Transcript Document

FROM PRINCIPLES TO PLANNING
FROM PRINCIPLES TO PLANNING
What You Need to Know About
FATCA - Now
Agenda
FATCA Overview
1
DD & Verif. Proced.
 Purpose
 IRS Registration
 Definitions
 Responsible Officer
 Prevention of 30%
Withholding
 DD obligations
 Exclusions
 Intergovernmental
Agreements (IGAs)
 Timeline
 Implementation
Strategies
2
Forms W-8series
 Chapter 3
Withholding Rules
 Chapter 4 - FATCA
 W-8BEN
 W-8IMY
3
FATCA Overview
 Purpose
 Definitions
 Prevention of 30% Withholding
 Exclusions
 Intergovernmental Agreements (IGAs)
What is the Purpose of FATCA?
What Is FATCA?
• FATCA is U.S. legislation enacted in 2010 which aims to prevent U.S. persons
from using foreign accounts and foreign entities to evade taxes.
• It requires withholding agents, including Foreign Financial Institutions (FFIs)
and certain Non-Financial Foreign Entities (NFFEs) to withhold a 30% U.S. tax
with respect to any “withholdable payment” or foreign passthru payment
made to another foreign entity or a recalcitrant account holder unless the
foreign entity (i) complies with the FATCA due diligence and reporting
requirements or (ii) qualifies for an exemption from these provisions and/or (iii)
unless the account becomes documented.
• Withholding under FATCA is separate and distinct and is in addition to the
current withholding regime under the Code (Chapter 3 NRA withholding).
• Although FATCA seeks to find U.S. persons hiding behind foreign accounts and
entities, the presumption is negative, so that unless the FFI complies with FATCA
or unless the NFFE provides satisfactory information, the entity is presumed to
be owned by U.S. persons and the 30% withholding is triggered.
FATCA Terminology
Accepts
deposits in
the ordinary
course of
business
FATCA Terminology (cont’d)
FATCA Terminology (cont’d)
Holding
Companies and/or
Treasury Centers as FFI
Part of an expanded affiliated group
Is formed in connection with or
(“EAG”) that includes a (i) depository
availed of by a collective
institution (ii) custodial institution (iii) -ORinvestment fund, mutual fund,
certain insurance companies (iv) an
exchange traded fund, hedge fund,
investment entity
private equity fund, etc.
WeiserMazars’ conclusion:

Financial groups with NPFFI or limited FFI will not be able to use holding companies to shelter payments from FATCA
withholding.

SPVs and other holding companies that are part of EAG of certain investment entities will fall under the FFI definition.
However, holding companies that are part of a nonfinancial group or are not part of other FFIs will likely be exempt from FFI status
– Although, these entities can be considered Passive NFFEs.
FATCA Terminology (cont’d)
NFFE
FFI
Dividends, Interest,
Rents, Annuities, any other
FDAP (Fixed, Determinable,
Annual or Periodical income)
+
Gross Proceeds (not merely
gains) from the sale of property
that produces interest and
dividends
Withholdable Payments –
An Expanded Scope of
U.S. Source Income
Is there an exclusion for certain
withholdable payments?
Dividends, Interest,
Rents, Annuities, any other FDAP
(Fixed, Determinable, Annual or
Periodical income)
+
Gross Proceeds (not merely
gains) from the sale of property
that produces interest and dividends
Important Exclusions
•
ECI – Income Effectively Connected with U.S. Trade or Business (unless income is exempt under the tax treaty).
•
Excluded nonfinancial payments for non financial goods or services and the use of property.
•
Short term obligations.
•
Grandfathered obligations, generally debt instruments, certain other legal documents with fixed terms, instruments that can produce
dividend equivalent amounts and certain collateralized agreements that are issued or executed before Jan. 1, 2014.
BEWARE – IF THE CHARACTER OR SOURCE IS UNKNOWN IT IS PRESUMED TO BE A WITHHOLDABLE PAYMENT FROM U.S.
SOURCES – WITHHOLDING AGENT CAN EITHER START WITHHOLDING OR DEPOSIT IN ESCROW ACCOUNT FOR ONE YEAR UNTIL THE
DUST SETTLES.
8
FATCA Terminology (cont’d)
Financial Account
Pursuant to Final
Regulations
Custodial and
depository accounts of
an entity that is
engaged in banking or
similar activity
Debt and equity
interest in certain
investment entities
Debt and equity
interest in a holding
company or a
treasury center
provided certain
requirements are
met
Debt and equity interest
in a custodial and/or depository
instituion or insurance company
provided that certain
requirements are met
Financial account needs to be held by a specified U.S. Person or U.S. Owned Foreign Entity.
WeiserMazars’ conclusion:

Depository account is clarified to include accounts that are maintained by financial institutions that are engaged in banking or a
similar activity.

