Schedule P (Form 1120-FSC) (Rev. 9-2017)
Page 2
General Instructions
Purpose of Schedule
Use Schedule P to figure an allowable
transfer price to charge the FSC or an
allowable commission to pay to the FSC
under the administrative pricing rules
discussed below. The transfer price or
commission is used to allocate foreign
trading gross receipts from the sale of
export property or from certain services
between the FSC and its related
supplier.
Related supplier. Under Regulations
section 1.482-1(a), a related supplier is
an entity that is owned or controlled
directly or indirectly by the same
interests as the FSC.
Filing the Schedule
File the schedule for an FSC that has
foreign trading gross receipts during the
tax year from:
• The resale of export property or from
certain services, or
• The disposition of export property or
from services in which the FSC served
as commission agent for a related
supplier.
When Not To File
Do not complete Schedule P (or an
alternate format) in the following three
situations.
1. The section 482 method of transfer
pricing is used. If the 23% and 1.83%
methods (see the instructions for
Sections B and C on page 3) do not
apply to a sale or if the related supplier
does not choose to use them, the
transfer price for a sale by the related
supplier to the FSC is figured on the
basis of the sales price actually charged
but is subject to section 482 and its
regulations and to Temporary
Regulations section 1.925(a)-1T(a)(3)(ii).
2. The arm’s-length pricing method is
used. If the transaction is with an
unrelated supplier, the FSC bases its
profit on the arm’s-length price.
3. Transactions are incomplete at the
end of the year. If export property
bought by the FSC from the related
supplier during the tax year is unsold by
the end of the FSC’s tax year or the
related supplier’s tax year in which the
property was transferred, the 23% and
1.83% methods cannot be used.
Instead, the transfer price of the property
bought by the FSC is the supplier’s cost
of goods sold for the property. See
Temporary Regulations section
1.925(a)-1T(c)(5)(i)(C) for rules regarding
the transfer price of property resold
during the subsequent tax year.
Specific Instructions
Item A—Product or Product Line.
Enter the product or product line that
meets one of the two standards below.
1. The principal product based on the
North American Industry Classification
System (NAICS) (see the last page of the
Instructions for Form 1120-FSC).
2. A recognized industry or trade use.
Note: If the FSC used the Standard
Industrial Classification (SIC) codes for
Schedule P in prior tax years, it may
complete item A based on the SIC codes
for the current tax year.
Item B—Basis of Reporting. The FSC
must indicate the basis on which the
amounts on Schedule P were
determined using either the transaction-
by-transaction basis or an election to
group transactions.
Except for certain small FSCs electing
to group transactions (discussed below),
FSCs should not file a separate
Schedule P for each transaction or each
group of transactions.
1. Transaction-by-transaction. If the
FSC makes pricing determinations
based on each transaction rather than an
election to group transactions, check
box 1a, box 1b, or box 1c depending on
the FSC’s preferred reporting format.
a. Aggregate on Schedule P. If the
FSC chooses to aggregate its
transactions on one or more Schedules
P, check box 1a.
• Aggregate on one Schedule P those
transactions for which the same
administrative pricing method is applied,
provided all the transactions are
included in the same product or product
line indicated in item A.
• Aggregate on separate Schedules P
those transactions for which the same
pricing method is applied in each
separate product line.
If a different pricing method is applied
to some of the transactions in one or
more of the separate product lines,
additional Schedules P must be filed.
Example. If the 23% of combined
taxable income method applies to
transactions in three separate product
lines (as indicated in item A), the FSC
would file three aggregate Schedules P.
However, if the FSC uses the 1.83% of
foreign trading gross receipts method for
some of the transactions in one of the
product lines, the FSC would file four
aggregate Schedules P.
b. Aggregate on tabular schedule. The
FSC may choose to aggregate its
transactions on a tabular schedule rather
than on Schedule P. To do so, file one
Schedule P, entering only the taxpayer’s
name and employer identification
number (EIN) at the top of Schedule P.
Also, check box 1b. Attach a tabular
schedule to the partially completed
Schedule P, reporting all information as if
a separate Schedule P were filed for
each aggregate of transactions
described in 1a above. Also see Format
of tabular schedules on page 3.
Note: To be eligible for either of the
aggregate reporting formats described
above in 1a or 1b, the FSC and its
related supplier must maintain a
supporting schedule that contains all
information that would be reported if a
separate Schedule P were filed for each
transaction. The supporting schedule
should not be filed with the Schedule P.
c. Tabular schedule of transactions.
Instead of aggregate reporting, the FSC
may choose to report transactions on a
tabular schedule. File one Schedule P,
entering only the taxpayer’s name and
EIN at the top of Schedule P. Also,
check box 1c. Attach a tabular schedule
to the partially completed Schedule P,
reporting all information as if a separate
Schedule P were filed for each
transaction. Also see Format of tabular
schedules on page 3.
2. Group of transactions. The FSC’s
related supplier may elect to group
transactions by product or product line
in making pricing determinations. The
grouping of transactions applies to all
transactions completed during the tax
year for that product or product line. Do
not group sale and lease transactions.
To make the election, complete one
Schedule P, entering only the taxpayer’s
name and EIN at the top of Schedule P.
Also, check box 2 of item B and attach a
tabular schedule to the partially
completed Schedule P, reporting all
information as if a separate Schedule P
were filed for each group of transactions
(see Format of tabular schedules on
page 3).
Note: If a grouping basis is elected,
aggregate reporting is not permitted.
Attach Schedule P to Form 1120-FSC.
Once the election is made, grouping
redeterminations are permitted no later
than 1 year after the due date of the
FSC’s timely filed (including extensions)
Form 1120-FSC. For details, see
Regulations section 1.925(a)-1(c)(8).
Small FSC. If the FSC elected to be a
small FSC under section 922(b) and has
foreign trading gross receipts of $5
million or less for the tax year, the small
FSC may file a separate Schedule P for
each group of transactions instead of
filing a tabular schedule.
