Analysis of 2014 final forms W-8BEN, W8BEN-E and W-8IMY
Posted by William Byrnes on May 14, 2014
free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671 Number of Pages in PDF File: 58
The Form W-8BEN has been split into two forms. The new 2014 Form W-8BEN (revision date 2014) is for use solely by foreign individuals, whereas the new Form W-8BEN-E is for use by entities for 2014 (revision date 2014) to provide US withholding agents. The newest version of Form W-8BEN-E must be used by all entities that are beneficial owners of a payment, or of another entity that is the beneficial owner.
The IRS released the new 2014 Form W-8BEN-E (2-2014) that coincides with FATCA and QI entity classification reporting requirements, and on April 30, 2014 the IRS followed up with the new Form W-8IMY (“Form W-8IMY”), formally replacing its 2006 predecessor W-8IMY.
Form W-8IMY is submitted generally by a payment recipient (the “filer”) with non-beneficial owner status, i.e. an intermediary. Such intermediary can be a U.S. branch, a qualified intermediary, a non-qualified intermediary, foreign partnership, foreign grantor or a foreign simple trust. Form W-8IMY requires a tax identification number. The new Form W-8IMY has 28 parts whereas the previous August 2013 FATCA draft W-8IMY only contained 26. The new 2014 Form W-8IMY is vastly different from the seven-part 2006 predecessor form.
Below is a summary for the 2014 W-8BEN, W-8BEN-E and of W-8IMY. The Form W8BEN instructions >link is here< but the Form W-8BEN-E Instructions have not been completed by the IRS yet. The W-8BEN-E instructions, when released, will address a hybrid entity’s claims for treaty benefits and chapter 4 certifications.
(For an in-depth compliance analysis of the new form W-8BEN-E and the other required withholding forms drafted by the see LexisNexis® Guide to FATCA Compliance Chapter 11 Withholding And Qualified Intermediary, § 11.08 Applicable Withholding Forms,  Analysis of Form W-8BEN-E. For a detailed analysis of Form W-8IMY see Chapter 11 Withholding And Qualified Intermediary, § 11.08 Applicable Withholding Forms,  Analysis of Form W-8IMY.) A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf
Foreign individuals (non-resident aliens – NRAs) must use Form W-8BEN to document their foreign status and claim any applicable treaty benefits for chapter 3 purposes, including a foreign individual that is the single member of an entity that is disregarded for U.S. tax purposes.
The NRA must give the Form W-8BEN to the withholding agent or payer if he/she is the beneficial owner of an amount subject to withholding, or if he/she an account holder of an FFI then to the FFI to document his/her status as a nonresident alien. Note that a sole member of a “disregarded” entity is considered the beneficial owner of income received by the disregarded entity, and thus the sole member must provide a W-8BEN.
If the income or account is jointly owned by more than one persons, the income or account will be treated by the withholding agent as owned by a foreign person that is a beneficial owner of a payment only if Forms W-8BEN or W-8BEN-E are provided by EVERY owner of the account. If the withholding agent or financial institution receives a Form W-9 from any of the joint owners, then the payment must be treated as made to a U.S. person and the account treated as a U.S. account.
If any information on the Form W-8BEN becomes incorrect because of a change in circumstances, then the NRA must provide within 30 days of the change of circumstances the withholding agent, payer, or FFI with a new W-8BEN. By example, if an NRA has a change of address to an address in the United States, then this change is a change in circumstances that requires contacting the withholding agent or FFI within 30 days. Generally, a change of address within the same foreign country or to another foreign country is not a change in circumstances. However, if Form W-8BEN is used to claim treaty benefits of a country based on a residence in that country and the NRA changes address to outside that country, then it is a change in circumstances requiring notification within 30 days to the withholding agent or FFI.
A NRA (nonresident alien individual) is any individual who is not a citizen or resident alien of the United States. An foreign person (‘alien”) meeting either the “green card test” or the “substantial presence test” for the calendar year is a resident alien. Any person not meeting either of these two tests is a nonresident alien individual. Additionally, an alien individual who is a bona fide resident of Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa is a nonresident alien individual.
Taxpayer Identification Numbers
Line 5 requires a taxpayer identification number, which is the US social security number (SSN), or if not eligible to receive a SSN, then an individual taxpayer identification number (ITIN). The SSN may be applied for www.socialsecurity.gov/online/ss-5.html. An ITIN may be applied for by filing Form W-7 with the IRS. To claim certain treaty benefits, either line 5 must be completed with an SSN or ITIN, or line 6 must include a foreign tax identification number (foreign TIN).
