“Countries white list” released
Registration deadline postponed by 10 days
Several Final Certification Forms Released by IRS
IGA signed with Honduras
The Treasury Department and IRS announced on 2 April that jurisdictions that have reached “agreements in substance” with the United States on the terms of intergovernmental agreements (IGAs) under the Foreign Account Tax Compliance Act (FATCA) can be treated as having agreements in effect until the end of 2014.
According to Treasury’s release, this treatment will be available to jurisdictions:
Read Announcement 2014-17 (PDF, 34KB) released by the IRS.
Implications for FFIs include more time to register
Because an increasing number of jurisdictions have reached agreements in substance, Wednesday’s announcement provides foreign financial institutions (FFIs) located in these jurisdictions with needed guidance before the upcoming registration deadlines.
Also, because of IRS experience with processing the registrations that have been submitted to date, Wednesday’s announcement also provides FFIs with 10 more days to register in order to be included on the first IRS FFI list.
Prior to yesterday’s notice, FFIs were required to register by 25 April 2014, to be certain that they would be included on the first IRS FFI list—i.e., the only list that will be published before withholding begins.
Yesterday’s announcement provides that FFIs will be included on this list if they submit a complete registration form by 5 May 2014—instead of 25 April as originally announced.
26 IGAs signed, 45 IGAs in effect
Treasury reports that as of 2 April:
The IRS has released final versions of the following forms and related instructions for 2014.
Other W-8 forms, released in draft during 2013, that have yet to be finalized are:
The forms and instructions were updated to reflect the Foreign Account Tax Compliance Act (FATCA) provisions as well as the temporary regulations that amend the final regulations. Highlights of the final forms are provided below.
Form W-8BEN (Revision date February 2014)
The Form W-8BEN is intended to be completed by a non-U.S. individual to certify he/she is the non-U.S. beneficial owner of income and, as applicable, entitled to treaty benefits. Revisions to note on form:
Abbreviations: The instruction to not abbreviate a country has been removed.
Foreign tax identification number (TIN): A foreign TIN is a required field when the owner is documenting him/herself with respect to a financial account held with a U.S. office of a financial institution. If the owner’s jurisdiction of tax residence does not issue TINs, or the owner does not have a TIN, the owner must provide date of birth.
As indicated, the instructions regarding country abbreviations have been removed. While this has long been an issue between industry and the IRS, and would appear to be welcomed relief, it is interesting to note that the regulations require the withholding agent to also have government issued identification, from a country that reasonably matches the abbreviated country, for the person providing such a form. Also noteworthy is the line 8 instruction that appears to require a date of birth for all owners of financial accounts held with a U.S. office of a financial institution.
That said, the Line 6 instruction provides that a date of birth is required only where a foreign TIN is not provided on Line 6. Given the language in the regulations and IGAs regarding the future reporting requirements (foreign TIN or DOB) by a U.S. withholding agent, we believe the Line 6 instruction is the correct one. We are in the processing of confirming this with the IRS. Finally, the use of the February 2014 version of the Form W-8BEN is August 2014. Until that time, withholding agents may continue to accept the prior version (February 2006).
Form W-8BEN-E (Revision date February 2014)
The Form W-8BEN-E is intended to be completed by a non-U.S. entity who is certifying it is the non-U.S. beneficial owner of a payment of income for current withholding tax purposes (under Chapters 3 and 61) as well as to provide its FATCA status as either payee or account holder of a foreign financial institution (under Chapter 4). No instructions have been issued for this revised form. Revisions to note on form:
It is noteworthy that Part IV, which is to be completed by a sponsored FFI that has not obtained a GIIN, does not include numbered checkboxes as it has in every other section (such as 17a and 17b where a choice needs to be made). This could be an identification challenge for requestors of the form. Another challenge for persons completing the paper version of the form is the very limited space provided on Line 9 (GIIN). Because the GIIN is 16 digits, it will be difficult for these persons to enter the number in a readable format.
This could lead to many inadvertent mismatches when the withholding agent tries to verify the number to the IRS published list. With respect to country abbreviations, the IRS has also removed the instructions that prohibit the use of country abbreviation on the Form W-8BEN-E. However, as indicated above, the regulations remain in conflict with this. Finally, like Form W-8BEN, mandatory use of final Form W-8BEN-E is six months after the revision date shown on the updated form (Rev. February 2014). It is interesting that the IRS has backdated this form. Unless the IRS states differently in instructions (not yet issued) or other guidance, the revised form is required to be in use by August 2014. Until that time, withholding agents may continue to accept the prior version (Rev. February 2006).
Form W-8ECI (Revision date February 2014)
The form is intended to be completed by a non-U.S. person that is beneficial owner of U.S. source income that is effectively connected with a trade or business in the U.S.. The revised form is identical to the July 2013 draft, with the exception of the revision date. Like the forms noted above, the revision date of the form is February 2014, making its use mandatory by August 2014.
For Your Reference
The forms described above can be accessed by clicking on the following links:
On 2 April, the Treasury Department posted text of an intergovernmental agreement (IGA) signed by representatives of the United States and Honduras in order to implement provisions of U.S. law known as FATCA.
The IGA between the United States and Honduras follows the Model 1 IGA. Read text of the IGA (PDF, 257 KB) with Honduras.
For further information, please do not hesitate to contact us.
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