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טופס 1120-F הוראות לתזמון H

הוראות לוח זמנים H (Form 1120-F), Deductions Allocated to ביעילות Connected Income underתקנות סעיף 1.861-8

2023

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  • טופס 1120-F H H - הניכויים התחייבו לחבר ביעילות את ההכנסה בהתאם לתקנות סעיף 1.861-8
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Department of the Treasury  
Internal Revenue Service  
2023  
Instructions for Schedule H  
(Form 1120-F)  
Deductions Allocated to Effectively Connected Income Under Regulations Section  
1.861-8  
Section references are to the Internal  
Revenue Code unless otherwise noted.  
the rules provided in Regulations  
section 1.882-5 and is reported on  
Schedule I (Form 1120-F). See  
Regulations section 1.882-5(a)(2).  
Bad debt expense allocated to ECI is  
reported directly on Form 1120-F,  
Section II, line 15.  
U.S. permanent establishment and  
applies OECD Transfer Pricing  
Guidelines in lieu of the ECI and  
expense allocation and apportionment  
rules of section 882(c) and  
Future Developments  
For the latest information about  
developments related to Schedule H  
(Form 1120-F) and its instructions,  
such as legislation enacted after they  
were published, go to  
Regulations sections 1.861-8 and  
1.861-17 and Temporary Regulations  
section 1.861-8T. This treaty-based  
reporting is permitted only if the  
applicable income tax treaty and  
accompanying documents (such as  
Exchange of Notes) expressly provide  
that attribution of business profits to a  
U.S. permanent establishment is  
determined under OECD Transfer  
Pricing Guidelines applied by analogy.  
See the Instructions for Schedule M-3  
(Form 1120-F) for the reporting of  
book-tax differences in Parts II and III  
of that schedule under a treaty-based  
return position pursuant to OECD  
Transfer Pricing Guidelines. See also  
Form 8833, Treaty-Based Return  
Position Disclosure Under Section  
6114 or 7701(b).  
Reporting Foreign Tax Information  
From Partnerships. If you received a  
Schedule K-3 (Form 1065) from a  
partnership that includes foreign tax  
information, see the instructions for  
Schedule K-3 (Form 1065), Part X,  
Section 2 and Section 3, for specific  
instructions for reporting expenses on  
Schedule H (Form 1120-F).  
Purpose of Schedule  
Schedule H (Form 1120-F) is used by  
a foreign corporation that files Form  
1120-F to report the amount of the  
foreign corporation's deductible  
expenses that are allocated and  
apportioned under Regulations  
sections 1.861-8 and 1.861-17 and  
Temporary Regulations section  
1.861-8T between ECI and non-ECI.  
The results reported on Schedule H  
are included on Form 1120-F,  
General Instructions  
Regulations section 1.861-8. Under  
section 882(c), a foreign corporation's  
expenses are deductible against its  
U.S. taxable income only if they are  
connected with income effectively  
connected with the conduct of a trade  
or business in the United States  
(“ECI”). The proper allocation and  
apportionment of deductions for this  
purpose is generally determined  
under the provisions of Regulations  
section 1.861-8 and Temporary  
Section II, line 26; and, for banks only,  
on Schedule M-3 (Form 1120-F), Part  
III, line 31.  
Who Must File  
Regulations section 1.861-8T, with  
special rules for the allocation and  
apportionment of research and  
Any foreign corporation that is  
required to file Form 1120-F and is (or  
is treated as) engaged in a trade or  
business within the United States at  
any time during the tax year must  
complete Schedule H and attach it to  
its Form 1120-F. Also, any foreign  
corporation that is a partner in a  
partnership that has deductions  
allocated to ECI under Regulations  
section 1.861-8 must also complete  
Schedule H and attach it to its Form  
1120-F.  
experimentation expenses at  
Regulations section 1.861-17. Under  
these regulations, a taxpayer must  
allocate deductions to the class of  
gross income to which the deduction  
is definitely related and then, if  
necessary, apportion deductions  
among the groups of income included  
in the class. Generally, deductions are  
allocated and apportioned on the  
basis of the factual relationship  
Specific Instructions  
Part I – Home Office  
Deductible Expenses  
Definitely Related Solely to  
ECI or Non-ECI  
between the deduction and gross  
income. (Under section 882(c)(1)(B),  
charitable contributions that are  
Protective returns. If the foreign  
corporation files a protective Form  
1120-F under Regulations section  
1.882-4(a)(3)(vi), Schedule H need  
not be completed or attached to the  
protective Form 1120-F.  