Financial accounts are clarified to include interests in certain investment entities. The final regulations clarify when such
interests are considered a financial account, e.g., in case of interest in holding companies of FFI groups.
Prevention of 30% WH for an FFI
FFI would have to become participating to avoid 30% withholding:
• An entity classified as an FFI, such as broker/dealers, foreign banks and credit unions will be
required to enter into an agreement with the IRS under which it would have to:
 Obtain information from investors to determine which are U.S. accounts, e.g., accounts
held by U.S. citizens, green-card holders, or entities substantially owned by U.S.
persons. Substantially owned applies a “more than 10%” threshold, however, for
investment entities a 0% threshold is applied.
 Comply with specified verification and due diligence procedures relating to its
investors.
 Report annually certain information with respect to U.S. accounts that it maintains.
 Deduct and withhold a 30% tax on any passthru payment made to a recalcitrant
account holder or another Non-Participating FFI;
 Comply with requests for additional information on accounts ; and –
 Attempt to obtain a waiver if foreign law prevents reporting and if a waiver is not
obtained, to close the accounts.
• If the FFI is in a country that is party to an Intergovernmental Agreement, then the FFI is
considered deemed compliant but would have to significantly comply with the terms of the
agreement.
 Significant noncompliance may result in the classification of the non-compliant FFI as
non-participating.
Prevention of 30% WH for an NFFE
NFFE would have to provide information or certify to the withholding agent its exempted status:
• To provide information on U.S. substantial ownership or to certify eligibility for an exemption
or lack of U.S. substantial ownership.
A 30% withholding will not be required if:
The NFFE certifies to the withholding agent that it has no substantial U.S. owners (a more
than 10% threshold both directly or indirectly); IMPORTANT: The Final Regulations do
NOT adopt the IGA controlling person approach (typical KYC 25%) so there is more
pressure to enter into an IGA to receive more favorable terms.
The NFFE provides the withholding agent the information with respect to U.S. owners;
The NFFE belongs to a class of NFFE that are considered “Excepted NFFE”; OR
The NFFE belongs to class of entities that are excluded FFI and NFFE.
• Excepted NFFE – Include:
Publicly traded entities and expanded affiliate group members;
Certain entities listed in a U.S. possession or wholly owned by residents in a U.S.
possession;
Certain excepted nonfinancial entities (such as certain holding companies, treasury
centers, start up companies and certain entities that emerge from liquidation or
reorganizing);
Active NFFE.
Active NFFE - Important Exception
• Active NFFE:
•
<50% of gross income is passive, and/or–
•
<50% of assets are of a kind that produce or are held for production of passive income
 Broad definition of “Passive Income” includes:








