Rapidly Approaching BE-10 Survey Deadlines to Report Your Foreign Investments
Eli Noff, Esq., Partner
EXECUTIVE SUMMARY
Although frequently overlooked, the international reporting form, known as the BE-10, has a rapidly approaching May 31, 2020, deadline. If you own 10% or more of a foreign company or foreign rental real estate, then you must file this report. With significant penalties, both criminal and civil, at stake for failing to file, individuals with questions should consult experienced tax professionals to insure proper filing of all applicable reports.
Note: Final regulations provide that the due date for reporters filing fewer than 50 forms is May 31, 2020, while those filing 50 or more forms must file no later than June 30, 2020.
The Benchmark Survey of U.S. Direct Investment Abroad (BE-10) is a mandatory survey performed once every five years by the Department of Commerce’s Bureau of Economic Analysis (BEA). The survey is a comprehensive survey of U.S. direct investment abroad. The survey compiles economic data about U.S. companies’ and individuals’ investments abroad. More specifically, the BEA clarifies in recently finalized regulations issued to improve the data quality and efficiency of data collection for the 2019 BE-10 survey that:
The data are needed to measure the size and economic significance of U.S. direct investment abroad, measure changes in such investment, and assess its impact on the U.S. and foreign economies. Such data are generally found in enterprise-level accounting records of respondent companies. The benchmark data provide a baseline for subsequent sample-based estimates in non- benchmark years. In particular, they serve as benchmarks for the quarterly direct investment estimates included in the U.S. international transactions, international investment position, and national income and product accounts, and for annual estimates of the U.S. direct investment abroad position and of the activities of U.S. multinational enterprises.3
Are You Required to Report?
Remember a response to the BE-10 survey is mandatory—but who exactly is “covered” such that they must respond with information about their U.S. investments abroad?
The technical answer is explained in the regulations as:
A BE-10 report is required of any U.S. person that had a foreign affiliate-that is, that had direct or indirect ownership or control of at least 10 percent of the voting stock of an incorporated foreign business enterprise, or an equivalent interest in an unincorporated foreign business enterprise, including a branch-at the end of the U.S. person’s fiscal year that ended in the calendar year covered by the survey.4
Note that “person” is statutorily defined to include individuals, partnerships, estates, trusts.5 Moreover, the definition of “business enterprise” specifically includes “any ownership of any real estate.”6 However, only foreign rental real estate is subject to the reporting requirements.7
Simply put, if you are a “person” who owned 10% or more of a foreign company or foreign rental real estate (i.e. “foreign affiliate) during your 2019 fiscal year, then you must file.
What is a Covered Person Required to Complete?
Various forms are potentially required in response to the BE-10 survey—one for the U.S. person and one for each foreign affiliate (i.e. foreign company or foreign real estate). Although no minimum asset or income amount threshold exists to trigger the reporting requirement, certain covered persons may qualify to file an abbreviated form BE-10A (accompanied by the appropriate foreign affiliate forms), depending on certain thresholds.
Basically, a U.S. reporter must file a form BE-10A and any of the applicable forms listed below:
- Form BE-10B must be filed for each majority-owned foreign affiliate with assets, sales or net income (not just the U.S. reporter’s share) exceeding $80 million (positive or negative) at the end of the 2019 fiscal year.8
- Form BE-10C must be filed: (i) for each majority-owned foreign affiliate which had assets, sales or net income exceeding $25 million, but not exceeding $80 million, (positive or negative) at the end of the 2019 fiscal year, and (ii) for each minority-owned foreign affiliate which had assets, sales or net income greater than $25 million (positive or negative) at the end of the 2019 fiscal year.9
- Form BE-10D must be filed for majority or minority-owned foreign affiliates which had assets, sales or net income exceeding $25 million (positive or negative) at the end of the 2019 fiscal year.10
Be aware that if the BEA contacts you concerning your reporting status, even if you are not subject to the reporting requirements, you must file a form BE-10, Claim for Not Filing.11
Finally, you may file report(s) online. You may find more information regarding online filing at: https://www.bea.gov/surveys/diasurv.
Is the Information Made Available to the Public?
Covered persons may be relieved to know that the information collected in the survey is confidential. The information is only available to those government officials and employees authorized to receive the information.12
What’s New for the BE-10A?
A number of changes were recently introduced by regulations which were finalized in November of 2019.13Significantly, the introduction of collection of the 20-digit Legal Entity Identifier (LEI) number will facilitate the government’s ability to measure non-compliance. Specifically, an active LEI without a corresponding BE-10A filing will likely attract scrutiny. Other changes include changes in data items collected, survey form designs, and various survey reporting requirements.
What Happens if You Don’t File?
Neglecting to file your survey response can have serious consequences. Civil and criminal penalties may be imposed for BE-10 survey noncompliance.14 Monetary penalties range from $2,500 to $25,000 for civil fines. Criminal fines may reach $10,000. Significantly, the criminal penalty for a willful failure to file could result in up to one year in prison.
Conclusion
The BE-10 survey response requirements can seem daunting but avoiding them can result in harsh consequences. Remarkably, since no minimum asset or income amount threshold exists
to trigger the reporting requirement, you could be on the hook for penalties that are, frankly, disproportionate to the outcome of your investment abroad. For instance, if you Airbnb your flat in Sweden a few times a year—even if it generated very little income during the year—you must file a response to the survey. Don’t find yourself among the many unfortunate covered persons who overlook their reporting requirement.
If you have questions or concerns about reporting your investments abroad, contact Frost Law today at 410-497-5947.
115 C.F.R. part 801.8, 84 Fed. Reg. 60912 (Nov. 12, 2019), effective December 12, 2019.
2The survey is authorized per the International Investment and Trade in Services Survey Act, 22 U.S.C. §§3101-3108.
315 C.F.R. part 801, 84 Fed. Reg. 60912 (Nov. 12, 2019). The final rules note that those subject to the BE-10 survey reporting requirements are required to respond, whether or not the BEA contacts them.
415 C.F.R. part 801.8(b).
5The full definition of “person” per 22 U.S.C. §3102(3) is: “any individual, branch, partnership, associated group, association, estate, trust, corporation, or other organization (whether or not organized under the laws of any State), and any government (including a foreign government, the United States Government, a State or local government, and any agency, corporation, financial institution, or other entity or instrumentality thereof, including a government-sponsored agency).”
622 U.S.C. §3102(6). See https://www.bea.gov/help/faq/1397.
7Id.Note that BEA clarifies that “[a] primary residence abroad that is leased to others while the owner is a U.S. resident, but which the owner intends to reoccupy, is considered real estate held for personal use.”
815 C.F.R. part 801.8(c)(2). Note that for purposes here a “majority-owned” foreign affiliate is one in which the combined direct and indirect ownership interest of all U.S. parents of the foreign affiliate exceeds 50%.
915 C.F.R. part 801.8(c)(3). Note that for purposes here, a “minority-owned” foreign affiliate is one in which the combined direct and indirect ownership interest of all U.S. parents of the foreign affiliate is 50% or less.
1015 C.F.R. part 801.8(c)(4).
1115 C.F.R. part 801.8(c)(5).
1215 C.F.R. part 801.5.
1315 C.F.R. part 801.8, 84 Fed. Reg. 60912 (Nov. 12, 2019), effective December 12, 2019.
1415 C.F.R. part 801.6.
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