Instructions For Schedule S (Form 1120-F) - 2016 (Page 2 of 4) in pdf

Certain types of exemptions provided

(as defined in Regulations section

A class of stock that is traded during

to corporations organized in the United

1.883-1(g)(1)). For types of activities that

the tax year on an established securities

States by foreign countries do not satisfy

are not considered incidental to the

market located in the United States shall

the equivalent exemption requirements of

international operation of ships or aircraft,

be considered to meet the trading

Regulations section 1.883-1(h). Examples

see Regulations section 1.883-1(g)(2).

requirement described in item 2 above if

of types of exemptions that do not qualify

the stock is regularly quoted by dealers

Part II — Stock Ownership

as equivalent exemptions include:

making a market in the stock.

Reduced tax rate or time limited

Test for Publicly-Traded

A dealer makes a market in a stock

exemption,

Corporations

only if the dealer regularly and actively

Inbound or outbound freight tax,

offers to, and in fact does, purchase the

Exemptions for limited types of cargo,

A foreign corporation satisfies the stock

stock from, and sell the stock to,

Territorial tax systems,

ownership test of Regulations section

customers who are not related persons

Countries that tax U.S. corporations

1.883-1(c)(2) if it is considered a

(as defined in section 954(d)(3)) with

that are not managed and controlled in

publicly-traded corporation and satisfies

respect to the dealer in the ordinary

that country on a residence basis, and

the substantiation and reporting

course of a trade or business.

Exemptions within categories of

requirements of Regulations sections

In general, a class of stock of a foreign

income. See Regulations section

1.883-2(e) and (f). To be considered a

corporation that otherwise meets the

1.883-1(h)(4) for additional information.

publicly-traded corporation, the stock of

requirements of the “regularly traded”

the foreign corporation must be primarily

Specific Instructions

rules described above shall not be treated

and regularly traded (as defined below) on

as meeting such requirements for a tax

one or more established securities

year if, for more than half the number of

markets (as defined in Regulations section

Part I — Qualified Foreign

days during the tax year, one or more 5%

1.883-2(b)) in either the United States or

Corporation

shareholders (defined below) own in the

any qualified foreign country.

aggregate, 50% or more of the vote and

Primarily traded. Stock of a

Line 1a. Enter the name of the qualified

value of the outstanding shares of the

corporation is primarily traded in a country

foreign country (defined earlier) in which

class of stock.

on one or more established securities

the foreign corporation was organized.

markets (as defined in Regulations section

Note. If the general rule described in the

Line 1b. Type of equivalent

1.883-2(b)) if, with respect to each class of

previous paragraph applies, the

exemption. Check one (and only one) of

stock described in item 1 under Regularly

corporation must check the “Yes” box on

the boxes on line 1b to indicate the type of

traded below, the number of shares in

line 9, and must complete lines 10a and

equivalent exemption granted by the

each such class that are traded during the

10b, to substantiate that the exception to

foreign country listed in line 1a. For a

tax year on all established securities

this general rule (described next) applies.

non-inclusive list of countries that grant

markets in that country exceeds the

If the general rule described in the

equivalent exemptions, see Rev. Rul.

number of shares in each such class that

previous paragraph does not apply, the

2008-17, 2008-12 I.R.B. 626, as modified

are traded during that year on established

corporation checks the “No” box on line 9,

by Announcement 2008-57, 2008-26

securities markets in any other single

and is not required to complete lines 10a

I.R.B. 1192.

country.

and 10b.

Line 1c. Applicable authority. Enter the

Exception: The rules discussed in the

Regularly traded. The stock of a

applicable authority of the equivalent

previous paragraph shall not apply to a

corporation is regularly traded on one or

exemption. For example, enter a citation

class of stock if the foreign corporation

more established securities markets if:

of the statute in the country where the

can establish that qualified shareholders

1. One or more classes of stock of the

corporation is organized, a diplomatic note

(defined later), applying the attribution

corporation that, in the aggregate,

between the United States and such

rules of Regulations section 1.883-4(c),

represent more than 50% of the total

country, or an income tax convention

own sufficient shares in the closely-held

combined voting power of all classes of

between the United States and such

block of stock to preclude nonqualified

stock of such corporation entitled to vote

country.

shareholders in the closely-held block of

and the total value of the stock of such

stock from owning 50% or more of the

Line 2a. Enter the gross income the

corporation are listed on such market or

total value of the class of stock of which

foreign corporation derived from the

markets during the tax year, and

the closely-held block is a part for more

carriage of passengers and cargo.

2. With respect to each class relied on

than half the number of days during the

Line 2b. Enter the gross income the

to meet the more than 50% requirement

tax year. Any shares that are owned, after

foreign corporation derived from time or

above (a) trades in each such class are

application of the attribution rules in

voyage (full) charter income of a ship or

effected, other than in de minimis

Regulations section 1.883-4(c), by a

wet lease income of an aircraft. See

quantities, on such market or markets on

qualified shareholder shall not also be

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

at least 60 days during the tax year

treated as owned by a nonqualified

definition of terms.

(or 1/6 of the number of days in a short tax

shareholder in the chain of ownership for

year); and (b) the aggregate number of

purposes of the preceding sentence. A

Line 2c. Enter the gross income the

shares in each such class that are traded

foreign corporation must obtain the

foreign corporation derived from the

on such market or markets during the tax

documentation described in Regulations

bareboat charter of a ship or dry lease

year are at least 10% of the average

section 1.883-4(d) from the qualified

income of an aircraft. See Regulations

number of shares outstanding in that class

shareholders relied upon to satisfy this

section 1.883-1(e)(5) for definition of

during the tax year (or, in the case of a

exception. However, no person otherwise

terms.

short tax year, a percentage that equals at

treated as a qualified shareholder under

Lines 2d, 2e, and 2f. Enter on these

least 10% of the average number of

Regulations section 1.883-4(b) may be

lines the gross amount the corporation

shares outstanding in that class during the

treated for purposes of Regulations

derived from the activities (specified on

tax year multiplied by the number of days

section 1.883-2(d)(3) as a qualified

these lines) that are incidental to the

in the short tax year, divided by 365).

shareholder if such person's interest in the

international operation of ships or aircraft

foreign corporation, or in any intermediary

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Instructions For Schedule S (Form 1120-F) - 2016 Page 2

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