Foreign entity
The Form 8938 instructions include interests in foreign entities among specified foreign financial assets for U.S. persons. FATCA materials also discuss foreign entities with substantial U.S. ownership and related reporting.
Meaning of foreign entity
The instructions for Form 8938 list interests in foreign corporations, partnerships, trusts, and estates as examples of interests in foreign entities. They treat those interests as specified foreign financial assets in defined circumstances, and FATCA uses the term foreign entity in connection with substantial U.S. ownership.[1][4]
The Form 8938 instructions identify any interest in a foreign entity as an asset category when held for investment and outside an account maintained by a financial institution. The examples include corporate stock, partnership interests, indebtedness issued by a foreign person, and interests in foreign trusts or estates.[1]
Where the term appears
Form 8938 reporting concerns specified foreign financial assets and applies according to the filing conditions in those instructions. The instructions distinguish assets held in financial accounts from other investment-held assets, including interests in foreign entities. They also state that an interest in a foreign trust or estate is not a specified foreign financial asset unless the person knows or has reason to know of the interest based on readily accessible information. Receiving a distribution from the trust or estate is treated as knowledge of the interest.[1]
The instructions address overlap with other information returns. If an asset is reported on a qualifying timely filed return for the same tax year, it does not have to be reported again on Form 8938. The listed forms include returns concerning foreign trusts, corporations, passive foreign investment companies, and partnerships; Form 8938 still identifies the other forms filed and the number of each.[1]
Relationship to FATCA terms
Under FATCA, foreign financial institutions report annually on accounts held by U.S. persons and by foreign entities with substantial U.S. ownership. Chapter 4 reporting with respect to U.S. persons generally applies to NFFEs and FFIs, including certain branches of U.S. institutions treated as FFIs under an applicable agreement.[4][6]
Foreign entity sits alongside narrower classifications such as foreign corporation, foreign partnership, foreign trust, NFFE, and FFI. Reporting treatment depends on the kind of asset or institution and the applicable ownership or documentation conditions. The term foreign entity does not establish a single reporting rule for every entity.[1]
In more detail
The Form 8938 instructions list stock issued by a foreign corporation, interests in foreign partnerships, and interests in foreign trusts or estates among other specified foreign financial assets when held for investment outside a financial account.[7][8]
Related reading
Specified foreign financial asset explains the asset category that includes entity interests. Foreign trust covers one type of entity interest named in the instructions. Foreign financial account provides context for the distinction between account reporting and other holdings. FATCA connects individual asset reporting with financial institution reporting.
Questions and answers
Does every interest in a foreign entity go on Form 8938?
The instructions include interests in foreign entities among specified foreign financial assets when held for investment and not in a financial account. They also identify exceptions and overlapping reporting rules, including an exception where an asset is reported on a qualifying timely filed form.[1]
How do foreign trusts fit this term?
The Form 8938 instructions list a foreign trust interest as an example of another specified foreign financial asset. An interest is excluded from that category unless the person knows or has reason to know of it based on readily accessible information; a distribution establishes such knowledge under the instructions.[1]
What does substantial U.S. ownership refer to in FATCA materials?
Under FATCA, a participating foreign financial institution reports annually on foreign entities with substantial U.S. ownership. FATCA withholding can apply when a foreign entity accountholder does not provide sufficient information about its substantial U.S. owners.[4]
Is an NFFE the same thing as a foreign entity?
NFFE is a category used in chapter 4 reporting, while Form 8938 uses foreign entity as a category of interests. Chapter 4 reporting with respect to U.S. persons generally applies to NFFEs and FFIs, subject to applicable limits on its scope.[6]
Related terms
- FATCA: FATCA requires certain U.S. taxpayers to report foreign assets and financial institutions to report accounts to the IRS. Form 8938 may apply at thresholds.
- Withholdable payment: A withholdable payment is covered by chapter 4 rules. An agent may withhold when a foreign entity does not provide required documentation or certification.
- Specified foreign financial asset: The Form 8938 instructions use specified foreign financial asset for certain foreign accounts and investment holdings. The term identifies assets for reporting.
- Foreign financial account: Form 8938 treats an account outside the United States as a specified foreign financial asset. FBAR rules identify reportable accounts by type and location.
Related guides and articles
- FATCA and the structure of U.S. reporting rules: FATCA terms, institutional reporting, withholding rules and links to U.S. tax forms, including Form 8938, for U.S. citizens learning about the regime.
- Form 8938 and Foreign Trust Assets: A U.S. citizen's guide to Form 8938: what counts as a specified foreign financial asset, when the form accompanies a tax return, and how filing thresholds vary.
- FBAR and Form 8938 for accounts linked to trusts: FBAR and Form 8938 are separate reports with different filing tests for a U.S. citizen. IRS instructions describe foreign accounts as well as trust interests.
Related pages
Sources and data notes
- Internal Revenue Service, Instructions for Form 8938. https://www.irs.gov/instructions/i8938. Retrieved .
- FinCEN, Report foreign bank and financial accounts. https://www.fincen.gov/report-foreign-bank-and-financial-accounts. Retrieved .
- U.S. Government, 31 CFR 1010.350. https://ecfr.io/Title-31/Section-1010.350. Retrieved .
- Internal Revenue Service, FATCA summary. https://www.irs.gov/businesses/corporations/summary-of-key-fatca-provisions. Retrieved .
- U.S. Department of the Treasury, FATCA: agreements by jurisdiction. https://home.treasury.gov/policy-issues/tax-policy/foreign-account-tax-compliance-act. Retrieved .
- Internal Revenue Service, 26 CFR 1.1471-4. https://www.irs.gov/instructions/iw9. Retrieved .
- tigta.gov, Additional Actions Are Needed to Address Non-Filing and Non-Reporting Compliance Under the Foreign Account Tax Compliance Act (Report 2022-30-019). https://www.tigta.gov/sites/default/files/reports/2024-11/202230019fr.pdf. Retrieved .
- thetaxadviser.com, Transnational tax information reporting: A guide for the perplexed. https://www.thetaxadviser.com/issues/2018/mar/transnational-tax-information-reporting/. Retrieved .
Dates in this block record when each source was read for this page.