1120-F Sch. S

Exclusion of Income From the International Operation of Ships or Aircraft Under Section 883

Agency
IRS
Revision
Rev. December 2022
Fillable fields
68
Pages
2
Official source
IRS form page
Checked
October 21, 2026
Fill 1120-F Sch. S online
Page 1 of form 1120-F Sch. S

Schedule S (Form 1120-F): Ships or Aircraft Income Exclusion Under Section 883

Schedule S (Form 1120-F) is used by foreign corporations to claim an exclusion from gross income under section 883 and to provide reporting information required by the section 883 regulations. The exclusion covers income from the international operation of ships or aircraft.

The schedule asks for the qualified foreign country where the corporation was organized, the type of equivalent exemption that country grants, the gross income in each category of qualified income and which stock ownership test the corporation meets. Parts II, III and IV hold the details for the publicly-traded test, the CFC stock ownership test and the qualified shareholder stock ownership test.

The form says to attach it to Form 1120-F. You can fill out Schedule S free in your browser on this page and download it without an account.

What's on Schedule S (Form 1120-F)

Header

Name of corporation and employer identification number.

Part I, lines 1 and 2

The qualified foreign country, the type of equivalent exemption (domestic law, exchange of notes or income tax convention), its authority, and gross income on lines 2a through 2h.

Part I, lines 3 to 5

The stock ownership test used, and check boxes about shares issued in bearer form and whether bearer shares were relied on.

Part II: publicly-traded test

Lines 6 through 10 ask for the country and markets where the stock trades, each class relied on and details for closely-held classes owned by 5% shareholders.

Part III: CFC test

Lines 11 through 14 ask for the percentage owned by qualified U.S. persons, the holding periods and whether the CFC is directly held by them.

Part IV: qualified shareholder test

Lines 15 and 16 ask about ownership by qualified shareholders, their number, percentages by country code and the days the stock was held.

How to fill out Schedule S (Form 1120-F)

  1. 1

    Lines 1a to 1c

    Enter the qualified foreign country, check one box for the exemption type and enter the applicable authority. The instructions give examples such as a statute citation, a diplomatic note or an income tax convention.

  2. 2

    Line 2

    Enter gross income in each category claimed. The form says that if an amount is not readily determinable, enter a reasonable estimate and check the estimate box.

  3. 3

    Lines 3 to 5

    Check one stock ownership test on line 3. Check line 4 if any shares are issued in bearer form, then complete line 5a or 5b.

  4. 4

    Complete the matching part

    Complete Part II, III or IV for the test checked on line 3. In Part II, the instructions say a Yes on line 9 leads to lines 10a and 10b, with a statement in the same format for other classes.

  5. 5

    Country codes

    On lines 10b(ii) and 16b, the instructions say to enter the two-letter codes from the list at IRS.gov/countrycodes.

  6. 6

    Attach to Form 1120-F

    Attach the completed schedule to the corporation's Form 1120-F income tax return.

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When and where Schedule S is filed

Attach to the return

The instructions say to attach Schedule S (Form 1120-F) to the foreign corporation's Form 1120-F income tax return.

Time, place and manner

The instructions say to see the Instructions for Form 1120-F for the time, place and manner for filing the corporation's income tax return.

Equivalent exemption by category

The instructions say whether a foreign country provides an equivalent exemption is determined separately for each category of income on lines 2a through 2h.

Exemptions that do not qualify

The instructions list examples that are not equivalent exemptions, including a reduced tax rate or time limited exemption, inbound or outbound freight tax and territorial tax systems.

Related Schedule V

The About page lists Schedule V (Form 1120-F) for each vessel or aircraft for which the corporation is subject to the 4% rate of tax under section 887.

Related forms

Who files Schedule S (Form 1120-F)?

  • Foreign shipping and airline corporations

    A corporation organized in a qualified foreign country and considered engaged in the international operation of ships or aircraft, claiming the section 883 exclusion.

  • Publicly-traded corporations

    A corporation relying on the publicly-traded test of Regulations section 1.883-2(a) completes Part II.

  • Controlled foreign corporations

    A corporation relying on the CFC stock ownership test of Regulations section 1.883-3(a) completes Part III.

  • Corporations with qualified shareholders

    A corporation relying on the qualified shareholder stock ownership test of Regulations section 1.883-4(a) completes Part IV.

  • Not for activities outside the definition

    The instructions list activities that do not constitute operation of ships or aircraft, such as freight forwarding, ship or aircraft brokering and the activities of travel agents.

The instructions say qualified foreign corporations engaged in the international operation of ships or aircraft that are claiming an exclusion of gross income under section 883 complete Schedule S. It is a corporate schedule, not a form for individuals.

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Questions about Form 1120-F Sch. S

What does Schedule S (Form 1120-F) do?

The instructions say foreign corporations use it to claim an exclusion from gross income under section 883 and to provide reporting information required by the section 883 regulations.

Is Schedule S filed on its own?

No. The form says to attach it to Form 1120-F, the U.S. Income Tax Return of a Foreign Corporation.

What is an equivalent exemption?

The instructions say a foreign country grants an equivalent exemption when it exempts from taxation income from the international operation of ships or aircraft derived by corporations organized in the United States.

Which part of the schedule is completed?

Line 3 asks which stock ownership test was satisfied. The publicly-traded test leads to Part II, the CFC test to Part III and the qualified shareholder test to Part IV.

What counts as international operation of ships or aircraft?

The instructions describe carriage of passengers or cargo on voyages or flights that begin or end in the United States, and exclude a voyage or flight that begins and ends in the United States unless passengers disembark or cargo is unloaded outside it.

Where are the country codes?

The instructions point to the list of two-letter country codes at IRS.gov/countrycodes for lines 10b(ii) and 16b.