Posts Tagged ‘FATCA’

FATCA’s impact on Brazil-USA cross border activities (live seminar in Florianopolis)

Posted by William Byrnes on December 17, 2014

This Friday, December 19 at the OAB in Florianapolis – FATCA’s impact on Brazil-USA cross border activities, and the OECD’s Common Reporting Standards (“GATCA”), see link to come join the discussion.

Com o apoio da OAB/SC, Comissão de Direito Tributário, ESA, CRC e IBET-SC, lá vamos nós fechar o ano com chave de OURO!!! Tradução simultânea na palestra com o Prof. William Byrnes, bestselling author of 30 books for LexisNexis and Wolters Kluwer; Associate Dean, Graduate & Distance Education, International Tax & Financial Services; Fellowship, International Bureau of Fiscal Documentation; LL.M. Universiteit van Amsterdam. Vagas limitadíssimas para os primeiros 40 VIP guests. Corre: http://www.academiatributaria.com.br/?opcao=ver_curso&id=8

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Highlights of Final FATCA Regulations for Reporting of Specified Foreign Financial Assets

Posted by William Byrnes on December 16, 2014

IRS has today notified the posting of the final regulations, effective December 12, 2014, TD 9706, Reporting of Specified Foreign Financial Assets, and removing the temporary regulations. The regulations can be found on the FATCA – Regulations and Other Guidance page in the For Individual Taxpayers section.

The IRS addressed such issues as dual residents, valuation challenges, foreign currency, virtual currency (left for another time), retirement accounts and insurance policies. Below are the highlights of the changes for my readers.

Dual Resident Taxpayers

A comment recommended an exemption from the section 6038D reporting requirements be included for an individual who is a dual resident taxpayer and who, pursuant to a provision of a treaty that provides for resolution of conflicting claims of residence by the United States and the treaty partner, claims to be treated as a resident of the treaty partner. In such a case, a dual resident taxpayer may claim a treaty benefit as a resident of the treaty partner and will be taxed as a nonresident for U.S. tax purposes for the taxable year (or portion of the taxable year) that the individual is treated as a nonresident.

The final rule adopts this recommendation for a dual resident taxpayer who determines his or her U.S. tax liability as if he or she were a nonresident alien and claims a treaty benefit as a nonresident of the United States as provided in § 301.7701(b)–7 by timely filing a Form 1040NR, ‘‘Nonresident Alien Income Tax Return,’’ (or such other appropriate form under that section) and attaching a Form 8833, ‘‘Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b).’’ The Treasury Department and the IRS have concluded that reporting under section 6038D is closely associated with the determination of an individual’s income tax liability.

Because the taxpayer’s filing of a Form 8833 with his or her Form 1040NR (or other appropriate form) will permit the IRS to identify individuals in this category and take follow-up tax enforcement actions when considered appropriate, reporting on Form 8938, “Statement of Specified Foreign Financial Assets,’’ is not essential to effective IRS tax enforcement efforts relating to this category of U.S. residents.

Individuals Resident in the United States Under Non-Immigrant Visas

A number of comments requested an exemption from the section 6038D reporting requirements for foreign executives and employees resident in the United States under non-immigrant H, L, or E visas. The final rule does not adopt this recommendation. Because all U.S. residents are taxable on worldwide income, excluding categories of residents from the scope of section 6038D reporting is not consistent with the purposes for which the provision was enacted.

Persons That Do Not Owe U.S. Tax for the Taxable Year

The final rule does not adopt any change. If the law requires the filing of a tax return, however, information reported on a Form 8938 concerning the taxpayer’s specified foreign financial assets is an important component of that return, even if no tax liability is shown. Requiring this filing will aid the IRS in devising effective enforcement programs with respect to such returns.

Assets Held by a Disregarded Entity

A number of comments requested clarification of the section 6038D reporting requirements with respect to specified foreign financial assets held by an entity disregarded as an entity separate from its owner under § 301.7701–2 of this chapter (a disregarded entity). In response to these requests, and consistent with instructions to Form 8938, the final rule provides in § 1.6038D–2(b)(4)(iii) that a specified person that owns a foreign or domestic entity that is a disregarded entity is treated as having an interest in any specified foreign financial assets held by the disregarded entity.

As a result, a specified person that owns a disregarded entity (whether domestic or foreign) that, in turn, owns specified foreign financial assets must include the value of those assets in determining whether the specified person meets the reporting thresholds in § 1.6038D–2(a) and, if so, must report such assets on Form 8938.

Jointly Owned Assets (§ 1.6038D–2(c))

A number of comments requested clarification of aspects of the rules in § 1.6038D–2(c) and (d) relating to joint owners of a specified foreign financial asset. These comments have been adopted.

Specifically, the final rule clarifies that each of the joint owners of a specified foreign financial asset who are not married to each other must include the full value of the asset (rather than only the value of the specified person’s interest in the asset) in determining whether the aggregate value of such specified individual’s specified foreign financial assets exceeds the applicable reporting thresholds, and each joint owner must report the full value of the asset on his or her Form 8938.

In addition, the final rule clarifies that, in the case of joint owners who are married to each other and file separate returns, each joint owner of a specified foreign financial asset must report the full value of the asset (rather than only the value of the specified person’s interest in the asset) on the individual’s Form 8938, even if both spouses are specified individuals and only one-half of the value of the asset is considered in determining the applicable reporting thresholds under § 1.6038D–2(c)(3)(i).

Retirement and Pension Accounts and Certain Non-Retirement Savings Accounts

These final regulations modify the definition of a financial account for purposes of section 6038D in order to require consistent reporting under section 6038D with respect to retirement and pension accounts and certain non- retirement savings accounts regardless of whether the account is maintained in a jurisdiction treated as having in effect a Model 1 IGA or Model 2 IGA. For financial accounts that are maintained by a foreign financial institution that is not located in a jurisdiction treated as having in effect a Model 1 IGA or Model 2 IGA, the definition of a financial account in the final rule continues to include the retirement and pension accounts and non-retirement savings accounts described in § 1.1471–5(b)(2)(i), consistent with the section 6038D coordination rule in that section.

Reporting on Both FinCEN Form 114 and Form 8938

A number of comments recommended that a foreign account reported on FinCEN Form 114, ‘‘Report of Foreign Bank and Financial Accounts,’’ (formerly Form TD F 90–22.1, ‘‘Report of Foreign Bank and Financial Accounts’’) (an FBAR), should not be required to be reported on Form 8938. he final rule does not adopt this recommendation.