US Exchange of Tax Information with Foreign Countries
Line 6 of Form W-8BEN requires a foreign tax identifying number ( foreign TIN) issued by a foreign jurisdiction of residence when an NRA documents him or herself with respect to a financial account held at a U.S. office of a financial institution. However, if the foreign jurisdiction does not issue TINs or has not provided the NRA a TIN yet, then the NRA must enter a date of birth in line 8.
The W-8BEN-E form has thirty parts, whereas the draft W-8BEN-E form only had twenty-seven, and the former W8BEN in use since 2006 has just four parts. All filers of the new W-8BEN-E must complete Parts I and XXIX.
Part I of the W-8BEN-E requires general information, the QI status, and the FATCA classification of the filer. Question 4 of Part I requests the QI status. If the filer is a disregarded entity, partnership, simple trust, or grantor trust, then the filer must complete Part III if the entity is claiming benefits under a U.S. tax treaty. Question 5 requests the FATCA classification of the filer. The classification indicated determines which one of the Parts IV through XXVIII must be completed.
Part XXIX requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf. This part of the final form also contains the following language that does not appear in the current form: “I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect.”
Note that if the filer is a passive NFFE, it must complete Part XXVI as well as Part XXX if it has substantial U.S. owners. For a Passive NFFE, a specified U.S. person is a substantial U.S. owner if the person has more than a 10 percent beneficial interest in the entity.
Completion of the other parts of the final form W-8BEN-E will depend upon the FATCA classification of the filer. The classifications on the newest version Form W-8BEN-E maintain the classification of a Restricted Distributor (previously Part X, but in the final form Part XI) (see the Rev. 2013 version of the W-8BEN-E). The complete list of Parts follows the list of thirty-one potential FATCA classifications from which the filer must choose one.
31 FATCA Classifications of the W-8BEN-E (must check one box only unless otherwise indicated).
- Nonparticipating FFI (including a limited FFI or an FFI related to a Reporting IGA FFI other than a registered deemed-compliant FFI or participating FFI).
- Participating FFI.
- Reporting Model 1 FFI.
- Reporting Model 2 FFI.
- Registered deemed-compliant FFI (other than a reporting Model 1 FFI or sponsored FFI that has not obtained a GIIN).
- Sponsored FFI that has not obtained a GIIN. Complete Part IV.
- Certified deemed-compliant nonregistering local bank. Complete Part V.
- Certified deemed-compliant FFI with only low-value accounts. Complete Part VI.
- Certified deemed-compliant sponsored, closely held investment vehicle. Complete Part VII.
- Certified deemed-compliant limited life debt investment entity. Complete Part VIII.
- Certified deemed-compliant investment advisors and investment managers. Complete Part IX.
- Owner-documented FFI. Complete Part X.
- Restricted distributor. Complete Part XI.
- Nonreporting IGA FFI (including an FFI treated as a registered deemed-compliant FFI under an applicable Model 2 IGA). Complete Part XII.
- Foreign government, government of a U.S. possession, or foreign central bank of issue. Complete Part XIII.
- International organization. Complete Part XIV.
- Exempt retirement plans. Complete Part XV.
- Entity wholly owned by exempt beneficial owners. Complete Part XVI.
- Territory financial institution. Complete Part XVII.
- Nonfinancial group entity. Complete Part XVIII.
- Excepted nonfinancial start-up company. Complete Part XIX.
- Excepted nonfinancial entity in liquidation or bankruptcy. Complete Part XX.
- 501(c) organization. Complete Part XXI.
- Nonprofit organization. Complete Part XXII.
- Publicly traded NFFE or NFFE affiliate of a publicly traded corporation. Complete Part XXIII.
- Excepted territory NFFE. Complete Part XXIV.
- Active NFFE. Complete Part XXV.
- Passive NFFE. Complete Part XXVI.
- Excepted inter-affiliate FFI. Complete Part XXVII.
- Direct reporting NFFE.
- Sponsored direct reporting NFFE. Complete Part XXVIII
W-8BEN-E’s 30 Parts
Part I Identification of Beneficial Owner
Part II Disregarded Entity or Branch Receiving Payment.