deductible under section 170 reduce  
ECI whether or not connected with  
such income.) Use Schedule H (Form  
1120-F) to report expenses, other  
than interest expense and bad debt  
expense, allocated and apportioned  
to ECI and non-ECI. Interest expense  
of a foreign corporation is allocated to  
ECI exclusively (except to the extent  
provided in certain tax treaties) under  
Part I is used to identify the total  
expenses, including interest expense  
and bad debt expense, recorded on  
the corporation's home office books;  
to report adjustments made to  
Treaty-based return reporting of  
business profits attributable to a  
U.S. permanent establishment. Do  
not complete Schedule H if the  
determine the amounts that are  
deductible for U.S. tax purposes; and  
to report the portion of the adjusted  
expenses that are definitely related to  
corporation files Form 1120-F  
pursuant to an income tax treaty to  
report business profits attributable to a  
Jul 25, 2023  
Cat. No. 50605P  
ECI and non-ECI. To the extent  
included in the home office records  
used to report total home office  
expenses, interest expense and bad  
debt expense are also identified on  
Schedule H and removed from  
expenses allocated and apportioned  
under Regulations sections 1.861-8  
and 1.861-17 and Temporary  
Reporting Standards, applicable to  
the corporation's local accounting  
practices or under U.S. GAAP, at the  
corporation's choosing. Expenses of  
other includible entities (that is,  
expense included on line 1a that is  
treated as an involuntary charge-off  
under Regulations section 1.166-2(d)  
(2). The deductible amount of bad  
debt expense remaining after any  
adjustments on line 2 is eliminated  
from Schedule H expenses on line 5.  
Attach a statement listing the  
amount of the adjustment for each of  
the following categories.  
disregarded entities) are included in  
home office expenses reported on  
line 1a only if the expenses of such  
other entities are recorded on the  
home office's books. However, if the  
home office's books and records are  
Regulations section 1.861-8T.  
Deductions reported on home office  
1. Expenses included on line 1a of  
entities whose expenses are not  
includible in the corporation's  
books may include expenses incurred maintained as part of a foreign  
outside the foreign corporation's home consolidated financial statement, the  
country (other than in the United  
States). Home office deductions do  
not include deductions that are  
consolidated group's expenses may  
be entered on line 1a, although such  
amounts are adjusted on line 2. If the  
consolidated group's expenses are  
used, the taxpayer must attach a  
statement listing the foreign  
expenses for U.S. tax purposes.  
2. Temporary differences (for  
example, costs capitalized under  
section 263A, carrying charges under  
section 263(g), depreciation and  
amortization, general loan loss  
reserves).  
reported on books and records used  
to complete Form 1120-F, Schedule L  
(“Schedule L books”). Schedule L  
books are the set or sets of books of  
the corporation's U.S. trade or  
consolidated group members.  
Expenses recorded on  
business or books of its U.S. branch  
(whether maintained within or outside  
the United States) as defined in  
Regulations section 1.882-5(d)(2).  
non-Schedule L books of disregarded  
entities (and not on the home office  
books) that are allocated and  
3. Permanent differences (for  
example, interbranch transactions  
other than interest; non-deductible  
meals and entertainment and  
apportioned to ECI are reported on  
line 19. If the corporation uses  
management cost accounting  
statements for its home office books  
that include expenses of one or more  
disregarded entities, and also  
maintains certified audited  
executive salary compensation).  
Part I may be completed in U.S.  
dollars or in the foreign corporation's  
functional currency. If the corporation  
completes Part I in U.S. dollars, check  
the box in the Part I heading. If the  
corporation completes Part I in its  
foreign functional currency, specify the  
currency in the space provided in the  
Part I heading.  
Do not allocate and apportion  
expenses to ECI and non-ECI on  
line 2. In addition, do not make  
adjustments on line 2 to reflect  
book-to-tax adjustments for any home  
office interest expense (including  
interbranch interest expense) included  
on line 1a. Interest expense included  
on line 1a is adjusted on line 4. The  
allocation of deductible interest  
expense to ECI is reported on  
third-country GAAP (or other  
applicable accounting standards)  
statements for a disregarded entity,  
the expenses of the disregarded entity  
must be included on line 1a in either  
U.S. dollars or the home office's  
functional currency even if the audited  
third-country GAAP (or other  
Line 1a. Enter on line 1a the total  
expenses recorded on the  
non-Schedule L books and records of  
the home office (including books and  
records maintained in locations  
outside the United States other than in  
the corporation's home country). The  
books and records may be home  
office records (for example,  
Schedule I (Form 1120-F).  