Lexis Guide to FATCA Compliance – 2015 Edition Out Soon

1,200 pages of analysis of the compliance challenges, over 54 chapters by 70 FATCA contributing experts from over 30 countries. Besides in-depth, practical analysis, the 2015 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers. The Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments. See Lexis’ order site and request a copy of the forthcoming 2015 edition – http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327

free download of 2014 Edition chapter at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671

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Analysis of the 2014 FATCA GIIN Registration Lists

Posted by William Byrnes on December 2, 2014

International Financial Law Prof Blog

Haydon Perryman and I have sifted through the GIIN lists of June through December. I present Part 1 initial analysis below. Part 2 on Thursday.

By the way, the 3^rd edition of my Lexis Guide to FATCA Compliance will be out soon with substantial more analysis – 1,200 pages over 54 chapters. Over 50 FATCA compliance experts from tier 1 institutions, former government officials, and professional firms have contributed to create this detailed and robust guide, filled with numerous practical examples and several chapters written specifically for the non-legal, compliance operations officer. No filler pages of publicly available documents and regurgitated regulations – it’s all beef. See the Lexis website to order a copy of this 3^rd edition.

…. The November 2014 list saw a jump in registration, led by the United Kingdom, achieving a total of 116,104 FFIs and branch registrations.[6] 43 percent of all registered GIIN are from the UK and her Crown Dependencies and Overseas Territories. The final GIIN list released before submission for publication, December’s, grew by only six thousand registrations, to 122,881, of which only 6,094 were from non-IGA countries. Such a stunted growth in FFI registration is foreboding of the remaining, significant compliance challenges. …. read the entire story at International Financial Law Prof Blog

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IRS extends FATCA IGA Signatory Deadlines Beyond January 1

Posted by William Byrnes on December 1, 2014

Announcement 2014-38 provides guidance with respect to jurisdictions that are treated as if they had a FATCA intergovernmental agreement (IGA) in effect pursuant to Announcement 2014-17, 2014-18 I.R.B. 1001, but that do not sign the IGA before December 31, 2014.

Announcement 2014-38 provides that a jurisdiction that is treated as if it had an IGA in effect, but that has not yet signed an IGA, retains such status beyond December 31, 2014, provided that the jurisdiction demonstrates firm resolve to sign the IGA as soon as possible.

After December 31, 2014, Treasury will review the list of jurisdictions having an agreement in substance on a monthly basis to assess whether it continues to be appropriate to treat such a jurisdiction as if it had an IGA in effect or whether a jurisdiction should be removed from the list.

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FATCA: An Introduction for Americans to the “Worst Law Nobody Has Ever Heard Of”: Part I #GATCA

Posted by William Byrnes on November 7, 2014

FATCA: An Introduction for Americans to the “Worst Law Nobody Has Ever Heard Of”: Part I #GATCA.

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Analysis of FATCA GIIN List (of November 1st)

Posted by William Byrnes on November 7, 2014

Hello Lexis FATCA / International Tax Subscribers,

I am just one weekend away from completing the 3rd edition of Lexis’ Guide to FATCA Compliance. Deep into my analysis of these challenging issues, editing, cross-referencing, and amalgamation of

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over 70 expert contributors analysis and perspectives (including Haydon Perryman). All the FATCA activity this year has spawned 54 chapters of over 1,000 of legal, operational and compliance analysis. I hope that I have been as pedantic as the previous years with catching every typo, cross reference link, footnote citation, and consistent style / grammar / punctuation.

Last month, the GIIN list included 104,344, a jump from the September list of 5,000 from 99,861 FFIs (mind you that a substantial number of these registrations are not unique, but instead represent affiliates within EAGs) – see our previous analysis links below. It is now November. The UK self-imposed (yet ignored) deadline to GIIN register passed October 25th.

So what happened? read on at http://lawprofessors.typepad.com/intfinlaw/2014/11/novembers-published-fatca-giin-list-analysis.html

remember to download for free –> LexisNexis® Guide to FATCA Compliance

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Update to the Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY

Posted by William Byrnes on November 6, 2014

This update supplements the Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY (Rev. July 2014) and provides additional information for withholding agents and foreign financial institutions (FFIs) requesting such forms. This update makes certain corrections and provides additional clarifying information not included in the instructions. A requester of a Form W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, or W-8IMY may rely on this update, which will be incorporated in the next issuance of the instructions.

On page 3, the instructions state that if the requester receives a Form W-9, it must generally make an information return on a Form 1099 unless the payee has provided a valid exempt recipient code. This instruction does not modify the existing requirements for a valid Form W-9 or impose additional information reporting requirements with respect to payments reportable on Form 1099 on the requester of a Form W-9. For those requirements, see the Instructions for the Requester of Form W-9.
On page 5, the instructions for the requester of a Form W-8BEN-E state that a “foreign reverse hybrid entity” making a claim for treaty benefits on its own behalf should provide a Form W-8BEN-E. The correct reference is to a “foreign hybrid entity” rather than “foreign reverse hybrid entity.”
On page 6, the instructions state that for a requester receiving a Form W-8BEN-E, a valid chapter 4 status is not required for a payment that is subject to chapter 3 withholding and is not a withholdable payment when the payment is made with respect to a preexisting obligation before January 1, 2016. The correct date for this purpose is before July 1, 2016.
On page 7, the instructions provide notes for a requester in validating a Form W-8BEN-E, including for Part I, Line 4 “Chapter 3 Status,” which is used by the person providing the Form W-8BEN-E to indicate its chapter 3 status. The instructions do not provide any exceptions for when this line is not required to be completed. This cover sheet clarifies that if Form W-8BEN-E is requested by an FFI solely for purposes of documenting the chapter 4 status of its account holder and the form is also not associated with a withholdable payment or with a reportable amount (as defined in Treas. Reg. § 1.14411(e)(3)(vi)), then Part I, Line 4 “Chapter 3 Status” is not required to be completed
On page 9, the instructions for the requester of Form W-8IMY state that when the Form W-8IMY is provided by a qualified securities lender (QSL), the payor may make payments of substitute dividends to the QSL without requiring a withholding statement when the QSL is a qualified intermediary (QI) or provides a written statement that it is not acting as an intermediary. However, consistent with Notice 2010-46, because a QSL (whether or not it is a QI or acting as an intermediary) does not provide a withholding statement to a withholding agent for substitute dividend payments, it need not provide the written statement described in the instructions, and the requestor may treat an entity as a QSL even when it knows that it is not acting as an intermediary for such payments.
On page 10, the instructions provide that the requester must obtain a Form W-8IMY from a QSL when the requester is required to determine the QSL’s chapter 4 status but may continue to rely on a written certification provided by the QSL pursuant to Notice 2010-46 when the QSL’s chapter 4 status is not required. For clarification, when the requestor obtains a Form W-8IMY from a QSL, the transitional provisions of Section III.C of Notice 2010-46 remain applicable to the QSL with respect to the annual statement requirement, and the QSL must therefore also provide to the requestor a statement at least annually, whether on a Form W-8IMY or on the separate statement described in the Notice.
On page 14, the instructions provide guidelines for the use of non-IRS forms for individuals. For clarification, the non-IRS form is not to be used in association with a payment that is a reportable amount (as defined in Treas. Reg. § 1.1441-1(e)(3)(vi)). Instead, the individual must provide a Form W-8BEN or an acceptable substitute (as defined in Treas. Reg. § 1.1441-1(e)(4)(vi)).

