William Byrnes' Tax, Wealth, and Risk Intelligence

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What FATCA Withholding Corrections Did the IRS Publish Today? (June 30^th)*

Corrections for Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities: http://www.ofr.gov/(S(4m13pp0czfmzywjl2cfjdpwn))/OFRUpload/OFRData/2014-15465_PI.pdf

Corrections for Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment: http://www.ofr.gov/(S(4m13pp0czfmzywjl2cfjdpwn))/OFRUpload/OFRData/2014-15466_PI.pdf

“As published, the final and temporary regulations contain a number of items that need to be corrected or clarified. Several citations and cross references are corrected.  The correcting amendments also include the addition, deletion, or modification of regulatory language to clarify the relevant provisions to meet their intended purposes or for consistency with other related provisions of these regulations. The addition of final regulatory language only includes language that was inadvertently removed in the final and temporary regulations.”

* Should out to Haydon Perryman for spotting this release (and alerting me) because Treasury did not send out an alert today on it.  Check out his blog: http://haydonperryman.wordpress.com/

Are All Systems Still Go for 30% FATCA Withholding starting tomorrow (July 1^st)

Yes, FATCA goes “live” on Tuesday!  30% withholding on all withholdable payments to nonparticipating FFIs in the 160 non-IGA countries/jurisdictions as of July 1^st.

What additional FFIs will be included on the July 1^st list to be published tomorrow? 

FFIs that registered by June 3^rd.  The IRS states the following on its FATCA Registration Portal: “the IRS believes it can ensure registering FFIs that their GIINs will be included on the July 1 IRS FFI List if their registrations are finalized by June 3, 2014.”

(See Notice 2014-17, page 6: “FFIs that finalize their registrations after … June 3 may still be included on the … July 1 IRS FFI List; however, the IRS cannot provide assurance that this will be the case.”)

Most commentators expect a rush of over 300,000 FFI registrations by the end of 2014.  Some predict more than a half million entities must still register, based on the UK’s HMRC estimate that 75,000 entities are impacted by FATCA within the United Kingdom (where less than 6,300 are currently registered on the GIIN list). Withholding on IGA jurisdiction non-compliant FFIs only begins January 1st.

What about FFIs that registered on June 30^th?

The IRS has allowed a 90 day safeguard for FFIs when a GIIN has been applied for but not yet received.

§1.1471-3(e)(3) Participating FFIs and registered deemed-compliant FFIs—(i) In general. … A payee whose registration with the IRS as a participating FFI or a registered deemed-compliant FFI is in process but has not yet received a GIIN may provide a withholding agent with a Form W-8 claiming the chapter 4 status it applied for and writing “applied for” in the box for the GIIN. In such case, the FFI will have 90 calendar days from the date of its claim to provide the withholding agent with its GIIN and the withholding agent will have 90 calendar days from the date it receives the GIIN to verify the accuracy of the GIIN against the published IRS FFI list before it has reason to know that the payee is not a participating FFI or registered deemed-compliant FFI. … (emphasis added).

Follow this highlighted link to my previous analysis for completing the W-8BEN-E

When Must FFIs in IGA countries Register? 

Financial institutions (FFIs) in the 90 IGA countries have an extension to register with the IRS in order to obtain a GIIN and thus appear on the IRS’ FATCA compliant list.  FATCA 30% withholding for FFIs in these Model 1 IGA countries and jurisdictions only begins January 1, 2015.

See Reg. § 1.1471-3(d)(4)(iv)(A): § 1.1471-3(d)(4)(iv) Exceptions for payments to reporting Model 1 FFIs.— (A) For payments made prior to January 1, 2015, a withholding agent may treat the payee as a reporting Model 1 FFI if it receives a withholding certificate from the payee indicating that the payee is a reporting Model 1 FFI and the country in which the payee is a reporting Model 1 FFI, regardless of whether the certificate contains a GIIN for the payee.

In its January 6, 2014 Announcement 2014-1 (IRB 2014-2), the IRS stated:

Thus, while reporting Model 1 FIs will be able to register and obtain GIINs on or after January 1, 2014, they will not need to register or obtain GIINs until on or about December 22, 2014, to ensure inclusion on the IRS FFI list by January 1, 2015. (emphasis added)

However, at least one IGA country is suggesting an earlier (perhaps more prudent) date than December 22, 2014 for GIIN registration in order to be included on the IRS’ last 2014 FATCA compliant list.  The United Kingdom’s Law Society and Institute of Chartered Accountants in May 2014 published combined guidance to members stating:

To ensure that the registration has been processed in time for inclusion on that list the last practical date for registration is 25 October 2014.

FATCA IGA FACTS as of June 30th at 9pm Washington, D.C.

