By Lee Grosse | Vice President, Structured Finance| TMF Group
There has been an influx of foreign investment in real estate in the United States as a direct corollary of the stable legal framework, strong property rights and as well as a robust commercial real estate environment.
But, these foreign investors may not be aware of the mandatory filings required by the United States Bureau of Economic Analysis for US domiciled corporations with 10% or more foreign ownership.
What is the BEA?
The Bureau of Economic Analysis (BEA) is a compliance agency that surveys foreign direct investment in the US. By way of mandatory filings, they compile data on the scale of activities undertaken by foreign owned businesses. The BEA sanitizes the data and publishes reports that provide meaningful insight for PERE businesses. These reports may assist real estate investors make informed decisions on optimizing the allocation of resources, backed by real data specific to the industry. They also show trends in business activity that are broken down by country and type of investment, making the information very valuable.
What does my business need to do?
BEA filings are required from all US business enterprises in which a foreign entity owns 10 percent or more of the voting interest in a US domestically domiciled enterprise. These enterprises must report select financial data that ultimately looks through the corporate veil to identify foreign ownership of real estate assets held in the US. The mandatory disclosures detail the foreign parent’s transactions with their U.S. affiliates, including fund inflows from the parent to their affiliates and any income or return on these funds.
There are various filings that businesses must complete, some quarterly and others annually. The filings must be submitted 30 days after the close of each calendar or fiscal quarter and 45 days for the final quarter report. The main two surveys are BE-13 and BE-605.
Form BE-13 is the new foreign direct investment survey and is required for each US business enterprise when a foreign entity acquires a direct or indirect voting interest in the company of at least 10 percent. It may also need to be submitted for each US enterprise when a foreign entity establishes a new legal entity in the US or expands operations to include a new facility.
Form BE-605 is the quarterly survey that must be completed for each directly-owned US affiliate whose assets, sales or net income exceeds $60 million at all time during the fiscal year. It is also required for each indirectly-owned US affiliate with an intercompany debt balance with the affiliated foreign group.
Reporting is mandatory under the International Investment and Trade in Services Survey Act. If a company fails to file with the BEA, it may result in civil or criminal penalties which can affect any officer, director, employee or agent of the business who knowingly participates in the violation. This compliance mandate is often overlooked by real estate funds looking to ramp up investment abroad. It is a natural imperative that a local company with global knowledge should be sought-out to help handle this reporting on their behalf.
We can help
TMF Group has both the local and global expertise to ensure that your business remains compliant with regulations like the BEA filings. Managing compliance risk is a real challenge for multinational companies as they look to expand their geographic footprint. Here at TMF Group, we can leverage our local knowledge to alleviate the compliance burden allowing you to focus on your core business activities. Talk to us.
Compliments of TMF Group, a member of the EACCNY