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

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FATCA Update for Forms 1099

Posted by William Byrnes on November 4, 2014

FATCA filing requirements of certain foreign financial institutions (FFIs). If you are required to report an account that is a U.S. account under chapter 4 of the Code (chapter 4), you may be eligible to elect to report the account on Form(s) 1099 instead of on Form 8966, “FATCA Report.”

Caution: If the account is either a U.S. account held by a passive NFFE that is a U.S. owned foreign entity or an account held by an owner-documented FFI, do not file a Form 1099 with respect to such an account. Instead, you must file a Form 8966, “FATCA Report,” in accordance with its requirements and its accompanying instructions to report the account for chapter 4 purposes.

Election described in Regulations section 1.1471-4(d)(5)(i)(A). You are eligible to make this election to report an account on Form(s) 1099 if–

You are a participating FFI (including a Reporting Model 2 FFI) (PFFI) or are a registered deemed-compliant FFI (RDC FFI) (other than a Reporting Model 1 FFI) required to report a U.S. account as a condition of your applicable RDC FFI status (see Regulations section 1.1471-5(f)(1)(i));
You are required to report the account as a U.S. account for chapter 4 purposes; and
The account is a U.S. account held by a specified U.S. person that you elect to report under Regulations section 1.1471-4(d)(5)(i)(A).

Election described in Regulations section 1.1471-4(d)(5)(i)(B) . You are eligible to make this election to report an account on Form(s) 1099 if–

You are a PFFI or are a RDC FFI (other than a Reporting Model 1 FFI) required to report a U.S. account as a condition of your applicable RDC FFI status (see Regulations section 1.1471-5(f)(1)(i));
You are required to report the account as a U.S. account for chapter 4 purposes; and
The account is a U.S. account held by a specified U.S. person that is a cash value insurance contract or annuity contract that you elect to report under Regulations section 1.1471-4(d)(5)(i)(B) in a manner similar to section 6047(d).

You may make an election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B) either with respect to all such U.S. accounts or, separately, with respect to any clearly identified group of such accounts (for example, by line of business or by the location where the account is maintained).

Special reporting by U.S. payer described in Regulations section 1.1471-4(d)(2)(iii)(A). If you are a U.S. payer that is a PFFI other than a U.S. branch, you also may satisfy your requirement to report with respect to a U.S. account for chapter 4 purposes by reporting on each appropriate Form 1099 in the manner described in Regulations section 1.1471-4(d)(2)(iii)(A).

Reporting procedures. If you are an FFI that is eligible to make an election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B) or are a U.S. payer reporting as described in Regulations section 1.1471-4(d)(2)(iii)(A), you must do so by filing each appropriate Form 1099 with the IRS and reporting the payments required to be reported by a U.S. payer (as defined in Regulations section 1.6049-5(c)(5)) with respect to the account.

Tip: All Form 1099 filers must have an EIN. If you have not previously filed a Form 1099 or other return, you must obtain an EIN and include it on each Form 1099 that you file. See part K for more information, including how to obtain an EIN.

In addition to the information otherwise required to be reported on the appropriate Form 1099, you also must include the following information for each account you are reporting as described in Regulations section 1.1471-4(d)(2)(iii)(A) or (d)(5)(i)(A) or (B):

The name, address, and TIN of the account holder;
The account number; and
If applicable, the jurisdiction of the branch that maintains the account being reported by adding the branch’s jurisdiction after the payer’s name, that is, “Payer’s Name (Jurisdiction X branch)”.

Caution: If you are an FFI making an election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B) or are a U.S. payer reporting as described in Regulations section 1.1471-4(d)(2)(iii)(A), you are required to report the payee’s account number on each Form 1099 you file (regardless of the fact that the account number otherwise may be optional for purposes of reporting on the applicable Form 1099).

Sponsored FFIs. If you are a sponsoring entity that is reporting a U.S. account on behalf of a sponsored FFI, report on the appropriate Form(s) 1099 the following information in the payer boxes (if filing on paper) or in the appropriate fields of the payer record (if filing electronically):

For the name, enter the sponsored FFI’s name on the first line and the sponsoring entity’s name on the second line.
For the address, enter the sponsoring entity’s address.
For the federal (or taxpayer) identification number, enter the sponsored FFI’s EIN.

In addition, if you are filing electronically, enter numeric code “1” in the “Transfer Agent Indicator” field. See Publication 1220 for electronic filing of forms. If you are filing on paper, enter your GIIN in the lower right hand portion of the title area on the top of Form 1096, Annual Summary and Transmittal of U.S. Information Returns. For transmittal of paper forms, see Form 1096 and its accompanying instructions.

Transitional rule. Calendar year 2014 is a transitional year for FFIs to report their U.S. accounts. If you make the election for 2014, you are required to report the account, but you are not required to report any payments pursuant to the election. Even though reporting of payments to an account is not required for 2014, FFIs making the election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B) for 2014 are required to report accounts to which no payments are made on Form 1099-MISC and enter “$1” in Box 3. Remember to include the name (including the jurisdiction of the branch, if applicable), address, and TIN of the account holder, along with the account number on the Form 1099.

Caution: If you made payments to the account that you are otherwise required to report on Form(s) 1099 for purposes of chapter 61 (for example, because you are a U.S. payer), making an election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B) does not affect your obligation to report such payments on the applicable Form 1099 in accordance with the requirements under chapter 61. See the separate specific instructions for each Form 1099 to determine which Form(s) 1099 to file.

