operating

(defined below) granted by the qualified

where the foreign country:

common carrier,

foreign country (defined below) in which

Generally imposes no tax on income,

Ship or aircraft management,

the corporation is organized.

including income from the international

Obtaining crews for ships or aircraft

operation of ships or aircraft;

operated by another party,

A qualified foreign country is a

Specifically provides a domestic law tax

Acting as a ship's agent,

foreign country or U.S. possession that

exemption for income derived from the

Ship or aircraft brokering,

grants to corporations organized in the

international operation of ships or aircraft,

Freight forwarding,

United States an equivalent exemption

either by statute, decree, income tax

The activities of travel agents and tour

(defined below) for the category of

convention, or otherwise; or

operators,

qualified income, derived by the foreign

Exchanges diplomatic notes with the

Rental by a container leasing company

corporation seeking qualified foreign

United States, or enters into an agreement

of containers and related equipment, and

corporation status. A foreign country may

with the United States, that provides for a

The activities of a concessionaire.

be a qualified foreign country with respect

reciprocal exemption for purposes of

to one category of qualified income but not

The term international operation of

section 883.

with respect to another such category.

ships or aircraft means the operation of

Oct 20, 2016

Cat. No. 51665B

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

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