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taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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One of our Mexican subsidiaries, 100% owned by the US sub,

Resolved Question:

One of our Mexican subsidiaries, 100% owned by the US sub, has a permanent establishment (PE) in the US this year, and is going to generate income, with potential USD1.5M tax. What tax form(s) we should file for this year to the IRS? 1120F?
Submitted: 9 months ago.
Category: Tax
Expert:  taxmanrog replied 9 months ago.
Welcome to Just Answers! Thank you for giving me the opportunity to assist you! I will do my best to help!

The Mexican subsidiary has to file its own Form 1120-F, reporting the income and expenses earned in the US.

On your US tax return, you still have to file a Form 5471, reporting the Mexican subsidiary. You also now have to track the income that has been taxed in the US on the Mexican side. It is what they refer to as PTI - Previously Taxed Income. When the Mexican subsidiary pays a dividend to the US company, part of it will be US-sourced and be previously taxed income, so you won't pay tax on it again.

I hope this answers your questions! If you have any more please let me know.

Thanks again!

Roger
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 379
Experience: Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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