Dividends including dividend substitutes;
Interest;
Rents and royalties;
Annuities;
Net gain from sale of property that generates passive income; commodities-type transactions; and foreign
currency;
Death benefits;
Amounts received from pool of insurance; and/orNet income from notional principal contracts.
 Valuation of assets – Weighted average percentage assets (tested quarterly). Valuation is based on fair
market value or book value of assets of the NFFE balance sheet.
•
Exceptions from passive income treatment:
 Look-thru rule: interest, dividends, rents or royalties received from a related person to the extent that
is properly allocable to non-passive income of such related person ;
 Income earned by dealers acting in the ordinary course of their business as regards forward and option
contracts and other similar financial instruments such as notional principal contracts and instruments
referenced to commodities.
Exclusions
 Deemed-Compliant FFIs:
–
Categories:
• Registered deemed-compliant
– Required to register with the IRS and meet certain procedural requirements
– Examples:
» An FFI or a branch of FFI, that is a reporting model 1 FFI and complies with the registration
requirements;
» Qualified credit card issuers;
» Local FFIs, and
» Non-reporting members of affiliated FFIs.
• Certified deemed-compliant
– Only needs to certify its status on the requisite Form (W-8) to the withholding agent
– Examples:
» Non-registered local banks with limited assets;
» A sponsored investment entity and controlled foreign corporation; and
» FFIs with low value accounts.
• Owner documented FFIs (ODFFI)
Deemed-compliant
FFIsbe
would
be treated
as participating
FFIs without
enter
into
Deemed-compliant
FFIs would
treated
as participating
FFIs without
the needthe
to need
enterto
into
an agreement
with
theallIRS
comply
with all of the FFI requirements.
with thean
IRSagreement
and comply
with
of and
the FFI
requirements.
Exclusions & Exceptions - Illustrative
Whether the FFI or NFFE is exempt from
FFI / NFFE
Whether the FFI or
NFFE is exempt from
FATCA ?
Nonfinancial group
entities and captive
financing entities
Start up companies and
Companies changing line
of business
Nonfinancial entities that
are liquidating or
reorganizing
Inter-affiliate FFI (the
“passthru affiliate”)
NFFE or FFI ?
DeemedCompliant FFI ?
Excepted NFFE ?
In addition, excepted entities include tax exempt entities pursuant to Sec. 501(c) and non-profit organizations if certain requirements are met.
Avoidance of 30% Withholding
FATCA applies to
both FFIs and NFFEs
To avoid the 30%
withholding requirement,
FFIs must
To avoid the 30%
withholding requirement,
NFFEs must
Enter into agreement with the IRS
-OR –
Significantly comply with an applicable
Intergovernmental Agreement
-ORRegister with the IRS or, in certain cases, to
certify to the withholding agent that the FFI
qualifies as a deemed-compliant FFI
Certify that it has no substantial (or
controlling in case of an IGA) U.S.
Owners
-ORProvide information on such U.S.
owners
-ORCertify that the NFFE qualifies for an
exception or an exclusion
Failure to take the
affirmative steps outlined
above would trigger 30%
withholding
Intergovernmental Agreements
 The implementation of FATCA Model Intergovernmental Agreements (IGAs) between the U.S. and FATCA Partner Jurisdictions
will permit Partner FFIs to comply with FATCA without violating local law.
 There are 2 model IGAs:
– Model I contains both reciprocal and non-reciprocal reporting to the local government;
– Model II will require reporting directly to the Internal Revenue Service (IRS).
 IGAs negotiated with 75 countries
– 6 IGAs signed:
• Model 1: UK, Mexico, Denmark, Ireland and Norway
• Model 2: Switzerland
– Agreed but not yet released: Germany, Italy, and Spain
– Actively negotiating with conclusion expected soon: Canada, Finland, France, Guernsey, Isle of Man, Japan, Jersey,
Bermuda, and the Netherlands
– Actively engaged in dialogue: Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel,
Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, Sweden, Bahamas, India, Taiwan
and BVI
 Treasury is exploring options: Brazil, Chile, Czech Republic, Gibraltar, Lebanon, Luxembourg, Romania, Russia, Seychelles, StMartin, Slovenia, and South Africa.
 No IGA: Asia, South America, South Africa… Extraordinary effort to get ready
 Tax Havens (e.g., Cayman Islands, BVI)
 Financial Action Task Force (“FATF”) Recommendations
Intergovernmental Agreements (cont'd)
 OUR OBSERVATION:
– Not entirely relieved - IGA FFI still required to withhold on payment to NPFFI:
•
U.S. financial institutions and FFIs should realize that the Model I and II Frameworks do not result in a significant lessening
of compliance burdens, although cost-effectiveness is increased. Due diligence and reporting, whether to the IRS or a
local governmental authority, will still be required. Further, FATCA withholding will still be required for FFIs in IGA
countries if they make payments to non-participating FFIs in non-IGA countries.
– IGA may create more complexity for multinational FFI and NFFE that operate in several
jurisdictions:
•
The IGAs may result in more complexity, particularly with respect to multinational financial institutions that operate in
multiple countries that are parties to Model I, Model II and/or countries that do not have an agreement with the U.S.
– May be subject to additional rules specific to certain jurisdictions.
– More than one reporting type per affiliated group.
– Reliance on common definitions resulted in an expanded inclusion of entities:
•
The reliance on the definition of the Financial Action Task Force Recommendations rather than FATCA proposed
regulations is a welcome change for the industry as it creates more clarity as to definitions already used in the foreign
jurisdictions. However, the new definition seems a bit more expanded as it includes investment manager entities in the
definition of an FFI.
– Rushed internal legislation and conclusion of treaties:
•
Timely implementation requires bilateral tax agreements to be quickly negotiated and adopted.
DD & Verification Procedures