If the corporation is a foreign bank  
that charges its U.S. branch office  
cost reimbursements for services and  
overhead which are booked by the  
branch in the third-party category of  
expense actually incurred rather than  
as a lump sum interbranch amount,  
list the adjustment for each third-party  
category expense separately on the  
statement for permanent differences.  
applicable accounting standards)  
statements are in another non-dollar  
functional currency.  
Line 2. Enter on line 2 the total of the  
adjustments necessary to conform the  
amounts on line 1a to the amounts  
that are deductible for U.S. tax  
management cost accounting reports)  
that identify only the expenses  
included in the corporation's financial  
statements for the tax year. It is not  
necessary that the home office  
records or reports used also include  
items of income, gain or loss  
purposes. These adjustments include  
temporary and permanent differences  
of the type applicable in determining  
the deductions of U.S. corporations  
that file their income tax returns on  
Form 1120 (for example, adjustments  
eliminating any line 1a expenses of  
entities whose expenses are  
Line 3. Combine lines 1a and 2 and  
enter the result on line 3. The amount  
reported on line 3 is the total amount  
of deductible expenses (determined  
under U.S. tax principles before  
apportionment between ECI and  
non-ECI) of the foreign corporation  
that files Form 1120-F, other than  
those that are included on the  
(including bad debt charge-offs), or  
financial transaction expenses such  
as interest expense and periodic  
notional principal contract expense.  
Alternatively, the expenses reported  
on line 1a may be derived from  
audited or unaudited financial  
includible in the corporation's  
expenses for book purposes but not  
for U.S. tax purposes). In addition,  
include adjustments to loan losses  
and loss reserves included in line 1a  
expenses to reflect the amount of bad  
debt expense that is deductible for  
U.S. tax purposes. Such adjustments  
include any amount of bad debt  
statements. The home office books  
may be books recorded under the  
Generally Accepted Accounting  
Principles (“GAAP”), or other  
corporation's Schedule L books.  
Line 4. Enter on line 4 the total  
amount of interest expense (including  
interbranch interest), if any, recorded  
applicable accounting standards,  
including International Financial  
Instructions for Schedule H (Form 1120-F) (2023)  
2
on the home office books that is  
included on line 3.  
amount of any interoffice or  
business is carried on). Also include  
on line 11 deductible research and  
experimentation expenditures that are  
definitely related to ECI under  
interbranch charges from the home  
office to various locations and  
Line 5. Enter on line 5 the bad debt  
expense, if any, that is included on  
line 3. Any portion of the amount  
included on line 5 that is allocable to  
ECI is reported directly on Form  
1120-F, Section II, line 15.  
Line 7. Subtract line 6 from line 3 and  
enter the difference on line 7. This is  
the corporation's remaining home  
office deductions which are to be  
allocated and apportioned between  
ECI and non-ECI in Parts I and II of  
Schedule H.  
Lines 8 through 10. The amounts  
reported on lines 8 through 10 are  
deductions that are definitely related  
to non-ECI under Regulations  
sections 1.861-8 and 1.861-17 and  
Temporary Regulations section  
1.861-8T. If the corporation has  
deductions included on line 7 that are  
definitely related and allocable to ECI  
that is exempt from tax under the  
Code or an income tax treaty, the  
deductions should be treated as  
allocable to non-ECI for purposes of  
Schedule H and included in the  
amounts reported on lines 8 through  
10.  
departments recorded on the home  
office books as home office “service”  
Regulations section 1.861-17 and  
fees for internal management or home deductible charitable contributions  
office tax accounting purposes (which that are included on line 7. Also  
amounts are eliminated on line 2) is  
include on line 11 deductible research  
not determinative of the amount of the and experimentation expenditures that  
home office's deductible expense that are definitely related to ECI under  
is definitely related to non-ECI.  
Regulations section 1.861-17,  
deductible charitable contributions  
that are included on line 7, and  
stewardship expenses, if any.  
Line 10. Enter on line 10 all other  
deductions included on line 7 that are  
definitely related solely to non-ECI of  
the corporation (other than amounts  
included on lines 8 and 9). For  
Part II – Home Office  
Deductible Expenses  
Allocated and Apportioned  
to ECI  
example, if a banking corporation  
conducts global banking operations  
through branch offices (including  
through disregarded entities) in  
locations outside the corporation's  
home country, the home office  
Line 13. Subtract line 12 from line 7  
and enter the difference on line 13.  