Definitions

For detailed information about definitions that apply for purposes of chapter 4 generally, see Regulations section 1.1471-1(b). A Reporting FI under a Model 2 IGA should also refer to definitions that may apply under that IGA or apply pursuant to any applicable domestic law pertaining to its FATCA obligations. Solely for purposes of filing Forms 1099, the following definitions are provided to help guide filers through the process.

Account. An account means a financial account described in Regulations section 1.1471-5(b), including a cash value insurance contract and annuity contract.

Account holder. An account holder is the person who holds a financial account, as determined under Regulations section 1.1471-5(a)(3).

Foreign financial institution (FFI). Except as otherwise provided for certain foreign branches of a U.S. financial institution, a foreign financial institution means a financial institution that is a foreign entity. The term foreign financial institution also includes a foreign branch of a U.S. financial institution with a QI Agreement in effect.

Owner-documented FFI. An owner-documented FFI is an FFI described in Regulations section 1.1471-5(f)(3).

Participating FFI (PFFI). A PFFI is an FFI, or branch of an FFI, that has in effect an FFI agreement with the IRS, and includes a Reporting Model 2 FFI.

Registered deemed-compliant FFI (RDC FFI). A registered deemed-compliant FFI is an FFI described in Regulations section 1.1471-5(f)(1), and includes a Reporting Model 1 FFI, a QI branch of a U.S. financial institution that is a Reporting Model 1 FFI, and a nonreporting FI treated as a registered deemed-compliant FFI under a Model 2 IGA.

Reporting Model 1 FFI. A Reporting Model 1 FFI is an FI, including a foreign branch of a U.S. financial institution, treated as a reporting financial institution under a Model 1 IGA.

Reporting Model 2 FFI. A Reporting Model 2 FFI is an FI or branch of an FI treated as a reporting financial institution under a Model 2 IGA.

Specified U.S. person. A specified U.S. person is any U.S. person described in Regulations section 1.1473-1(c).

Sponsored FFI. A Sponsored FFI is an investment entity or an FFI that is a controlled foreign corporation having a Sponsoring Entity that performs certain due diligence, withholding, and reporting obligations on behalf of the Sponsored FFI.

Sponsoring Entity. A Sponsoring Entity is an entity that has registered with the IRS to perform the due diligence, withholding, and reporting obligations of one or more Sponsored FFIs or Sponsored Direct Reporting NFFEs.

U.S. account. A U.S. account is any account held by one or more specified U.S. persons. A U.S. account also includes any account held by a passive NFFE that has one or more substantial U.S. owners, or in the case of a Reporting Model 2 FFI, any account held by a passive NFFE that has one or more controlling persons that are specified U.S. persons. See Regulations section 1.1471-5(a) and an applicable Model 2 IGA.

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

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FATCA Update Information – Form W-8BEN-E Instructions

Posted by William Byrnes on November 3, 2014

This update supplements the Instructions for Form W-8BEN-E (Rev. June 2014) and provides additional information for foreign entities using the form. This update makes certain corrections and adds certain information not included in the instructions. A foreign entity using a Form W-8BEN-E (and the recipient of the form) may rely on this update, which will be incorporated in the next issuance of the instructions. See previous analysis of the instructions at https://profwilliambyrnes.com/2014/06/25/analysis-of-w-8ben-e-and-its-instructions-released-june-25/

Part I, Line 4 of Form W-8BEN-E referring to “Chapter 3 Status” is used for the entity providing the Form W-8BEN-E to indicate its chapter 3 status. On page 7, the instructions to Form W-8BEN-E do not provide any exceptions for when this line is not required to be completed. This update to the instructions clarifies that an entity providing Form W-8BEN-E is not required to complete Line 4 if the form is requested by an FFI solely for purposes of documenting the chapter 4 status of the entity that is an account holder and the form is not associated with a withholdable payment or with a reportable amount (as defined in Treas. Reg. § 1.1441-1(e)(3)(vi)) paid to such entity.
If the entity providing the Form W-8BEN-E has indicated in Part I, Line 4 that it is a disregarded entity, partnership, simple trust, or grantor trust, Part I, Line 4 also asks whether the entity is a hybrid entity making a treaty claim (and, if so, directs the entity to complete Part III). This update to the instructions provides that if the disregarded entity, partnership, simple trust, or grantor trust is an account holder of an FFI and is using the form solely for purposes of documenting its chapter 4 status to the FFI and the form is not associated with a withholdable payment or a reportable amount (as defined in Treas. Reg. § 1.1441-1(e)(3)(vi)), it may check “No” on Line 4 if it otherwise completes Part I, Line 4, notwithstanding that it is not required to provide a status for chapter 3 purposes.
On page 6, the instructions state in the definition of “substantial U.S. owner” that a territory NFFE must disclose its substantial U.S. owners if it cannot qualify as an excepted territory NFFE. This update to the instructions clarifies that a territory NFFE that qualifies as an excepted NFFE pursuant to any of the categories described in Treas. Reg. § 1.1472-1(c)(1), which includes an excepted territory NFFE, is not required to disclose its substantial U.S. owners.
On page 10, the instructions include examples of when an entity should complete Line 15 of Form W-8BEN-E, “Special rates and conditions.” The example requiring entities claiming treaty benefits under an “other income” article should be ignored. This update to the instructions clarifies that entities receiving payments of income eligible for treaty benefits under an “other income” article generally will not be required to complete Line 15, unless the claim of treaty benefits requires the payee to meet conditions not covered by the representations made in Line 14.

download for free –> LexisNexis® Guide to FATCA Compliance

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Jury Determines 150-Percent FBAR Penalty and U.S. Seeks FBAR Related Forfeiture of $12 Million!”

Posted by William Byrnes on October 4, 2014

International Financial Law Prof Blog.

In Zwerner, the government assessed civil FBAR penalties equivalent to 50 percent of the highest account balance for each of tax year 2004, 2005, 2006 and 2007, aggregating $3,488,609.33 for an account that appears to have had a high balance of $1,691,054 during the relevant time period! The IRS asserted a 75-percent civil income tax fraud penalty for tax years 2004, 2005 and 2006. … The jury trial in Zwerner began on May 19, 2014 …

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FATCA Supplement to the 2014 General Instructions for Certain Information Returns Reporting on Forms 1099

Posted by William Byrnes on September 29, 2014

International Financial Law Prof Blog.

FATCA filing requirements of certain foreign financial institutions (FFIs). If you are required to report an account that is a U.S. account under chapter 4 of the Code (chapter 4), you may be eligible to elect to report the account on Form(s) 1099 instead of on Form 8966, “FATCA Report.”