 IRS Registration
 Responsible Officer
 DD obligations
 Timeline
IRS Registration
 FFI Registration and Global Intermediary Identification Number (“GIIN”):
–
For Non-IGA Countries and for certain Model 2 IGA negotiations, the FFI will have to enter into a FFI
Agreement with the IRS. A Revenue Procedure is intended to be issued that will contain all the terms and
conditions applicable to the FFI agreement.
–
The IRS Portal (“Portal”) for an FFI Registration will be available on July 15, 2013. FFI Agreements will take
effect on January 1, 2014. The Portal will be the primary means for financial institutions to interact with the
IRS.
–
By registering, the FFI agrees to their obligations as PFFI or as sponsoring FFI or to act as a limited or
registered deemed-compliant FFI.
–
Upon approval, the IRS will issue a Global Intermediary Identification Number (“GIIN”). These GIIN will be
assigned no later than October 15th, 2013 and will be used as the institution’s identifying number for
satisfying its reporting requirements and identifying its status to the withholding agent.
–
A financial institution registering through the Portal will agree to comply with the FFI agreement pertaining to
its particular situation. All FFIs will be able to manage their accounts through the Portal.
• A Multinational FFI that is a resident of Model 1 agreement will be able to register once and enter into
an agreement with the IRS on behalf of its affiliated entities that are not residents of Model 1
agreement.
–
Existing Qualified Intermediaries (“QI”), Withholding Partnerships (“WP”) and Withholding Trusts (“WT”) will
be required to renew their QI agreements by registering on the Portal and agreeing to comply with the
modified QI agreement. A Revenue Procedure will be published prior to registering to outline the modified
provisions of the agreement.
Responsible Officer
 Responsible Officer (RO):
–
The Final Regulations expand the scope of the FATCA Compliance Program and the role of the RO.
–
Each FFI must appoint a FATCA – RO who certifies compliance under penalty of perjury. Alternately, all or
some of the FFIs in an EAG may adopt an RO of the compliance FFI. This is an administrative benefit
particularly for funds.
–
•
RO is identified in the FATCA registration system and will apply for a FATCA-EIN now entitled global intermediary
identification number (“GIIN”)
•
RO signs the FFI agreement via the IRS Portal or a hard copy
The Final Regulations require both initial and ongoing certification whereby the RO certifies that:
•
The PFFI has established a compliance program; that there are no material failures and if failures are identified that they
have been remediated and steps taken to prevent future reoccurrences (upon effective date of FFI Agreement and every 3
years).
•
From August 6, 2011 to the date of certification, there were no formal or informal procedures in place to assist account
holders in avoidance of Chapter 4 provisions;
•
The FFI completed the review of high value accounts and all other preexisting accounts (due 60 days following the 2nd year
effectivity of the FFI Agreement).
•
Certifications will be filed via the Portal.
Comment: There is a strong need for a third party advisor to ensure FATCA compliance due to impact on
numerous areas of the firm (e.g., on-boarding, reporting) prior to self-certifications.
Due Diligence
 Standard of Reason To Know:
–
–
–
The final regulations permit withholding agents to rely on claim of status as a participating or registered
deemed-compliant FFI based on checking the payee’s GIIN against the published FFI list.
Withholding agent’s reliance on documentation requires either ACTUAL or IMPUTED reason to know that the
documentation is incorrect.
Withholding agent would be considered to have reason to know that the documentation is incorrect if:
•
•
•
•
–
For example, the following indicia will cause a withholding agent to know that a withholding certificate is
unreliable and/or incorrect:
•
•
•
–
The withholding certificate is incomplete;
The withholding certificate is inconsistent with the payee’s claims;
The withholding agent has other account information that is inconsistent with the payee’s claim; OR
The withholding certificate does not provide sufficient information to establish withholding.
A U.S. address or telephone number;
A U.S. place of birth ;
Standing instruction of an offshore obligation to a U.S. address or a U.S. account.
The conflict can be remedied with documentary evidence and a withholding certificate that supports the right
withholding claim.
Due Diligence (cont’d)
 Final Regulations Impact on Documentation Requirements:
–
–
–
–
–
–
–
–
–
–
Specific documentation requirements for different types of payees is retained.
Further differentiation based on whether account is onshore (generally require Form W-9) or offshore (Forms
W-8 or self certifications/other documentation).
Additional standards for new accounts vs. preexisiting accounts.
Liberalization of documentation standards to include industry suggestions (e.g., third party documentationshared documentation agency systems, third-party data providers, introducing broker certifications, certain
credit reports, and industry coding of preexisting accounts).
Bulk acquisition/merger 6 month reliance of transferor’s Chapter 4 status determination.
Reliance of pre-FATCA and sunset period for new FATCA Forms W-8 may suggest withholding agents to resolicit tax forms within the next 6 months.
IGA Annex 2 due diligence procedures require further clarification.
Document expiration extended and additional permanent documentation identified. Forms and tax
documentation for certain “low risk” accounts can remain valid indefinitely based on fact specific conditions.
Establishment of certain enhanced verification categories (e.g., annual GIIN re-verification, $1Million
Accounts, and Active NFFEs).
Reinstatement of the Eyeball Test under the presumption rules to treat a payee as other than a specified U.S.
person (only for USFIs).
Due Diligence (cont’d)
Important Deadline Timeline
2013
2014
2015
2016
2017
Important Deadlines
July 15th, 2013:

FFI web portal opens for registration.
January 1st, 2014:

Implementation of new account on-boarding
procedures.

U.S. source FDAP withholding begins on new account
holders identified as NPFFIs, Recalcitrant, and Passive
NFFEs.
October 15th, 2013

IRS begins issuing Global Intermediary
Identification Numbers (“GIIN”) to registered
FFIs. FFIs can start providing information on
sponsored FFIs.
October 25th, 2013

Last day by which a financial institution can
register with the IRS to ensure its inclusion on
published list of compliant FFIs.
December 2nd, 2013:

Initial list of FFIs to be published.
December 31st, 2013:

Last day of issue of “grandfathered obligations.”

FFI agreement becomes effective.
*Gross Proceeds withholding remains theoretical and the Final
Regulations reserve on the implementation rules.

Effective date of FFI agreement for all PFFIs that have
received a GIIN that establishes the PFFI’s FATCA
status for withholding purposes and identifies the PFFI
to the IRS for reporting obligations.
March 31st, 2015:

FATCA reports for calendar year 2013 and 2014 are
due and should include account holder’s name,
taxpayer TIN, number and balance. Forms 1042, 1042S and 8966.
st
January 1 , 2016:

The transition period for expanded affiliated group
(EAG) expires. “All or nothing’’ rule kicks in.
st
January 1 , 2017:


FATCA withholding on gross proceeds begins*
Withholding on foreign passthru payments will not
begin before January 1st, 2017.
Transitional Relief for WH Agents
Preexisting Obligations/Accounts*:

Withholding agents are not required to
withhold on payments made before Jan.
1st, 2015 with respect to a preexisting
obligation to a payee that is not a “Prima
Facie” FFI and for which a withholding
agent does not have documentation
indicating the payee’s status as a “Passive
NFFE” with one or more substantial U.S.
owners.

A withholding agent is not required to
withhold on payment prior to Jan. 1st,
2016 with respect to a preexisting
obligation held by an FFI for which the
withholding agent does not have
documentation indicating the payee’s
status as a NPFFI, unless “Prima Facie”
FFI.

Participating FFIs and withholding agents
can document their account holders that
are not “Prima Facie” FFI until Dec. 31st,
2015.
“Prima Facie” FFI**:

Withholding agents will have to treat a
“Prima Facie” FFI as a NPFFI beginning
July 1st, 2014 and begin withholding on
payments until documentation is
obtained to establish compliance.
*Generally, a pre-existing obligation refers to
a financial instrument that is held in account
with the withholding agent on Dec. 31st, 2013.
**A “Prima Facie” FFI can include banks, brokerage securities
and custodianship.
Implementation Strategies