The amount on line 13 is the residual  
amount of the deductions entered on  
line 7 that is not definitely related  
solely to the corporation's ECI or  
non-ECI. The amount on line 13 is  
subject to apportionment under  
deductions included on line 7 that are  
definitely related to non-ECI booked in  
those locations are reportable on  
line 10. These deductions include  
home office deductions definitely  
related to non-ECI of disregarded  
entities, whether or not the balance  
sheet from such entity is reportable on  
Schedule L of Form 1120-F. (For  
corporations other than banks, such  
non-ECI may be reflected as income  
from includible entities on  
Regulations sections 1.861-8 and  
1.861-17 and Temporary Regulations  
section 1.861-8T on Part II, line 16.  
Line 14. If the corporation reports  
expenses and deductions in Part I in  
the corporation's foreign functional  
currency, enter the average exchange  
rate that is used to convert those  
deductions to U.S. dollars for  
Line 8. Enter on line 8 deductions  
included on line 7 that are definitely  
related to non-ECI received from  
subsidiaries (other than disregarded  
entities whose income and deductions  
are treated as income and deductions  
of the corporation filing Form 1120-F).  
See, for example, Regulations section  
1.861-8(e)(4)(ii) and Regulations  
section 1.861-17 (relating to treatment  
of stewardship expenses and  
Schedule M-3 (Form 1120-F), Part I,  
line 5. Foreign banks record such  
non-ECI on Schedule M-3 (Form  
1120-F), Part I, line 5, only if the  
entity's sets of books are reportable  
on Form 1120-F, Schedule L.) See the  
Instructions for Schedule M-3 (Form  
1120-F), Part I.  
purposes of lines 15 and 17. The  
exchange rate must be rounded to at  
least five places.  
Note. You must round the result to  
more than five places if failure to do so  
would materially distort the exchange  
rate or the equivalent amount of U.S.  
dollars.  
If the corporation reports amounts  
in Part I in U.S. dollars, leave line 14  
blank.  
Line 15. Enter on line 15 the amount  
on line 13, converted if necessary to  
U.S. dollars. If the amount on line 13 is  
stated in the corporation's foreign  
functional currency, divide line 13 by  
the line 14 exchange rate and enter  
the result on line 15.  
Line 11. Enter on line 11 the portion  
of the deductions included on line 7  
that is definitely related to ECI under  
Regulations sections 1.861-8 and  
1.861-17 and Temporary Regulations  
section 1.861-8T. Deductions  
research and experimentation  
expenses).  
Line 9. Enter on line 9 deductions  
included on line 7 (other than amounts  
included on line 8) that are definitely  
related under Regulations sections  
1.861-8 and 1.861-17 and Temporary  
Regulations section 1.861-8T to  
non-ECI of the corporation that is  
booked in the corporation's home  
office and in other locations in the  
corporation's home country. For  
example, line 9 includes deductions  
included on line 7 that are definitely  
related to non-ECI of a banking  
corporation that is booked in the  
corporation's home office and in its  
retail banking branches in the  
definitely related to ECI may include  
specifically identifiable personnel and  
other associated costs incurred in the  
home office with respect to persons  
who work on the evaluation and  
approval of ECI-producing activities of  
the corporation's trade or business  
within the United States (for example,  
specifically identifiable home office  
deductions incurred for the evaluation  
and approval of U.S. loans to  
Line 16. Enter on line 16 the amount  
of deductions included on line 15 that  
is allocated and apportioned to ECI  
under Regulations sections 1.861-8  
and 1.861-17 and Temporary  
customers negotiated and solicited by  
the corporation's U.S. branch office  
where a banking, financing, or similar  
corporation's home country. The  
Regulations section 1.861-8T. Attach  
Instructions for Schedule H (Form 1120-F) (2023)  
3
a statement describing the  
apportionment methods used,  
identifying the numerator and  
denominator of any ratio-based  
method, and listing the amount  
apportioned under each method to  
ECI.  
Line 17. Enter on line 17 the amount  
entered on line 11, converted if  
necessary to U.S. dollars. If the  
amount on line 11 is stated in the  
corporation's foreign functional  
currency, divide line 11 by the line 14  
exchange rate and enter the result on  
line 17.  
