25% foreign-owned corporation

A 25% foreign-owned corporation is a US corporation at least 25% owned, by vote or value, by one foreign person.

Updated September 2026 · Sources

What the 25% test triggers

25%: is the test, met if one foreign person holds that stake at any time in the tax year.
$25,000: is the penalty for each year a required Form 5472 is missing, for each related party.
90 days: is how long you have to file after an IRS notice. Each 30 days after that, or part of 30 days, adds $25,000 per related party.

The added 30-day penalty has no cap. Reasonable cause can excuse either penalty. Before the 2017 tax act, the $25,000 penalty was $10,000.

A foreign person is anyone who is not a US person, such as a nonresident alien or a foreign company. Shares that person owns indirectly, such as through family members or other companies, also count toward the 25% test. The attribution rules of Section 318, as modified by Section 6038A(c)(5), decide what counts. Unrelated foreign owners are not added together, so two with 15% each do not make the company 25% foreign-owned.

Under Section 6038A, a 25% foreign-owned US corporation is a reporting corporation. It files a separate Form 5472 for each related party, such as the foreign owner, that it had a reportable transaction with. The 2025 Form 1120 asks about 25% foreign ownership in Schedule K, question 7.

Form 5472 is attached to the income tax return and is due with it. For a calendar-year 2026 return, that is April 15, 2027, or October 15, 2027 on extension. The penalty is a fixed amount, so it applies even in a year when no income tax is due.

A US LLC wholly owned by one foreign person counts as a US corporation for Form 5472, and may have to file one.

Sources

Reviewed and updated September 2026. General information, not advice for your situation.