IRS Classification of Foreign Entities: “Per Se” Foreign Corporations

For the U.S. tax compliance purposes, it is very important to properly classify foreign business entities, because there are special IRS requirements associated with ownership of foreign business entities. For instance, a list of various tax forms is tied to particular classification (for example, certain U.S. taxpayers are required to file Form 5471 with respect to foreign corporations; a similar requirement (form 8865) would apply to certain filers with respect to a foreign partnership) and esoteric tax reporting requirements may need to be disclosed on your personal tax returns (such as subpart F income in case of Controlled Foreign Corporation).

The process of a foreign entity classification can be very complex.  In this article, however, I would like to discuss a shortcut available in certain situations  –“per se foreign corporations”. This term means the IRS decided to treat certain business entities as a foreign corporation irrespective of the taxpayer’s position.  For practical purposes, this means that, if your entity is on the list of the “per se corporations”, then it is a foreign corporation, there is no need to explore the issue further and “check-the-box” rules will not apply

Where to Look For the IRS List of Per Se Corporations

Once you are able to determine that you are dealing with a foreign entity and this entity is a business entity, you should check with the Treasury Regulation to see if this business entity is part of the long list of entities that the IRS considers as foreign corporations.  The list is detailed in Treas. Reg. §301.7701-2(b)(8).

List of Per Se Corporations

Treas. Reg. §301.7701-2(b)(8) classifies the following foreign entities as corporations (keep in mind that this may not be the most up-to-date list and you will need to check with the relevant updates of this regulation):

American Samoa, Corporation

Argentina, Sociedad Anonima

Australia, Public Limited Company

Austria, Aktiengesellschaft

Barbados, Limited Company

Belgium, Societe Anonyme

Belize, Public Limited Company

Bolivia, Sociedad Anonima

Brazil, Sociedade Anonima

Bulgaria, Aktsionerno Druzhestvo.

Canada, Corporation and Company

Chile, Sociedad Anonima

People’s Republic of China, Gufen Youxian Gongsi

Republic of China (Taiwan), Ku-fen Yu-hsien Kung-szu

Colombia, Sociedad Anonima

Costa Rica, Sociedad Anonima

Cyprus, Public Limited Company

Czech Republic, Akciova Spolecnost

Denmark, Aktieselskab

Ecuador, Sociedad Anonima or Compania Anonima

Egypt, Sharikat Al-Mossahamah

El Salvador, Sociedad Anonima

Estonia, Aktsiaselts

European Economic Area/European Union, Societas Europaea

Finland, Julkinen Osakeyhtio/Publikt Aktiebolag

France, Societe Anonyme

Germany, Aktiengesellschaft

Greece, Anonymos Etairia

Guam, Corporation

Guatemala, Sociedad Anonima

Guyana, Public Limited Company

Honduras, Sociedad Anonima

Hong Kong, Public Limited Company

Hungary, Reszvenytarsasag

Iceland, Hlutafelag

India, Public Limited Company

Indonesia, Perseroan Terbuka

Ireland, Public Limited Company

Israel, Public Limited Company

Italy, Societa per Azioni

Jamaica, Public Limited Company

Japan, Kabushiki Kaisha

Kazakstan, Ashyk Aktsionerlik Kogham

Republic of Korea, Chusik Hoesa

Latvia, Akciju Sabiedriba

Liberia, Corporation

Liechtenstein, Aktiengesellschaft

Lithuania, Akcine Bendroves

Luxembourg, Societe Anonyme

Malaysia, Berhad

Malta, Public Limited Company

Mexico, Sociedad Anonima

Morocco, Societe Anonyme

Netherlands, Naamloze Vennootschap

New Zealand, Limited Company

Nicaragua, Compania Anonima

Nigeria, Public Limited Company

Northern Mariana Islands, Corporation

Norway, Allment Aksjeselskap

Pakistan, Public Limited Company

Panama, Sociedad Anonima

Paraguay, Sociedad Anonima

Peru, Sociedad Anonima

Philippines, Stock Corporation

Poland, Spolka Akcyjna

Portugal, Sociedade Anonima

Puerto Rico, Corporation

Romania, Societate pe Actiuni

Russia, Otkrytoye Aktsionernoy Obshchestvo

Saudi Arabia, Sharikat Al-Mossahamah

Singapore, Public Limited Company

Slovak Republic, Akciova Spolocnost

Slovenia, Delniska Druzba

South Africa, Public Limited Company

Spain, Sociedad Anonima

Surinam, Naamloze Vennootschap

Sweden, Publika Aktiebolag

Switzerland, Aktiengesellschaft

Thailand, Borisat Chamkad (Mahachon)

Trinidad and Tobago, Limited Company

Tunisia, Societe Anonyme

Turkey, Anonim Sirket

Ukraine, Aktsionerne Tovaristvo Vidkritogo Tipu

United Kingdom, Public Limited Company

United States Virgin Islands, Corporation

Uruguay, Sociedad Anonima

Venezuela, Sociedad Anonima or Compania Anonima


Exceptions, Inclusions and Complications With Respect To the List of Per Se Foreign Corporations

In addition to the list of entities above, the regulations also provide various inclusions, exceptions, and complications.  For example, a Nova Scotia Unlimited Liability Company (or any other company or corporation all of whose owners have unlimited liability pursuant to federal or provincial law) will not be treated as a corporation. The same applies to Sendirian Berhad of Malaysia and some companies in India.

On the other hand, the IRS regards the whole family of “Sociedad Anonima” entities are considered corporations, disregarding their variable capital provisions (such as, “Sociedad Anonima de Capital Variable”).

The regulations further clarify the scope of terms such as “public companies” and “limited companies”.  With regard to Cyprus, Hong Kong, and Jamaica, the term “Public Limited Company” includes any Limited Company that is not defined as a private company under the corporate laws of those jurisdictions.  In all other cases, where the term Public Limited Company is not defined, that term shall include any Limited Company defined as a public company under the corporate laws of the relevant jurisdiction.

Furthermore, with respect to limited companies, a Limited Company includes companies limited by shares and companies limited by guarantee.

What if the company is named in a different but means the same thing as in the usual name? The regulations specifically state that “different linguistic renderings of the name of an entity listed in paragraph (b)(8)(i) of this section shall be disregarded”.  Treas. Reg. §301.7701-2(b)(8)(v).  For example, an entity formed under the laws of Switzerland as a Societe Anonyme will be a corporation and treated in the same manner as an Aktiengesellschaft.

Finally, very important complications may arise where a business entity is formed under the laws of more than one jurisdiction.  Detailed complex rules will determine whether such an entity should be treated as a corporation for U.S. tax purposes, in some cases over-ruling the classification patterns described in this essay.  This is a topic for a future article, though.

Contact Sherayzen Law Office for Legal Help With Foreign Business Entity Classifications

Classification of a foreign business entity for U.S. tax purposes is a very complex process.  This article only describes one of many variations and it does NOT constitute legal advice; only an international tax attorney looking at the specific circumstances of your case may determine how your foreign business entity should be classified.

If you have a foreign business entity and you are not sure how you should classify it and what will be the U.S. tax compliance consequences of such classification, contact Sherayzen Law Office. Our experienced international tax firm will analyze your business entity in detail,  help you find the correct classification (or adopt a classification that is likely to withstand an IRS challenge), and identify the necessary IRS tax reporting requirements.