Line 18. Add lines 16 and 17 and  
enter the total on line 18. The amount  
on line 18 is the total amount of  
deductible expenses reported on the  
home office books that is allocated  
and apportioned to ECI under  
Regulations sections 1.861-8 and  
1.861-17 and Temporary Regulations  
section 1.861-8T.  
Line 19. Enter on line 19, in U.S.  
dollars, the amount of deductible  
expenses allocated and apportioned  
to ECI under Regulations sections  
1.861-8 and 1.861-17 and Temporary  
Regulations section 1.861-8T that is  
recorded on non-Schedule L books  
and records of foreign locations other  
than those of the home office. Attach  
a statement listing the amount of  
deductions allocated and apportioned  
to ECI from each location.  
records used to determine the amount  
of the deductions that are allocated  
and apportioned to ECI in Parts I and  
II of Schedule H. The corporation's  
ratios of effectively connected gross  
income, U.S. assets, and U.S.  
Line 21a. Enter on line 21a the  
corporation's gross ECI reportable on  
Schedule M-3 (Form 1120-F), Part II,  
line 25, column (e), plus any  
additional gross income amounts  
reportable on line 27, column (e). If  
the corporation is not required to and  
does not file Schedule M-3 (Form  
1120-F) for the tax year, enter the  
amount of gross income from Form  
1120-F, Section II, line 11.  
personnel to worldwide gross income,  
worldwide assets, and worldwide  
personnel are reported on lines 21  
through 23. Other ratio-based  
methods and any non-ratio-based  
methods the corporation used for the  
tax year to allocate and apportion  
deductions to non-ECI on lines 8  
through 10 and to ECI on lines 11, 16,  
and 19 are identified in statements  
required by the instructions for lines  
24 and 25.  
Line 21b. Enter on line 21b the  
corporation's worldwide gross income  
stated in U.S. dollars. Corporations  
other than banks enter the worldwide  
gross income amount from  
Schedule M-3 (Form 1120-F), Part II,  
line 25, column (a), plus any  
Check Boxes Above Line 21  
additional gross income amounts  
included on line 27, column (a).  
However, if the corporation's  
New methods. Check the box to  
indicate if the corporation used a  
method to allocate and apportion  
deductions for the current tax year  
that was not used in the prior year.  
Interbranch amounts in Part IV.  
Check the box to indicate if an  
expense in respect of any amount  
included in Part II, line 20, in the home  
office allocation and apportionment  
was recorded on the Schedule L  
books that are used to complete Part  
IV of Schedule H. Include the full  
amount of the interbranch charge in  
Part IV, line 35.  
worldwide income is effectively  
connected to its trade or business  
within the United States, the  
corporation should instead enter the  
gross income amount from  
Schedule M-3, Part II, line 25, column  
(e) (plus any additional gross income  
amounts included on line 27, column  
(a)), but only if there are no permanent  
differences for tax-exempt income  
under section 103 or under a treaty  
(for example, force of attraction  
income not attributable to a U.S.  
permanent establishment) that would  
otherwise be removed in column (c). If  
the corporation is not required to and  
does not report worldwide gross  
income in column (a) of Schedule M-3  
(Form 1120-F), enter the worldwide  
gross income from any other  
Lines 21 Through 23. Gross  
Income, Asset, and Number of  
Personnel Ratios  
The corporation must complete the  
gross income ratio for line 21 whether  
or not it used such method to allocate  
and apportion deductions in Parts I  
and II. If the corporation used the  
asset or number of personnel method  
(whether separately or as  
Line 20. Add lines 18 and 19 and  
enter the total on line 20. The amount  
entered on line 20 is the total amount  
of deductible expenses reported on  
the corporation's non-Schedule L  
books that is allocated and  
reasonable source. Reasonable  
sources include worldwide income  
statements used to report allocations  
of income or capital to other  
apportioned to ECI under Regulations  
sections 1.861-8 and 1.861-17 and  
Temporary Regulations section  
1.861-8T. This amount is also  
reported on Form 1120-F, Section II,  
line 26, and, for banks only, on  
Schedule M-3 (Form 1120-F), Part III,  
line 31.  
regulatory or non-federal tax  
components of a multi-factor method),  
it must report the attributes on lines 22  
and 23. If the corporation did not use  
either the asset or the personnel  
method to allocate and apportion  
deductions for the year, then, except  
as provided for worldwide assets  
reported on line 22b, only the  
authorities or the worldwide income  
statements that would be used if the  
corporation was required to report  
worldwide gross income in column (a)  
of Schedule M-3 (Form 1120-F).  
