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William Byrnes (Texas A&M) tax & compliance articles

FATCA Corrections Released June 30th – Withholding on 160 Countries Begins July 1st

Posted by William Byrnes on June 30, 2014


free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

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

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 1st)

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 1st.

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

FFIs that registered by June 3rd.  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 30th?

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 1st 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

 

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