1120-F Schedule V Instructions for Form 1120-F Schedule V

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2018

Instructions for Schedule V
(Form 1120-F)

Department of the Treasury
Internal Revenue Service

DRAFT AS OF
August 30, 2018

List of Vessels or Aircraft, Operators, and Owners
Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Schedule V
(Form 1120-F) and its instructions, such
as legislation enacted after they were
published, go to IRS.gov/Form1120F.

General Instructions
Purpose of Schedule

Schedule V (Form 1120-F) is used by a
foreign corporation to report basic
information for each vessel or aircraft with
respect to which the corporation is subject
to the 4% rate of tax on U.S. source gross
transportation income (USSGTI) under
section 887.

Who Must File

Foreign corporations that are subject to
the 4% tax on their USSGTI under section
887 must complete Schedule V.

When and Where To File

Attach Schedule V (Form 1120-F) to the
foreign corporation's Form 1120-F income
tax return. See the Instructions for Form
1120-F for the time, place, and manner for
filing the corporation's income tax return.

Definitions

The term “United States source gross
transportation income (USSGTI)” means
any gross income (without reduction by
any deductions or losses) that is
transportation income (as defined in
section 863(c)(3)) to the extent such
income is treated as from sources within
the United States under section 863(c)(2)
(A).
The term does not include
transportation income which is:
Not sourced under section 863(c)(2);
Taxable as effectively connected with
the corporation's trade or business in the
United States pursuant to section 887(b)
(4); or
Taxable in a possession of the United
States under a provision of the Code, as
made applicable in such possession.
Note. Foreign corporations may derive
USSGTI directly, from participation in a
Jul 25, 2018

pool, joint venture, joint service
arrangement, as a partner in a
partnership, or as the beneficiary of a trust
or estate.
The term “transportation income” (as
defined in section 863(c)(3)) means any
income derived from, or in connection
with:
The use (or hiring or leasing for use) of
any vessel or aircraft, or
The performance of services directly
related to the use of any vessel or aircraft.
The term “vessel” or “aircraft” includes
any container used in connection with a
vessel or aircraft. However, the term
“transportation income” does not include
income from the disposition of vessels,
containers, or aircraft.
The term “income derived from, or in
connection with, the use (or hiring or
leasing for use) of any vessel or aircraft”
means:
Income derived from transporting
passengers or property by vessel or
aircraft;
Income derived from hiring or leasing a
vessel or aircraft for use in the
transportation of passengers or property
on the vessel or aircraft; and
Income derived by an operator of
vessels or aircraft from the rental or use of
containers and related equipment
(container related income) in connection
with, or incidental to, the transportation of
cargo on such vessels or aircraft by the
operator. Persons other than an operator
of a vessel or aircraft do not derive
container related income. Such income is
treated as rental income, not
transportation income.
The term “income derived from, or in
connection with, the performance of
services directly related to the use of a
vessel or aircraft” includes the following
categories of income.
1. On board services. Income in this
category is derived from services
performed on board a vessel or aircraft in
the course of the actual transportation of
passengers or property aboard vessels or
aircraft. Examples of income in this
category include income from renting
staterooms, berths, or living
accommodations; furnishing meals and
entertainment; operating shops and
casinos; providing excess baggage
Cat. No. 51664Q

storage; and the performance of personal
services by individuals. The term also
includes income derived from demurrage,
dispatch, and dead freight.
2. Off board services. Income in this
category is derived from services
performed off board any vessel or aircraft
by an operator of a vessel or aircraft,
provided such services are incidental to
the operation of vessels or aircraft by such
operator. The term does not include
income from services performed by
persons other than an operator. Examples
of off board services include terminal
services such as dockage, wharfage,
storage, lights, water, refrigeration,
refueling and similar services; stevedoring
and other cargo handling services;
maintenance and repairs; and services
performed as a travel or booking agent.
The term “operator” includes the actual
operator of a vessel or aircraft, as well as
a time or voyage charterer of such vessel
or aircraft.