Worldwide gross income is worldwide  
gross receipts less only cost of goods  
sold, if applicable.  
Part III – Allocation and  
Apportionment Methods  
and Financial Records  
Used to Complete Parts I  
and II  
numerators of each method must be  
reported on lines 22 and 23. See the  
instructions for line 22b for disclosure  
of the asset ratio by corporations that  
used the actual ratio to allocate  
interest expense under Regulations  
section 1.882-5.  
Line 22a. Enter on line 22a the  
average assets reported on  
Schedule I (Form 1120-F), line 5,  
column (d). These are the average  
U.S. assets included in the  
Part III is used to identify the income,  
asset, and personnel attributes of the  
U.S. trade or business and to report  
the methodologies and financial  
corporation's Regulations section  
1.882-5 interest expense allocation. If  
the corporation does not have any  
Instructions for Schedule H (Form 1120-F) (2023)  
4
interest expense for the year and does determine the number of personnel  
not file Schedule I (Form 1120-F), ratio and enter the percentage on  
Line 29. Enter on line 29 the total  
expenses recorded on the Schedule L  
books.  
enter the average assets derived from line 23c. If line 23b is blank, leave  
the beginning and ending U.S. assets  
included in the computation of U.S.  
net equity on Form 1120-F, Section III,  
lines 4a and 4b. If the corporation is  
exempt from the branch profits tax  
under an applicable income tax treaty  
and is not required to complete Form  
1120-F, Section III, Part I, the average  
U.S. assets should be derived from  
the beginning and ending U.S. assets  
included on Form 1120-F, Schedule L.  
line 23c blank.  
Note. The Schedule L books may be  
maintained using GAAP, or other  
applicable accounting standards,  
other than U.S. GAAP. The  
Line 24. If the corporation used any  
other ratio-based method to allocate  
and apportion deductions to ECI and  
non-ECI on line 8, 9, 10, 11, 16, or 19  
of Schedule H, attach a statement  
describing the ratio used on each line.  
Include the numerator and  
Schedule L books may include more  
than one set of books, including the  
set(s) of books of disregarded entities.  
See the Instructions for Schedule M-3  
(Form 1120-F), Part I, lines 4 and 5,  
for the Schedule L treatment of  
denominator of the ratio used for each  
applicable line.  
Line 25. If the corporation used a  
non-ratio-based method to allocate  
and apportion deductions to ECI and  
non-ECI on line 8, 9, 10, 11, 16, or 19  
of Schedule H, attach a statement  
describing each such method and the  
percentage used, if any, for each  
applicable line. These may include  
methods for which percentage  
disregarded entities and the  
Line 22b. If the corporation used the  
worldwide actual ratio under  
combined reporting of multiple sets of  
books. These rules apply to both  
banks and non-banks for purposes of  
determining the expenses reportable  
on Schedule H, line 29. Interbranch  
income and expenses recorded  
between separate sets of books must  
be eliminated in the combined reports.  
Regulations section 1.882-5(c)(2) to  
allocate interest expense to ECI, enter  
the amount from Schedule I (Form  
1120-F), line 6b. If the corporation did  
not use the actual ratio, but used a  
worldwide asset ratio to apportion  
deductions to ECI for purposes of  
line 11, 16, or 19, enter the worldwide  
assets used in that ratio. If a  
allocations to ECI or non-ECI are  
estimated and documented by  
Line 30. Enter on line 30 the total of  
the adjustments necessary to conform  
the amounts on line 29 to the amounts  
that are deductible for U.S. tax  
questionnaires or home office  
worldwide asset ratio is not available  
from either Schedule I (Form 1120-F),  
line 6b, or Schedule H, line 11, 16, or  
19, leave line 22b blank.  
Line 22c. If an amount is entered on  
line 22b, divide line 22a by line 22b to  
determine the asset ratio and enter  
the percentage on line 22c. If line 22b  
is blank, leave line 22c blank.  
department interviews (for example,  
estimated percent of time spent by  
employees of particular home office  
departments or sub-departments on  
U.S. trade or business activities).  
purposes. See the instructions for Part  
I, line 2, for a general description of  
the types of temporary and permanent  
differences that are reportable as  
adjustments to the book expenses in  
determining current year tax  
Lines 26 Through 28.  
Identification of Financial  
Records Used  
deductions under U.S. tax principles.  
However, do not include on line 30  
any adjustments that are otherwise  
reportable on lines 32a through 35.  