Caution: If the account is either a U.S. account held by a passive NFFE that is a U.S. owned foreign entity or an account held by an owner-documented FFI, do not file a Form 1099 with respect to such an account. Instead, you must file a Form 8966, “FATCA Report,” in accordance with its requirements and its accompanying instructions to report the account for chapter 4 purposes. …

download for free –> LexisNexis® Guide to FATCA Compliance

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FATCA Updates: Substitute W-8BEN-E, non-reporting FFI GIIN Registration, and new FATCA compliant 1099s

Posted by William Byrnes on September 25, 2014

International Financial Law Prof Blog.

FATCA Releases of September 25:

– two new Q&As, one addressing whether a nonreporting FFI under the IGA should register for a GIIN, the other addressing whether a substitute W-8, allowed for IGA countries, is FATCA compliant.

– new FATCA compliant 1099s that have a check-box added to identify an FFI filing the 1099 to satisfy its chapter 4 reporting requirement.

download for free –> LexisNexis® Guide to FATCA Compliance

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Revised Qualified Intermediary (QI) Agreement

Posted by William Byrnes on September 23, 2014

Form 1099 Reporting Responsibility, Private Arrangement Intermediaries (PAIs) and Joint Account and Agency Options under the Revised QI Agreement, Special Procedures for New QIs during Calendar Year 2014, and QI Application and Renewal Procedures for Central Banks of Issue

This applies to certain entities that apply to enter into or have entered into the revised Qualified Intermediary (QI) agreement published in Revenue Procedure 2014-39, 2014-29 I.R.B. 151.

I. Form 1099 Reporting Responsibility

Section 8.06 of the revised QI Agreement provides the Form 1099 reporting responsibilities of a QI and incorporates the coordination rule provided in §1.6049-4(c)(4) for Form 1099 reporting with reporting under chapter 4 or an applicable IGA. The following paragraphs are revised as set forth below.

Section 8.06(A). Reportable Amount. QI must file a Form 1099 in accordance with the instructions to the form for the aggregate amount of a particular type of reportable amount paid to an account holder that is (or is presumed) a U.S. non-exempt recipient (whether a direct or indirect account holder). However, QI is not required to file a Form 1099 on a reportable amount if–
Section 8.06(A)(1). QI is a non-U.S. payor reporting the account holder of a U.S. account under its FATCA requirements as a participating FFI or registered deemed-compliant FFI (including a reporting Model 1 FFI) and the other conditions of §1.6049-4(c)(4)(i) are satisfied;
Section 8.06(B)(1). QI is a non-U.S. payor reporting the account holder of a U.S. account under its FATCA requirements as a participating FFI or registered deemed-compliant FFI (including a reporting Model 1 FFI) and the other conditions of §1.6049-4(c)(4)(i) are satisfied;

The corrections described above conform to the coordination rule under §1.6049-4(c)(4)(i) by eliminating the Form 1099 reporting requirement for non-U.S. payors that are reporting Model 1 FFIs if the conditions of §1.6049-4(c)(4)(i) are satisfied. The reference to backup withholding in section 8.06(A) of the revised QI agreement is also removed to be consistent with section 8.06(B) and because the backup withholding requirements are referenced separately, to the extent applicable, in sections 8.06(A)(1)-(6) of the revised QI agreement.

II. Private Arrangement Intermediaries (PAIs) and Joint Account and Agency Options under the Revised QI Agreement

Section 4 of the QI Agreement provides the requirements for a QI that enters into an agreement with a PAI or applies the joint account or agency option to a partnership or trust. Section 4 will include the following:

A QI may apply the joint account option (section 4.05 of the revised QI agreement) to a partnership or trust that is an owner-documented FFI or an NFFE (other than a WP or WT) that otherwise meets the requirements of section 4.05 of the revised QI Agreement;
A PAI or partnership or trust to which a QI applies the agency option (section 4.06 of the revised QI agreement) may provide its documentation and other information to the QI for inclusion in the QI’s periodic review described in section 10.04 of the revised QI Agreement instead of performing the review itself and providing the QI with a certification of its compliance;
A partnership or trust to which a QI applies the joint account or agency option must waive any legal prohibitions against providing its records to the QI (rather than the IRS); and
A QI may continue to apply the rules of sections 4 and 4A of the former QI agreement (as published in Revenue Procedure 2002-12, 2000-1 C.B. 387 (as amended)) to a PAI or a partnership or trust to which it has applied the joint account or agency option until January 1, 2015, provided that the QI has entered into an agreement with such entity prior to June 30, 2014, pursuant to the terms of the former QI agreement.

The modifications described above are consistent with the provisions in the joint account and agency option section of the revised Withholding Foreign Partnership and Withholding Foreign Trust Agreements. See sections 9.01 and 9.02 of the Withholding Foreign Partnership and Withholding Foreign Trust Agreements published in Revenue Procedure 2014-47, 2014-35 I.R.B. 393.

III. New QIs for Calendar Year 2014.

Section 1.03 of Revenue Procedure 2014-39 provides that a QI that submits an application for QI status before July 31, 2014 and is approved during calendar year 2014 may act as a QI in accordance with Revenue Procedure 2000-12 (as amended) until June 30, 2014, as if the QI agreement of such QI were effective on January 1, 2014 and expires on June 30, 2014. The IRS is allowing an entity that submits an application for QI status at any time during the 2014 calendar year, if such application t is approved by the IRS by the end of 2014, to act as a QI in accordance with the former QI agreement from January 1, 2014, until June 30, 2014 as if the QI agreement were effective during that period. Thus, a QI does not need to submit its application before July 31, 2014 in order to benefit from this retroactive allowance (as described in section 1.03 of Revenue Procedure 2014-39). The IRS will specify in its approval letter to a QI how such QI may notify the IRS that it will act as a QI for the entire 2014 calendar year. See also IRS Qualified Intermediaries News, Issue Number 2014-03, which is supplemented and modified by this issue.

IV. QI Application and Renewal Procedures for Certain Central Banks of Issue

Section 1.02 of Revenue Procedure 2014-39 provides that a central bank of issue may enter into a QI agreement. A central bank of issue that is not required to register on the registration portal to obtain status as a participating FFI or registered deemed-compliant FFI (as described in sections 1.02 and 3.02 of Revenue Procedure 2014-39) must apply for or renew its QI agreement by submitting an application or request for renewal to the Foreign Intermediaries Program at the address provided in section 3.01 of Revenue Procedure 2014-39. A central bank of issue described in the preceding sentence that renews its QI agreement on or before July 31, 2014, will have a QI agreement with an effective date of June 30, 2014. If such QI renews after July 31, 2014, the effective date of the QI agreement will be the date of renewal provided in the IRS approval notice. A central bank of issue that is not required to obtain status as a participating FFI or registered deemed-compliant FFI and that applies for QI status will have a QI agreement with an effective date of the date it is issued a QI-EIN.