Part III Claim of Tax Treaty Benefits (if applicable). (For chapter 3 purposes only)
Part IV Sponsored FFI That Has Not Obtained a GIIN
Part V Certified Deemed-Compliant Nonregistering Local Bank
Part VI Certified Deemed-Compliant FFI with Only Low-Value Accounts
Part VII Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
Part VIII Certified Deemed-Compliant Limited Life Debt Investment Entity
Part IX Certified Deemed-Compliant Investment Advisors and Investment Managers
Part X Owner-Documented FFI
Part XI Restricted Distributor
Part XII Nonreporting IGA FFI
Part XIII Foreign Government, Government of a U.S. Possession, or Foreign Central Bank of Issue
Part XIV International Organization
Part XV Exempt Retirement Plans
Part XVI Entity Wholly Owned by Exempt Beneficial Owners
Part XVII Territory Financial Institution
Part XVIII Excepted Nonfinancial Group Entity
Part XIX Excepted Nonfinancial Start-Up Company
Part XX Excepted Nonfinancial Entity in Liquidation or Bankruptcy
Part XXI 501(c) Organization
Part XXII Non-Profit Organization
Part XXIII Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
Part XXIV Excepted Territory NFFE
Part XXV Active NFFE
Part XXVI Passive NFFE
Part XXVII Excepted Inter-Affiliate FFI
Part XXVIII Sponsored Direct Reporting NFFE
Part XXIX Certification
Part XXX Substantial U.S. Owners of Passive NFFE
Part I of the W8-IMY Form adds FATCA classification. Part I of the form requires general information, the Chapter 3 QI status, and the Chapter 4 FATCA classification of the filer.
Question 4 of Part I requests the QI status:
- If the filer is a Qualified Intermediary, then the filer must complete Part III Qualified Intermediary. If the filer is a Nonqualified Intermediary, then the filer must complete Part IV Nonqualified Intermediary.
- Territory Financial Institutions complete Part V. U.S. Branches complete Part VI.
- Withholding Foreign Partnership or Withholding Foreign Trusts complete Part VII.
- Nonwithholding Foreign Partnership, Nonwithholding Foreign Simple Trust, and Nonwithholding foreign grantor trusts must complete Part VIII.
Question 5 requests the FATCA classification of the filer. The classification indicated determines which one of the Parts IX through XXVII must be completed.
Part II of this form is to be completed if the entity is a disregarded entity or a branch receiving payment as an intermediary. Part II only applies to branches of an FFI outside the FFI’s country of residence.
Chapter 3 Status Certifications Parts III – VIII
Parts III – VIII of this form address the QI Status of the entity. Part III is to be completed if the entity is a QI, and requires the entity to certify that it is a QI and has provided appropriate documentation. Part IV is to be completed if the entity is a Nonqualified Intermediary (NQI), and requires the entity to certify that it is a NQI not acting for its own account.
Part V is to be completed if the entity is a Territory Financial Institution. Part VI is to be completed by a U.S. branch only if the branch certifies on the form that it is the U.S. branch of a U.S. bank or insurance company, and that the payments made are not effectively connected to a U.S. trade or business. Part VII is to be completed if the entity is a Foreign Withholding Partnership (WP) or a Withholding Foreign Trust (WT). Part VIII is to be completed if the entity is either a Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust.
Chapter 4 Status Certifications Parts IX – XXVI
Parts IX – XXVI of this form address the FATCA Status of the entity. These classifications include the new classification of a Restricted Distributor (Part XVI), but do not include the new classification of a Reporting NFFE.
Statement of Certification
Part XXVIII requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf. Finally, the form contains the following language: “I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect.”
Structure of New Form Form W-8IMY
- Part I Identification of Entity
- Part II Disregarded Entity or Branch Receiving Payment.
Chapter 3 Status Certifications
- Part III Qualified Intermediary
- Part IV Nonqualified Intermediary
- Part V Territory Financial Institution
- Part VI Certain U.S. Branches
- Part VII Withholding Foreign Partnership (WP) or Withholding Foreign Trust (WT)
- Part VIII Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust
Chapter 4 Status Certifications
- Part IX Nonparticipating FFI with Exempt Beneficial Owners
- Part X Sponsored FFI That Has Not Obtained a GIIN
- Part XI Owner-Documented FFI
- Part XII Certified Deemed-Compliant Nonregistering Local Bank
- Part XIII Certified Deemed-Compliant FFI with Only Low-Value Accounts
- Part XIV Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
- Part XV Certified Deemed-Compliant Limited Life Debt Investment Entity
- Part XVI Restricted Distributor
- Part XVII Foreign Central Bank of Issue
- Part XVIII Nonreporting IGA FFI
- Part XIX Exempt Retirement Plans
- Part XX Excepted Nonfinancial Group Entity
- Part XXI Excepted Nonfinancial Start-Up Company
- Part XXII Excepted Nonfinancial Entity in Liquidation or Bankruptcy
- Part XXIII Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
- Part XXIV Excepted Territory NFFE
- Part XXV Active NFFE
- Part XXVI Passive NFFE
- Part XXVII Sponsored Direct Reporting NFFE
The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance challenges (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf
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