On 10 October 2014, the IRS released Notice 2014-59 which announces its plans to amend certain provisions of chapters 3, 4 and 61. The amendments effect:
The reason for the amendments is to coordinate certain provisions of chapters 3 and 61 with the provisions of chapter 4 that were issued earlier this year.
On 6 March 2014, Treasury and the IRS published temporary chapter 4 regulations and under temporary coordinating regulations under chapters 3, 61, and section 3406. The temporary coordinating regulations modified certain provisions of the regulations under chapters 3 and 61 and section 3406 to coordinate with the chapter 4 regulations, including the standards of knowledge for withholding agents and the conditions under which a withholding agent or a payor may rely on documentary evidence to document a payee’s foreign status. The temporary coordinating regulations are generally effective for payments made by withholding agents and payors beginning on or after 1 July 2014.
The temporary coordinating regulations amended the standards of knowledge regarding the circumstances that a withholding agent has reason to know that a payee’s claim of foreign status is unreliable or incorrect. These amendments were made to coordinate with the chapter 4 regulations and are consistent with those standards of knowledge, modifying the circumstances when a withholding agent has obtained a withholding certificate or documentary evidence has reason to know that a claim of foreign status made by a direct account holder is unreliable or incorrect for purposes of chapters 3 and 61. The temporary coordinating regulations included additional U.S. indicia that will cause a withholding agent to have reason to know that a claim of foreign status by a direct account holder is unreliable or incorrect for purposes of chapters 3 and 61.
The additional U.S. indicia are:
The temporary coordinating regulations do not require a withholding agent to take into account these additional U.S. indicia for a preexisting obligation if the foreign status of the direct account holder was documented by the withholding agent for purposes of chapter 3 or chapter 61 before 1 July 2014, unless the withholding agent is notified of a change in circumstances with respect to the obligation or, in the case of an individual account holder, reviews documentation that contains a U.S. place of birth.
The chapter 3 and 61 regulations provide guidance on a the circumstances under which a withholding agent or payor may use of documentary evidence with respect to an offshore obligation to establish a payee’s foreign status for certain amounts paid outside the U.S. Prior to amendment, an amount was considered paid outside the U.S. if the payor completed the acts necessary to effect the payment outside the U.S., provided that the payment was not categorized as a “U.S. tiebacks.” Such a payment is not treated as an amount paid outside the U.S. such as when a payment is transferred to an account maintained by the payee in the United States or mailed to a United States address when certain other conditions apply.
Additionally, prior to amendment, the regulations under 1.6049-5(c)(4) modified the regulations under 1.6049-5(c)(1) regarding the use of documentary evidence for payments of amounts that are not subject to withholding (other than U.S. short-term original issue discount and U.S. bank deposit interest). The temporary coordinating regulations provide further guidance with respect to when an amount is considered paid outside the U.S and the types of documentary evidence permitted for establishing a payee’s foreign status with respect to certain payments, including the requirements for maintaining such documentation.
Notice 2014-33, issued in May 2014, states the intention of Treasury and the IRS to amend the chapter 4 regulations to allow a withholding agent or FFI to treat an obligation held by an entity that is issued, opened, or executed on or after 1 July 2014, and before 1 January 2015, as a preexisting obligation, except that an FFI may not apply the documentation exception under §1.1471-4(c)(3)(iii).
Modified Applicability Dates under Notice 2014-59
Following the publication of Notice 2014-33 and comments relating to various provisions, Treasury and the IRS intend to:
Allowance to apply prior rules regarding documentary evidence for certain offshore payments
The temporary coordinating regulations also revise chapter 61 to make the use of documentary evidence available with respect to offshore obligations (rather than just offshore accounts) and remove the U.S. tiebacks, allowing the payor to determine whether the rules apply based on its own actions and not those of the payee. In addition, the temporary coordination regulations specify the types of documentary evidence on which a payor can rely, replacing the generalized standard for documentary evidence previously provided in chapter 61. The types of documentary evidence allowed are consistent with the final chapter 4 regulations. Finally, the temporary coordinating regulations specify the types of withholding agents and payors that may use documentary evidence to document a payee.
The temporary coordinating regulations apply to payments made on or after 1 July 2014, except to payments made with respect to preexisting obligations as described in chapter 4. To allow payors additional time to modify their systems to implement the revised requirements, Treasury and the IRS intend to modify the temporary coordinating regulations to allow a payor to continue to use, for accounts opened on or after 1 July 2014, and before 1 January 2015, the rules regarding the use of documentary evidence under chapter 3 instead of the new rules regarding documentary evidence for offshore obligations under the temporary coordinating regulations.
The guidance provided in Notice 2014-59 regarding modified applicability dates may be relied upon until the regulations are modified.
For your reference
Treasury Department posted text of an intergovernmental agreement (IGA) between Poland and the United States, to implement the FATCA regime.
According to the Treasury website, the IGA signed by Poland and the United States (dated 7 October 2014) follows the Model 1 IGA.
Read the 49-page Poland-United States FATCA IGA (PDF, 243 KB)
For further information, please do not hesitate to contact us.
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