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Posted in FATCA | Tagged: FATCA, PAI, QI | Leave a Comment »

UK trusts under the UK-US Intergovernmental Agreement (IGA)

Posted by William Byrnes on September 16, 2014

August 2014, STEP, alongside ICAEW and The Law Society of England and Wales, updated their joint guide to the treatment of UK trusts under the UK-US Intergovernmental Agreement (IGA) to take into account minor revisions from HMRC. The trust tests (left hand side of the flowchart) have been amended. Detailed questions in Appendix II of the guidance have also been revised to reflect this. The changes are not fundamental.

download for free –> LexisNexis® Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA)

Posted in FATCA | Tagged: FATCA, FFI, IGA, NFFE, trusts, united kingdom | Leave a Comment »

FATCA FFI Update and It Doesn’t Look Pretty. September Did Not Break 100,000!

Posted by William Byrnes on September 2, 2014

The IRS published its September list of 99,861 FFIs registered for FATCA. But that’s just an increase of about 4,500 registrations since the August list of 95,239. The disappointing September result is a harbinger of the rough waters ahead for general FATCA compliance. Considering the growth in registrations has slowed dramtically from the July to August increase of only7,246 additional entities (up from 87,993 in July), many industry watchers are sounding the alarm bells.

How Many Foreign Financial Institutions Are Still Not Registered? Most!

read the country by country analysis at International Financial Law Prof Blog.

Read the August analysis and a country-by-country, and IGA, breakdown at International Financial Law Professor

Who We Are?

Haydon Perryman, FATCA Compliance expert of Strevus, and I have been undertaking (and publishing) the leading, same-day, analysis of the previous June 2nd and the July 1st of the FATCA FFI GIIN list by country, by IGA, by EAG, as well as exploring other interesting aspects of registered FFIs, and FATCA compliance documentation (e.g. W-8s and equivalent forms allowed by IGA). Haydon brings the practical side to bear having established the FATCA compliance system for Tier 1 UK institutions and Tier 1 EU ones, and I the academic side being the primary author of Lexis’ Guide to FATCA Compliance and an international tax professor.

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

Posted in FATCA | Tagged: FATCA, FFI, IGA | 3 Comments »

Legal framework for FATCA in the Russian Federation

Posted by William Byrnes on August 15, 2014

Legal framework for FATCA in the Russian Federation.

Posted in FATCA | Tagged: FATCA, Russia | 1 Comment »

What Are the IRS Changes in the Newly Released Withholding Agreements for Foreign Trusts and Partnerships

Posted by William Byrnes on August 8, 2014

Revenue Procedure 2014-47 updates the Withholding Foreign Partnership (WP) and Withholding Foreign Trust (WT) agreements applicable to foreign partnerships and trusts that wish
to enter into a WP or WT withholding agreement with the IRS under §§1.1441-5(c)(2)(ii) and (e)(5)(iv).

Under Chapters 3 and 4, Application Procedures and Overview of Requirements for –

Withholding Foreign Partnership or
Withholding Foreign Trust Status

The procedure also contains the new –

Final Withholding Foreign Partnership Agreement
Final Withholding Foreign Trust Agreement

download for free –> LexisNexis® Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA)

Reporting Forms?

If a foreign partnership has U.S. partners, the foreign partnership is generally required to file Form 1065 with a Schedule K-1 to report each U.S. partner.

If a foreign trust is a grantor trust with U.S. owners, the foreign trust is required to file Form 3520-A, Annual Information Return of a Foreign Trust with a U.S. Owner, and to provide statements to a U.S. owner, as well as each U.S. beneficiary who is not an owner and receives a distribution.

What Entities Are Eligible to Execute a WP or WT Agreement?

The WP agreement and WT agreement may be entered into by a foreign partnership and a foreign trust.

With respect to an FFI, the WP agreement and WT agreement may only be entered into by an FFI that agrees to satisfy the requirements and obligations of

1. a participating FFI (including a reporting Model 2 FFI),

2. a registered deemed-compliant FFI (including a reporting Model 1 FFI and a nonreporting Model 2 FFI treated as registered deemed-compliant), or

3. a registered deemed-compliant Model 1 IGA FFI (as defined in section 2 of the WP agreement or WT agreement).

An FFI that is a certified deemed-compliant FFI (including a nonreporting IGA FFI may enter into a WP agreement or WT agreement if the FFI meets and agrees to assume the obligations of, and to be treated as, a participating FFI (including a reporting Model 2 FFI), a registered deemed-compliant FFI (including a reporting Model 1 FFI or a nonreporting Model 2 FFI treated as registered deemed-compliant), or a registered deemed-compliant Model 1 IGA FFI.

An NFFE or an FFI that is a retirement fund (as defined in section 2 of the WP agreement or WT agreement) may also apply to enter into a WP agreement or WT agreement.

What Is the 2014 Effective Date of Execution of the Agreement?

An entity (other than a retirement fund or an NFFE that is not a sponsoring entity) that applies for WP or WT status before August 31, 2014 and is approved will have a WP agreement or WT agreement with an effective date of June 30, 2014, provided that it obtains a GIIN, if it has not already done so, within 90 days of such approval.
An entity (other than a retirement fund or an NFFE that is not a sponsoring entity) that applies after August 31, 2014 will have a WP agreement or WT agreement with an effective date of the date it is issued a WP-EIN or WT-EIN, if its application is approved and provided that it obtains a GIIN, if it has not already done so, within 90 days of such approval.
A new WP or WT applicant that is a retirement fund or an NFFE that is not a sponsoring entity will have a WP agreement or WT agreement with an effective date of the date it is issued a WP-EIN or WT-EIN, if its application is approved.

What Is the Effective Date After 2014?

For calendar years after 2014, applications for WP or WT status received on or before March 31 of the calendar year, if approved, will be effective January 1 of that calendar year. Applications for WP or WT status received on or after April 1, if approved, will be effective January 1 of the following calendar year and the entity must be in compliance with the WP Agreement beginning January 1.

Withholding Requirements?

