Just want to go over a US shareholder of a Canadian Corporation who has more than at 10% interest in the Corp and is not an Officer or Director of the Corp (does not have control other than the shares). This is a Category 3 Filer
There is no requirement that the Foreign/Canadian Corporation be a Controlled Foreign Corporation.
Category 3 does not necessarily have to file annually only when circumstances require.
Basically, a category 3 filer has to file Form 5471 when ownership goes above 10%.
If the interest remains the same then no 5471 needs to be filed.
If the US person becomes an Officer or Director then he has to file (Category 2)
If you are a greater than 10% shareholder then when you accumulate more shares then you have to file Form 5471.
Need to file Form 5471 when you go below the 10%.
Who Must File:
Generally, all U.S. persons described in Categories of Filers below must complete the schedules, statements, and/or other information requested in the chart, Filing Requirements for Categories of Filers, on page 2. Read the information for each category carefully to determine which schedules, statements, and/or information apply
Categories of Filers
Stock ownership requirement. For purposes of Category 2 and Category 3, the stock ownership threshold is met if a U.S. person owns:
1. 10% or more of the total value of the foreign corporation's stock or
2. 10% or more of the total combined voting power of all classes of stock with voting rights. U.S. person. For purposes of Category 2 and Category 3,
a U.S. person is:
1. A citizen or resident of the United States,
2. A domestic partnership,
3. A domestic corporation, and
4. An estate or trust that is not a foreign estate or trust defined in section 7701(a)(31). See Regulations section 1.6046-1(f)(3) for exceptions.
Category 3 Filer This category includes:
A U.S. person (defined above) who acquires stock in a foreign corporation which, when added to any stock owned on the date of acquisition, meets the 10% stock ownership requirement (described above) with respect to the foreign corporation;
A U.S. person who acquires stock which, without regard to stock already owned on the date of acquisition, meets the 10% stock ownership requirement with respect to the foreign corporation;
A person who is treated as a U.S. shareholder under section 953(c) with respect to the foreign corporation;
A person who becomes a U.S. person while meeting the 10% stock ownership requirement with respect to the foreign corporation; or A U.S. person who disposes of sufficient stock in the foreign corporation to reduce his or her interest to less than the stock ownership requirement.
What needs to be reported on the 5471 for a Category 3 Filer:
Identifying information on first page, of course
Schedule A, B, C, E, F, G & O Part 2
Schedule A - Stock of the Foreign Corporation - straightforward
Schedule B - Shareholders listed out
Schedule C - Income Statement
Schedule E - Foreign Taxes
Schedule F - Balance Sheet
Schedule G - Specific Questions
Schedule O Part 2 - Shareholder activity
So just being a greater than 10% US shareholder of a Canadian corporation involves a bunch of filing.