New Rule: Companies and Individuals With Foreign Affiliates Must File a BE-10 by 6/30!
What is the BE-10 and how has it changed?
The BE-10 is a Benchmark Survey of U.S. Direct Investment abroad that is conducted once every 5 years by the Bureau of Economic Analysis (BEA). Do not let the term “survey” fool you; this is not voluntary. The new BE-10 Benchmark Survey reporting requirements are not well publicized and can carry significant penalties (up to $25,000 per occurrence) for non-compliance, including criminal sanctions.
This survey was last conducted in 2009 and, at that time, was only required to be submitted by U.S. persons (which includes companies) that were contacted by the BEA. However, in November 2014, the rules were changed such that any company meeting certain thresholds would have to submit a BE-10 filing, or survey, and those responsible for filing are not necessarily going to be “contacted” by the BEA like they had in previous years . These changes were not well known and the first deadline for submitting the BE-10 came and passed on May 29, 2015 with very few submissions. To accommodate those unaware of the filing requirement, the BEA has now extended the deadline until June 30, 2015.
Who is required to file a BE-10?
A BE-10 report is required to be filed by all individuals and companies that had a foreign affiliate at any time during the 2014 fiscal year. An individual or company has a “foreign affiliate” when there is “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”.
What do you need to file?
According to the rules as stated in 79 FR 69043:
• Form BE–10A must be completed by a U.S. Reporter. If the U.S. Reporter is a corporation, Form BE–10A is required to cover the fully consolidated U.S. domestic business enterprise. It must also file Form(s) BE–10B, C, and/or D for its foreign affiliates, whether held directly or indirectly.
• Form BE–10B must be filed for each majority-owned foreign affiliate for which any of the following three items – total assets, sales or gross operating revenues excluding sales taxes, or net income after provision for foreign income taxes – was greater than $80 million (positive or negative) at any time during the affiliate’s 2014 fiscal year.
• Form BE–10C must be filed for each majority-owned foreign affiliate and minority-owned foreign affiliate for which any one of the three items – total assets, sales or gross operating revenues excluding sales taxes, or net income after provision for foreign income taxes – was greater than $25 million during the affiliate’s 2014 fiscal year. For majority-owned foreign affiliates with more than $80 million, you do not have to file both a BE-10B & C.
• Form BE–10D must be filed for majority or minority-owned foreign affiliates for which none of the three items – total assets, sales or gross operating revenues excluding sales taxes, or net income after provision for foreign income taxes – was greater than $25 million (positive or negative) at any time during the affiliate’s 2014 fiscal year.
The forms can be e-filed at www.bea.gov/efile. They can also be paper filed at the addresses found on the front of the survey forms. If an individual or company was notified by the BEA about the need to file the survey but did not have foreign affiliates during its 2014 fiscal year, or if the foreign affiliates are fully consolidated in the BE-10 report of another company, the “BE-10 Claim for Not Filing” form can be filled out by the due date of the form. The BEA asks first time filers to file hard copies rather than online filing. The forms must be signed by the individual or an officer of the company and may be faxed to BEA.
What is the risk?
There is a risk of both civil and criminal penalties associated with failure to supply the information or comply with the requirements above. The individuals and companies that fail to comply are subject to a civil penalty between $2,500 and $25,000 per instance. Additionally there are criminal penalties for a willful violation of up to $10,000 and individuals who fail to comply could get up to a year in prison.
These new regulations reach a wide range of companies and individuals. You should not rely on this article as legal advice; however, if you have specific questions regarding how the information contained in this article affects you individually or your company, BILTgroup has the experience and resources to assist you. BILTgroup is a law firm dedicated to issues of international law and tax. Please feel free to contact us at +1.919.615.3767 or by email at wstyons@BILTgroup.net.