IGAs: 90

Model 1: 80

Model 2: 10

Non-IGAs: 250 – 90 = 160 countries for withholding as of June 30, 2014

Registered: 77,353 FFI/branches from 205 countries/jurisdictions*

* Haydon Perryman of Strevus and I will in the morning, as quickly as possible, undertake a count and analysis of the July 1^st FFI list release.  Hopefully Treasury will release it well ahead of the USA v Belgium World Cup semi-finals game at 4pm Washington, D.C time.  Feel free to email me at williambyrnes@gmail.com if you notice any anomalies or have comments to be included in our analysis.

Model 1 IGA – 32 (followed by number of registered FFIs as of June 30th)

1. Australia (4-28-2014): 1,865
2. Belgium (4-23-2014): 250
3. Canada (2-5-2014): 2,265
4. Cayman Islands (11-29-2013): 14,837
5. Costa Rica (11-26-2013): 123
6. Denmark (11-19-2012): 187
7. Estonia (4-11-2014): 27
8. Finland (3-5-2014): 467
9. France (11-14-2013): 2,291
10. Germany (5-31-2013): 2,555
11. Gibraltar (5-8-2014): 97
12. Guernsey (12-13-2013): 2,396
13. Hungary (2-4-2014): 102
14. Honduras (3-31-2014): 48
15. Ireland (1-23-2013): 1,757
16. Isle of Man (12-13-2013): 313
17. Italy (1-10-2014): 457
18. Jamaica (5-1-2014): 42
19. Jersey (12-13-2013): 1,619
20. Latvia (6-27-2014): 41 <– moved from below list
21. Liechtenstein (5-19-2014): 240
22. Luxembourg (3-28-2014): 3,561
23. Malta (12-16-2013): 236
24. Mauritius (12-27-2013): 728
25. Mexico (4-9-2014): 419
26. Netherlands (12-18-2013): 2,054
27. New Zealand (6-12-2014) 335
28. Norway (4-15-2013): 313
29. Slovenia (6-2-2014): 21
30. South Africa (6-9-2014): 318  
31. Spain (5-14-2013): 1,188
32. United Kingdom (9-12-2012): 6,264

Model 1 IGA – 48 (followed by number of registered FFIs)

1. Algeria (6-30-2014)  < – new entry
2. Antigua and Barbuda (6-3-2014): 36
3. Azerbaijan (5-16-2014): 17
4. Bahamas (4-17-2014): 611
5. Barbados (5-27-2014): 124
6. Belarus (6-6-2014): 65
7. Brazil (4-2-2014): 2,259
8. British Virgin Islands (4-2-2014): 1,838
9. Bulgaria (4-23-2014): 73
10. China (6-26-2014) 212 <– new entry
11. Colombia (4-23-2014): 173
12. Croatia (4-2-2014): 51
13. Curaçao (4-30-2014): 174
14. Czech Republic (4-2-2014): 93
15. Cyprus (4-22-2014): 280
16. Dominica (6-19-2014): 17
17. Dominican Republic (6-30-2014): 68 <– new entry
18. Georgia (6-12-201): 24
19. Greenland (6-29-2014): 1 <– new entry
20. Grenada (6-16-2014): 32
21. Guyana (6-24-2014) <– new entry
22. India (4-11-2014): 247
23. Indonesia (5-4-2014): 308
24. Israel (4-28-2014): 322
25. Kosovo (4-2-2014) – nil
26. Kuwait (5-1-2014): 78
27. Lithuania (4-2-2014): 22
28. Panama (5-1-2014): 451
29. Peru (5-1-2014): 165
30. Poland (4-2-2014): 165
31. Portugal (4-2-2014): 256
32. Qatar (4-2-2014): 47
33. Romania (4-2-2014): 110
34. St. Kitts and Nevis (6-4-2014): 71
35. St. Lucia (6-12-2014): 61
36. St. Vincent and the Grenadines (6-2-2014): 105
37. Saudi Arabia (6-24-2014): 18
38. Seychelles (5-28-2014): 38
39. Singapore (5-5-2014): 784
40. Slovak Republic (4-11-2014): 55
41. South Korea (4-2-2014): 397
42. Sweden (4-24-2014): 313
43. Thailand (6-24-2014): 768
44. Turkey (6-3-2014): 66
45. Turkmenistan (6-3-2014): 1  
46. Turks and Caicos Islands (5-12-2014): 28
47. Ukraine (6-26-2014): 106  < – new entry
48. United Arab Emirates (5-23-2014): 136

Model 2 IGA – 5

1. Austria (4-29-2014): 2,979
2. Bermuda (12-19-2013): 1,243
3. Chile (3-5-2014): 325
4. Japan (6-11-2013): 3,252
5. Switzerland (2-14-2013): 4,041

Jurisdictions that have reached agreements in substance:

Model 2 IGA – 5

1. Armenia (5-8-2014): 28
2. Hong Kong (5-9-2014): 1,540
3. Moldova (6-30-2014):  < – new entry
4. Paraguay (6-6-2014): 17 
5. Taiwan (6-23-2014): 409