Specific Instructions
Important. All information reported on
Schedule V must be in English. All
amounts must be stated in U.S. dollars.
Throughout these instructions, when
the pronouns “you” and “your” are used,
they are used in reference to the foreign
corporation filing Form 1120-F, U.S.
Income Tax Return of a Foreign
Corporation.
Columns A through D. Complete a
separate column for each vessel or aircraft
with respect to which you are subject to a
4% rate of tax under section 887. For
example:
If you were a bareboat lessor of vessels
or aircraft during the tax year, complete a
separate column for each vessel or aircraft
you leased out during the tax year for
which you derived USSGTI.
If you earned income during the tax
year from the operation of vessels or
aircraft, including time or voyage charter
hire, complete a separate column for each
vessel or aircraft operated by you during
the tax year for which you derived
USSGTI.
If you earned income during the tax
year from providing services directly
related to the use of vessels or aircraft,

complete a separate column for each
vessel or aircraft for which such services
were performed and for which you derived
USSGTI.
If you derive USSGTI subject to a 4%
rate of tax under section 887 from more
than 4 vessels or aircraft, attach
continuation statements using the same
size and format as this Schedule V.

4. The number of days during the tax
year the vessel or aircraft was under
lease.
5. A description of the method used to
determine the USSGTI from the leases for
the vessel or aircraft, and the calculations
used to apply this method (see the Note in
the instructions for line 9 for examples of
reasonable methods that may be used).

Line 1. Enter the name of the vessel or
type of aircraft.

Line 5. Enter the name of the registered
owner. If you are the registered owner,
enter “Same as filer above” on line 5.

method. For example, where a vessel or
aircraft is under charter, one reasonable
method of determining the portion of such
charter income which is USSGTI is to
apply to such charter income the ratio of
(a) the number of days of uninterrupted
travel on voyages or flights between the
United States and the farthest point(s)
where cargo or passengers are loaded en
route to, or discharged en route from, the
United States, to (b) the number of days in
the smaller of the tax year or the particular
charter period. When determining
USSGTI, the number of days the vessel is
located in United States waters for repairs
or maintenance should not be included in
either the numerator or in the denominator
of the ratio.

DRAFT AS OF
August 30, 2018

Line 2. For each column, if you are
completing the column for a vessel, enter
the Lloyd's register number on line 2. If
you are completing the column for an
aircraft, enter the registration number on
line 2.

Line 3. For each column, if the answer to
the question on line 3 is “Yes” and you
operate the vessel or aircraft which is
under a bareboat lease or sublease to
you, attach to Schedule V the following
items.
1. The name and address of the
lessor of the vessel or aircraft.
2. The term of the bareboat lease or
charter and the method for calculating the
rental portion of the payment.

Line 4. For each column, if the answer to
the question on line 4 is “Yes” and you are
the bareboat lessor of the vessel or
aircraft, attach to Schedule V the following
items.
1. The country of registration of the
vessel or aircraft.
2. Name and address of each lessee
or person chartering the vessel or aircraft
from you.
3. The term of the lease.

Line 6. Enter the employer identification
number (EIN) or social security number
(SSN) of the registered owner, if known. If
you are the registered owner, enter “Same
as filer above” on line 6. If you are not the
registered owner and you do not know the
EIN or SSN of the registered owner, enter
"Not known."
Line 7. Enter the name of the operator, if
known. If you are the operator, enter
“Same as filer above” on line 7. If you are
not the operator and you do not know the
name of the operator, enter "Not known."

Line 8. Enter the EIN or SSN of the
operator, if known. If you are the operator,
enter “Same as filer above” on line 8. If
you are not the operator and you do not
know the EIN or SSN of the operator,
enter "Not known."
Line 9. For each column, enter the
USSGTI the corporation derived with
respect to the vessel or aircraft. See
Definitions, earlier.
Note. In determining the amount of
USSGTI, the foreign corporation must
establish the actual amount of USSGTI
derived from a charter under a reasonable

-2-

Another reasonable method would be to
use a ratio based on the USSGTI earned
from the operation of the vessel or aircraft
by the lessee-operator, compared with the
total gross income of the lessee-operator
from the operation of the vessel or aircraft
during the smaller of the tax year or the
term of the charter. However, an allocation
based on the net income of the
lessee-operator will not be considered
reasonable for this purpose.

Important. You must attach a statement
to Schedule V describing the method used
to determine the USSGTI from the vessel
or aircraft.
Line 11. If the foreign corporation is
claiming a treaty exemption on its
USSGTI, enter the amount on line 11 and
attach Form 8833, Treaty-Based Return
Position Disclosure Under Section 6114 or
7701(b).

Instructions for Schedule V (Form 1120-F) (2017)