Automation to implement an electronic due diligence system
Outsourcing to deal with the complexity in reporting
Operationalizing FATCA requirements
Setting Priorities
– Establish a compliance program including the appointment of a Responsible Officer;
– Create an account due diligence strategy and implement new account opening procedures;
– Develop and implement a withholding solution or functionality; and
– Evaluate reporting needs.
FATCA Matters In Motion
Forms W-8 series
 Chapter 3 Withholding Rules
 Chapter 4 - FATCA
 W-8BEN
 W-8IMY
Chapter 3 Withholding Rules on Nonresident
Aliens & Foreign Corporations
Foreign persons/entities are subject to US tax at generally a
30% flat tax rate on certain income received from US sources:
• Interest
• Dividends
• Rents
• Royalties
• Annuities
• Other fixed or determinable annual or periodic
gains/profits or income
“FDAP income”
30
Chapter 3 Withholding Rules (cont'd)
Generally, the withholding agent is required to deduct and
withhold 30% on payments made to persons of FDAP income
unless:
• payee provides W-9 to establish US status; or
• foreign payee assumes withholding responsibility by
providing withholding agent with a W-8IMY.
• Withholding agent may rely on forms provided by
payee.
• Reduced withholding may apply to payments made to a
foreign beneficial owner pursuant to applicable treaty
provision
31
Chapter 3 Withholding Rules (cont'd)
Withholding Agent
Any person, US or foreign, who has control, receipt or custody of a
payment or disbursement of an amount subject to withholding
(FDAP income) is a “withholding agent”.
• individual
• Corporation, partnership, trust
• Certain foreign intermediaries
• Certain foreign banks and insurance companies
If the withholding agent does not obtain documentation to show
payees status, agent is liable for the taxes otherwise required to be
withheld.
32
Chapter 3 Withholding Rules (cont'd)
Withholding Agent Presumptions-Absence any documentation, a withholding agent must
use the following presumptions when making a
‘withholdable’ payment:
• Generally, payments made outside of the US are
presumed to be made to a foreign payee.
• Payments for services outside the US are presumed
to be made to a foreign payee (if not known to be
ECI).
33
Chapter 4— “FATCA”
Foreign Account Tax Compliance Act
The concept behind the FATCA rules is to enforce tax
compliance by US persons with overseas accounts.
• A participating FFI must identify all of its US accounts
and comply with other due diligence. FFI must
withhold on non-compliant FFIs/NFFE payments or
other recalcitrant account holders.
• Withholding agent must withhold 30% of payment to
non-participating FFIs or NFFEs.
FATCA increases due diligence and account reporting far
beyond prior reporting to withholding agent.
34
Chapter 4 FATCA—(cont'd)
• Due diligence and withholding requirements for
withholding agents (including certain
participating FFIs) will be determined by
certification forms W-9, W-8 series.
• Generally, beneficial owners of payments are
entitled to refunds for any overpayment actually
due per the Code, but an FFI only receives refund
if required by treaty.
• No credit/refund if account holder information
not provided.
35
W-8BEN—Draft as of May 31, 2012
Only to be used by a foreign individual (not a citizen or resident
alien of the US);
• DO NOT use the form if:
• An entity—use W-8BEN-E
• A US citizen or resident alien—use W-9
• A foreign beneficial owner of income that is effectively
connected to a US trade or business—use W-8ECI
• A foreign beneficial owner of income from
compensation for personal services performed in the
US—use Form 8233 or W-4
• A foreign person acting as an intermediary—use W8IMY
36
W-8BEN—(cont'd)
DO NOT use the form if:
• A Disregarded entity with single US person
owner—use W-9
• Receiving income effectively connected to a US
trade or business—use W-8ECI
• Foreign trust or partnership—use W-8IMY
37
W-8BEN—(cont'd)
Part I—
• Line 6: SSN or ITIN. Filer MUST provide ITIN if:
• Claiming exemption from withholding under §
871(f) for certain annuities;
• Foreign grantor trust with 5 or fewer grantors;
• Claiming benefits under an income tax treaty; or
• Submitting form to partnership that conducts a
trade or business in the US.
38
W-8BEN—(cont'd)
Part I—
• Line 7: enter tax ID number in country of tax residence.
• Line 8: referencing information for withholding agent, such as