Chapter 4: FATCA

Section 1471(a) requires a withholding agent to deduct and withhold a tax equal to 30 percent on any withholdable payment made to an FFI, unless the FFI agrees to and complies with the terms of an FFI agreement to satisfy the obligations specified for a participating FFI, is deemed to meet these requirements of a deemed-compliant FFI, or is treated as an exempt beneficial owner.

Section 1472(a) requires a withholding agent to deduct and withhold a tax equal to 30 percent on any withholdable payment made to an NFFE unless such entity provides a certification that it does not have any substantial U.S. owners, provides information regarding its substantial U.S. owners, or an exception to these requirements otherwise applies.

A participating FFI (including a reporting Model 2 FFI) or registered deemed-compliant FFI (other than a reporting Model 1 FFI or registered deemed-compliant Model 1 IGA FFI) will
satisfy its requirement to withhold under sections 1471(a) and 1472(a) with respect to account holders of the FFI that are entities by withholding on withholdable payments made to
nonparticipating FFIs and recalcitrant account holders under the FFI agreement, or an applicable Model 2 IGA. See the FFI agreement, §1.1471-5(f), and the applicable Model 2 IGA for the withholding requirements that apply to withholdable payments made to account holders of the FFI that are individuals treated as recalcitrant account holders.

A reporting Model 1 FFI or a registered deemed-compliant Model 1 IGA FFI will satisfy its requirement to withhold under section 1471(a) with respect to its account holders by withholding on withholdable payments made to nonparticipating FFIs to the extent required under the applicable Model 1 IGA. A withholding agent (including a participating FFI or registered deemed-compliant FFI) that is required to withhold on a withholdable payment must report the payment on Form 1042- S, Foreign Person’s U.S. Source Income Subject to Withholding.

A participating FFI (including a reporting Model 2 FFI) and certain registered deemed-compliant FFIs must, for a transitional period, report certain information about accounts it maintains that are held by nonparticipating FFIs. A withholding agent (including an FFI with respect to payments made to an NFFE that were not already reported with respect to a U.S. account or U.S. reportable account (as defined under the applicable Model 1 or Model 2 IGA) is also required to report withholdable payments made to an NFFE (other than an excepted NFFE) with substantial U.S. owners on Form 8966, FATCA Report, even though no withholding is required.

Chapter 3

A withholding agent is required to deduct and withhold a tax equal to 30 percent on any payment of U.S. source fixed or determinable annual or periodical (FDAP) income that is an amount subject to withholding made to a foreign person. A lower rate of withholding may apply under the Code, the regulations, or an income tax treaty. Generally, a withholding agent must also report the payments on Forms 1042-S, regardless of whether withholding is required.

Coordination of Withholding and Reporting Requirements under Chapters 3 and 4.

With respect to a payment that is subject to withholding under chapter 4, a withholding agent may credit any tax withheld under chapter 4 against its liability for any tax due with respect to the payment under chapter 3. A withholding agent may use a single Form 1042-S to report information required under both chapters 3 and 4 with respect to a withholdable payment of U.S. source FDAP income subject to withholding under chapter 4 and for which a credit against the beneficial owner’s chapter 3 liability, if any, may be claimed.

Thus, a withholding agent that reports on Form 1042-S a withholdable payment that has been withheld upon under chapter 4 may provide certain information about the beneficial owner of the payment for purposes of chapter 3 on the same Form 1042-S. With respect to a withholdable payment of U.S. source FDAP income that is not subject to withholding under chapter 4 and that is an amount subject to withholding (or reporting) under chapter 3, a withholding agent is also required to report the applicable chapter 4 exemption code in addition to the other information required to be reported on Form 1042-S.

What Are the Changes to the WP Agreement and the WT Agreement?

The revenue procedure revises and updates the WP and WT agreements to coordinate with the withholding and reporting requirements of chapter 4, and based on the IRS’ experience in dealing with these entities since the WP and WT agreements were first published in 2003.

Additionally, because a WP or WT will be required to assume primary withholding responsibility for chapter 4 purposes, the revised WP agreement and WT agreement expand the scope of payments for which an entity can act as a WP or WT to reportable amounts (as defined in section 2 of the WP or WT agreement, which includes withholdable payments). Thus, a WP or WT need not provide its withholding agent with a nonqualified intermediary withholding certificate and withholding statement for reportable amounts not subject to chapter 3 withholding that are allocable to partners, beneficiaries, or owners that are U.S. non-exempt recipients. A WP or WT will be required to report partners, beneficiaries, or owners that are U.S. non-exempt recipients on Form 8966, Schedule K-1, or Form 3520-A to the extent required under its FATCA requirements or the WP agreement or WT agreement.

Documentation Requirements.

The existing WP agreement and WT agreement require a WP or WT to document its partners, beneficiaries or owners solely with Forms W-8 and W-9 and do not permit reliance on the presumption rules of chapters 3 or 61. The revised WP agreement and WT agreement also prohibit reliance on the presumption rules with respect to a WP or WT’s direct partners, beneficiaries, or owners and retain an automatic termination provision for a WP or WT’s failure to obtain documentation for a direct partner, beneficiary, or owner.

The revised WP agreement and WT agreement provide for the use of documentary evidence, in lieu of a Forms W-8 or Form W-9, for direct partners, beneficiaries, or owners that is obtained by a WP or WT that is an FFI and that is subject to the “know-your-customer” practices and procedures of a jurisdiction that the IRS has approved. A list of jurisdictions for which the IRS has received know-your-customer information and for which the know-yourcustomer rules are acceptable is available at: http://www.irs.gov/Businesses/International-Businesses/List-of-Approved-KYC-Rules.

The rules permitting the use of documentary evidence do not apply to an NFFE acting as a WP or WT, which is required to obtain Forms W-8 and W-9 to document the chapter 3 status and, when required, the chapter 4 status of its partners, beneficiaries, or owners.

Agency Option, Joint Account Option, and Indirect Partners.

The existing WP agreement and WT agreement do not allow a WP or WT to act as a WP or WT for its indirect partners, beneficiaries, or owners, except in two specific situations describe section 9 of the WP agreement or WT agreement (agency and joint account arrangements), both of which require a written agreement between the WP or WT and another foreign partnership or foreign trust.

Notwithstanding the restriction described above, the existing WP agreement and WT agreement were modified by rider in certain cases to permit a WP or WT to act as such for its indirect partners, beneficiaries, or owners, but the rider required specific payee reporting by the WP or WT with respect to these partners, beneficiaries, or owners.