Specifically, third-party interest  
expense and interbranch interest  
expense included on line 29 is  
Check the “Yes” or “No” box to  
indicate whether the types of financial  
books and records indicated were  
used to complete Parts I and II of  
Schedule H.  
Line 28. If the “Yes” box is checked,  
attach a statement listing the other  
documentation used to complete  
Parts I and II of Schedule H (for  
example, home country regulatory  
reports or functional analyses).  
Line 23a. Enter on line 23a the  
number of personnel who worked in  
the corporation's U.S. trade or  
business during the tax year. The  
corporation may use any reasonable  
method to determine the number of  
personnel, including data that is  
already prepared and used by the  
corporation for a non-tax business  
purpose. For example, if the  
adjusted on lines 32a and 32b,  
instead of line 30. Bad debt expense  
included on line 29 is adjusted on  
line 33, instead of line 30. Other  
third-party deductible expenses not  
allocated or apportioned to ECI and  
non-ECI under Regulations section  
1.861-8 are adjusted on line 34,  
instead of line 30. Interbranch  
corporation maintains headcount data  
(such as weighted average headcount  
data) in its personnel records or for  
other purposes such as budgeting,  
planning, and control, such numbers  
may be used in the numerator.  
Line 23b. If the corporation used a  
ratio based on number of personnel to  
apportion deductions on line 11, 16,  
or 19, enter the worldwide personnel  
count used in the denominator of such  
ratio on line 23b. If the corporation  
does not apportion deductions using a  
number of personnel ratio, leave  
line 23b blank.  
Part IV – Allocation and  
Apportionment of  
expenses (other than interest  
Expenses on Books and  
Records Used to Prepare  
Form 1120-F, Schedule L  
expense) included on line 29  
(including interbranch book charges  
for home office services provided to  
the U.S. trade or business) are  
Use Part IV of Schedule H to report  
the allocation and apportionment of  
deductions recorded on the  
adjusted on line 35, instead of line 30.  
However, if the corporation is a foreign  
bank that charges its U.S. branch  
office cost reimbursements for  
corporation's Schedule L books, other  
than interest and bad debt expense,  
to ECI and non-ECI under Regulations  
sections 1.861-8 and 1.861-17 and  
Temporary Regulations section  
1.861-8T.  
services and overhead which are  
booked by the branch in the  
third-party category of expense  
actually incurred rather than as a lump  
sum interbranch amount, the  
Line 23c. If an amount is entered on  
line 23b, divide line 23a by line 23b to  
Instructions for Schedule H (Form 1120-F) (2023)  
5
interbranch amounts charged and  
recorded by the U.S. branch  
income reported on Form 1120-F,  
Section II, line 10, or as a separately  
identified deduction under Form  
1120-F, Section II, line 27.  
deductions included on line 37 that  
are definitely related to ECI or  
non-ECI under Regulations section  
1.861-8 and Temporary Regulations  
section 1.861-8T. Deductions  
included on line 38a are periodic  
expense from notional principal  
contracts that are sourced under  
Regulations section 1.863-7 with  
respect to non-dealer securities  
hedging transactions or from  
Schedule L book should not be  
reported on line 35 as interbranch  
expenses, but should be left in the  
third-party categories to which they  
are assigned on the U.S. books and  
records. If any such amounts require  
adjustment for U.S. tax principles,  
then such adjustment should be  
shown on line 30.  
Line 35. Enter on line 35 all  
interbranch expenses, other than  
interbranch interest expense, that are  
included in the amount reported on  
line 31. The interbranch amounts  
reportable on line 35 include home  
office charges reflected on the  
Schedule L books for home office  
management services provided to the  
U.S. trade or business.  
securities trading or non-global  
dealing operations. If notional  
principal contract periodic expense is  
allocated and apportioned under the  
global dealing rules of Proposed  
Regulations section 1.863-3(h), such  
amounts should be included on  
line 34 and, therefore, are not  
definitely related to ECI or non-ECI  
under Regulations section 1.861-8  
and Temporary Regulations section  
1.861-8T.  
Attach a statement detailing the  
items adjusted and amounts of each  
adjustment.  
Line 32a. Enter on line 32a the  
amount of third-party interest expense  
(whether owed to unrelated or related  
parties) that is included in the amount  
reported on line 31. Interest expense  
is allocated to ECI under Regulations  
section 1.882-5 and reported on  
Schedule I (Form 1120-F).  