account number or other information to help withholding agent.
Part II—
• Line 8 and 9: list country of tax residency.
• List article and paragraph and withholding amount pursuant to
treaty.
39
W-8BEN—E
Draft as of May 31, 2012
Only to be used by a foreign Entity
• Part I line 3—Chapter 3 status
• Grantor trust, partnership, estate, other entity
• Part I line 4—Chapter 4 status
• 22 separate status types:
• FFI—participating/ non-participating/
Registered deemed compliant/owner –
documented—, etc.
• NFFE—publicly traded; affiliate; active; passive;
etc.
Generally, one box is checked for each chapter type.
40
W-8BEN—E (cont'd)
• Part II—Treaty Benefits
• Part III—notional principal contracts
• Part IV-XXIII—Chapter 4 status
• Certification under penalties of perjury.
41
W-8IMY Draft August 13, 2012
Form used to show intermediary status—not the
beneficial owner of the payment.
Form should not be used by:
• Beneficial owner –use W-8BEN
• Hybrid entity claiming treaty benefits—use W8BEN
• ECI income—use W-8ECI
• Disregarded entity—use W-8BEN of owner
• US taxpayer—use W-9
42
W-8IMY (cont'd)
Part I –Identification of entity—Entity type
Line 3—Chapter 3 status
Line 4—Chapter 4 status
Chapter 3 Definitions:
• Qualified Intermediary—has entered into a
withholding agreement with IRS
• Will provide withholding agent with
withholding statement
• May or may not take primary withholding
responsibility (ck appropriate box).
43
W-8IMY (cont'd)
Chapter 3 Definitions (cont'd):
• Nonqualified Intermediary—no agreement with
IRS
• No withholding responsibility
• Will provide withholding
certificates/statements for beneficial owners.
• US branch subject to certain regulatory
requirements
• Branch of FFI
• will be treated as US person or
• Will provide withholding
documentation/statements
44
W-8IMY (cont'd)
Chapter 3 Definitions (cont'd)
• Withholding foreign partnership/trust
• Withholding—entered into agreement with
IRS
• Will assume primary withholding responsibility
• Nonwithholding foreign partnership/trust
• no agreement with IRS
• includes foreign simple trust/grantor trust.
• Income not ECI
• Will provide withholding
certificates/statements to agent.
45
W-8IMY (cont'd)
Chapter 4 definitions:
• Nonparticipating FFI—will provide withholding
certificates/statement of BOs.
• Participating FFI/registered deemed compliant
• has FATCA ID
• Not a ltd branch or local FFI
• Assumed primary withholding
• Owner documented FFI
• US institution or participating FFI agrees
with owner documented status
• Partnership or grantor trust
• Not intermediary
• Not a bank, etc.
46
W-8IMY (cont'd)
Chapter 4 definitions (cont'd):
• Owner documented FFI (cont'd)
• Must provide valid documentation of each
individual, specified US person owners,
owner-documented FFI, etc. AND
reporting statement providing required
info on all persons with equity interest OR
• Will provide auditor’s letter signed within 1
year of date of payment from independent
accounting firm or legal rep in US stating
no US person owns direct/indirect interest
in payment.
47
W-8IMY (cont'd)
Chapter 4 Definitions (Cont.):
• Certified deemed-compliant nonregistered
local bank/retirement plan/non-profit org
(see instructions).
• Certified deemed-compliant FFI with lowvalue accounts
• No account >$50,000
• FFI not > $50MM.
• Audited financial statements provided
• Restricted distributor
• Operates as distributor with debt/ equity
interest of restricted fund Distribution
agreement with prohibition.
48
W-8IMY (cont'd)
Chapter 4 definitions (cont'd):
• Exempt beneficial owners
• Excepted nonfinancial holding co/start up co
• Holds substantially stock of subsidiary
engaged in business
• No sub is financial institution
• Does not function as investment fund
• formation date (start up)
• not an investment/equity fund
• Not a FFI
• Other excepted entities
• Territory FFI/NFFE
49
W-8IMY (cont'd)
Chapter 4 definitions (cont'd):
• Active NFFE
• Not a financial institution
• <50% gross income passive AND
• <50% assets held to produce passive
income
• Passive NFFE
• Not a financial institution
• Includes territory passive NFFE AND
• Will provide withholding
certificates/documentation and
withholding statement.
• QI branch of US institution/other
50
W-8IMY (cont'd)
Part XXIV—Certification
• Declaration with signature under penalty
of perjury
51
Colleen P. Waddell
WeiserMazars LLP
212.315.6780
[email protected]
&
Dara S. Green
Kaufman Rossin & Co.
305.646.6180
[email protected]