Background

The Bureau of Economic Analysis (BEA) of the US Department of Commerce requires that any “US person” that owns (or controls), directly or indirectly, 10% or more (by vote) of a foreign corporation or an unincorporated foreign business enterprise (such as a partnership or branch) at any time during 2019—i.e., a “foreign affiliate”—must file a benchmark survey on Form BE-10 (Benchmark Survey of US Direct Investment Abroad). There is no de minimis value exception from filing. Rather, abbreviated filing requirements apply depending on the assets, sales, gross operating revenue, or net income (loss) of the foreign affiliate. A foreign business includes the ownership of real estate located outside of the United States (unless it is residential real estate for personal use only). A limited exemption exists for investments in foreign affiliates that are private funds. 

The BEA requires the filing of Form BE-10 every five years as part of a survey it conducts on US investments in foreign businesses. Form BE-10 is one of numerous forms that a US reporter may have to file with respect to its cross-border transactions. For example, the BEA also requires survey reports of foreign direct investment in the United States (such as an annual survey on Form BE-15 or a five-year benchmark survey on Form BE-12). BEA forms are for statistical purposes only, and any submitted information is treated as confidential. The filing of foreign entity information returns with the Internal Revenue Service (IRS) (such as Forms 5471, 8858, and 8865) does not relieve a US reporter of this Form BE-10 filing obligation, although some of the information reflected on such IRS forms may be used in completing Form BE-10.

For this purpose, a "US person" includes an individual, corporation, partnership, branch, trust, estate, or charitable or other nonprofit organization that is "resident in the United States or subject to the jurisdiction of the United States." An individual is considered a resident of, and subject to the jurisdiction of, the country in which they are physically located, subject to certain qualifications. Thus, the definition of a US individual for BEA purposes is different than the meaning of a US resident for US federal tax purposes. For example, for BEA purposes, if a US citizen (or green card holder) resides outside the United States for one year or more, they are considered to be a resident of the country in which they are residing subject to two exceptions: (1) if they own or work for a business in the United States, are living outside of the United States for one year or more in order to conduct business, and intend to return to the United States within a reasonable period of time; or (2) if they are a US government employee. Thus, a US citizen who lives abroad full-time may not be treated as a US person while a non-US citizen who lives predominantly in the United States may have a Form BE-10 filing obligation.

Extensions for filing readily available

Form BE-10 is due May 29, 2020 (or June 30, 2020, if a US reporter is filing 50 or more forms). As a result of the COVID-19 pandemic, the BEA is accepting extension requests on its secure eFile system at www.bea.gov/efile on a case-by-case basis if such requests are received by the original due date. The BEA is also permitting US reporters to use data estimates if specific information is unavailable at this time or access to required records is limited.

Failure to file Form BE-10 may result in civil penalties and injunctive relief (requiring a filer to comply with the filing requirements), and in criminal penalties for willful violations. In addition, an officer, director, employee, or agent of an entity who knowingly participates in such violations may be subject to criminal penalties. We expect, however, that cases involving civil penalties and injunctive relief are rare provided a good faith effort is made to comply with the BEA’s requirements.