Line 32b. Enter on line 32b any  
interbranch interest expense that is  
included in the amount reported on  
line 31.  
Note. Amounts paid or accrued on  
the Schedule L books to the home  
office are not determinative of the  
amount of home office expense  
allocated and apportioned to ECI on  
Schedule H, Part II, line 20.  
Line 36. Add the amounts on lines  
32a through 35 and enter the total on  
line 36. This amount reflects the  
deductions included on line 31 for  
which there are special rules to which  
the general allocation and  
Note. Periodic expenses from  
notional principal contracts may be  
allocated and apportioned to ECI and  
non-ECI in accordance with the ECI  
and non-ECI treatment of the item(s)  
the notional principal contract hedges.  
Line 33. Enter on line 33 any bad  
debt expense that is included in the  
amount reported on line 31. Any  
portion of the amount eliminated on  
line 33 that is allocated and  
apportionment rules under  
Regulations sections 1.861-8 and  
1.861-17 and Temporary Regulations  
section 1.861-8T do not apply.  
Line 38b. Enter on line 38b all other  
deductions included in the amount  
reported on line 37 that are definitely  
related to ECI or non-ECI under  
Regulations sections 1.861-8 and  
1.861-17 and Temporary Regulations  
section 1.861-8T.  
Line 39. Add lines 38a and 38b and  
enter the total on line 39 for each of  
columns (a) through (c). The amounts  
on line 39 are the portion of total  
deductions reported on line 37 that  
are definitely related to ECI and  
non-ECI.  
Line 40. Enter on line 40 the  
deductions included on line 37 that  
are not definitely related to ECI or  
non-ECI that are apportioned to ECI  
and non-ECI under Regulations  
sections 1.861-8 and 1.861-17 and  
Temporary Regulations section  
1.861-8T. The total on line 40, column  
(c), must equal line 37 minus line 39,  
column (c).  
Line 37. Subtract the amount on  
line 36 from the amount on line 31 and  
enter the difference on line 37. The  
amount reported on line 37 is  
apportioned to ECI is reported directly  
on Form 1120-F, Section II, line 15.  
Line 34. Enter on line 34 other  
third-party expenses that are included  
in the amount reported on line 31 and  
that are not allocated and apportioned  
between ECI and non-ECI under  
Regulations sections 1.861-8 and  
1.861-17 and Temporary Regulations  
section 1.861-8T. Periodic expense  
from a notional principal contract is  
not allocated and apportioned under  
Regulations section 1.861-8 and  
Temporary Regulations section  
allocated and apportioned to ECI and  
non-ECI under Regulations sections  
1.861-8 and 1.861-17 and Temporary  
Regulations section 1.861-8T and  
reconciled on lines 38a through 41.  
Lines 38a Through 41.  
Reconciliation of Allocable  
Expenses on Books Under  
Regulations Section 1.861-8  
(from line 37)  
1.861-8T if the amount is includible in  
the profits and losses of a global  
dealing operation and the corporation  
allocates and apportions such  
The amount of deductions reported on  
line 37 that is allocated and  
apportioned to ECI and non-ECI is  
reported on lines 38a through 41,  
columns (a) through (c). With respect  
to each of lines 38a through 41, enter  
the amount included on line 37 that is  
allocated or apportioned to ECI in  
column (a) and the amount allocated  
or apportioned to non-ECI in column  
(b). Add columns (a) and (b) for each  
line and enter the total amount in  
column (c).  
amounts under Proposed Regulations  
section 1.863-3(h). Such periodic  
expense is subject to allocation and  
apportionment under Proposed  
Regulations section 1.863-3(h) in  
accordance with the principles of  
Proposed Regulations section  
Line 41. Add lines 39 and 40 and  
enter the total on line 41 for each of  
columns (a) through (c). The amount  
entered on line 41, column (a), is the  
total amount of deductions included  
on line 37 that is allocated and  
1.482-8. If such periodic expense is  
included on line 31, it should be  
included on line 34 and reported  
separately on Form 1120-F, Section II,  
as either part of the global dealing  
Line 38a. Enter on line 38a the  
apportioned to ECI. These deductions  
are included on Form 1120-F,  
amount of derivative transaction  
Instructions for Schedule H (Form 1120-F) (2023)  
6
Section II, lines 12, 13, 14, 16, 17, 19  
through 24, and 27. The total amount  
on line 41, column (c), must equal the  
amount on line 37.  
Instructions for Schedule H (Form 1120-F) (2023)  
7