The WP agreement and WT agreement are revised to provide that a WP or WT may act as a WP or WT with respect to direct and indirect partners, beneficiaries, or owners of a direct partner that is a passthrough partner (as defined in section 2 of the WP or WT agreement), provided that such partner, beneficiary, or owner is not a U.S. non-exempt recipient (unless such U.S. non-exempt recipient is included in the passthrough partner’s chapter 4 withholding rate pool of U.S. payees or recalcitrant account holders) in which case the WP or WT may also assume the withholding and Form 1042-S reporting requirements for these indirect partners.

Compliance Procedures.

The existing WP agreement and WT agreement require periodic audits by an external auditor in certain circumstances, including when a WP or WT made a pooled reporting election. The revised WP agreement and WT agreement replace the external audit requirement with an internal compliance program.

Modified Form 1065 Filing Requirement.

Under the existing WP agreement, unless modified by a rider, a WP is required to file Form 1065 and Schedules K-1 in accordance with the requirements of §1.6031(a)-1 and the instructions to the form.The revised WP agreement, incorporates the modified filing obligations under §1.6031(a)-1(b)(3) with certain revisions to permit a WP that meets the conditions specified in section 6.03(B) of the WP agreement, including that the WP would not otherwise be required to report a specifically allocated item to any partner on Schedule K-1, to either not file a partnership return or not file Schedules K-1 for certain foreign partners dependent on whether the WP has any direct or indirect U.S. partners.

SECTION 4. Withholding Foreign Partnership Agreement

Section 1. PURPOSE AND SCOPE
Section 2. DEFINITIONS
Section 3. WITHHOLDING RESPONSIBILITY
Section 4. DOCUMENTATION REQUIREMENTS
Section 5. WITHHOLDING FOREIGN PARTNERSHIP WITHHOLDING CERTIFICATE
Section 6. TAX RETURN AND INFORMATION REPORTING OBLIGATIONS
Section 7. ADJUSTMENTS FOR OVER- AND UNDERWITHHOLDING; REFUNDS
Section 8. COMPLIANCE PROCEDURES
Section 9. CERTAIN PARTNERSHIPS AND TRUSTS AND INDIRECT PARTNERS
Section 10. EXPIRATION, TERMINATION AND DEFAULT
Section 11. MISCELLANEOUS PROVISIONS
Section 12. EFFECTIVE DATE

SECTION 5. Withholding Foreign Trust Agreement

Section 1. PURPOSE AND SCOPE

Section 2. DEFINITIONS

Section 3. WITHHOLDING RESPONSIBILITY

Section 4. DOCUMENTATION REQUIREMENTS

Section 5. WITHHOLDING FOREIGN TRUST WITHHOLDING CERTIFICATE

Section 6. TAX RETURN AND INFORMATION REPORTING OBLIGATIONS

Section 7. ADJUSTMENTS FOR OVER- AND UNDERWITHHOLDING; REFUNDS

Section 8. COMPLIANCE PROCEDURES

Section 9. CERTAIN PARTNERSHIPS AND TRUSTS AND INDIRECT BENEFICIARIES AND OWNERS

Section 10. EXPIRATION, TERMINATION AND DEFAULT

Section 11. MISCELLANEOUS PROVISIONS

Section 12. EFFECTIVE DATE OF AGREEMENT

download for free –> LexisNexis® Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA)

Posted in FATCA, W-8BEN-E | Tagged: FATCA, Foreign Partnership, Foreign Partnership Agreement, Foreign Trust Agreement, Foreign Trust Status, IRS | Leave a Comment »

New FATCA FAQ – Application of the Preexisting Obligation Election to Intermediaries and Flow-through Entities

Posted by William Byrnes on August 8, 2014

Question: Notice 2014-33, 2014-21 I.R.B. 1033, provides that a withholding agent or FFI may treat an obligation as a preexisting obligation if the obligation (i) is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015, and (ii) is held by an entity. How does this provision of Notice 2014-33 apply when the recipient of a payment made under the obligation is a flow-through entity or intermediary?

Answer: A withholding agent may treat an obligation held by an entity (including an entity acting as an intermediary with respect to the obligation or a flow-through entity) as a preexisting obligation to the extent permitted in Notice 2014-33. Therefore, an obligation held by an intermediary or flow-through entity is treated as a preexisting obligation if it is issued, opened, or executed before January 1, 2015. In such a case, the withholding agent may rely on a pre-FATCA Form W-8 to document the holder of the obligation throughout 2014. If the flow-through entity or intermediary provides the withholding agent with a withholding statement allocating a portion of a payment to a chapter 4 withholding pool of recalcitrant account holders or NPFFIs (or payee-specific information for such persons), then the withholding agent is required to apply chapter 4 withholding to the portion of the payment allocated to each such pool of payees (or each such payee), even though it is not yet required to document the chapter 4 status of the flow-through entity or intermediary. However, a withholding agent must determine the chapter 4 status of a flow-through entity or intermediary as a PFFI or RDCFFI when provided with a withholding statement allocating a portion of a payment to a chapter 4 withholding rate pool of U.S. payees that the withholding agent reports on Form 1042-S as made to the pool rather than requiring payee-specific documentation for each payee in the pool or withholding and reporting in accordance with the applicable presumption rules.

If the withholding agent receives documentation from a flow-through entity with respect to an interest holder in the entity or from an intermediary with respect to its account holder and confirms (in writing) that the intermediary or flow-through entity treats the obligation as a preexisting obligation (including under Notice 2014-33, if applicable), the withholding agent may treat the obligation as a preexisting obligation provided that the withholding agent does not have documentation showing the interest holder or account holder to be an NPFFI. The preceding sentence would apply, for example, to documentation provided with respect to a passive NFFE that is an account holder in an intermediary and that does not provide the information or certification described in Treas. Reg. § 1.1471-3(d)(12)(iii) with respect to its owners.

FATCA – FAQs: General Compliance, See Q7

download free –> the 58 page Lexis Guide to FATCA Compliance, Chapter 1.

Posted in FATCA | Tagged: EAG, FATCA, FFI, IGA, IRS, PFFI, RDCFFI | Leave a Comment »

IRS Posts New and updated FATCA FAQs

Posted by William Byrnes on August 5, 2014

New and updated FATCA Registration System and FFI List FAQs have been posted to the FATCA Website.

What is the maximum number of points of contact allowed on the Registration? Updated: 8-1-2014
What is the maximum number of points of contact allowed on the Registration? Updated: 8-1-2014
What information will be in the notification e-mail the RO receives? Updated: 8-1-2014
Why is the RO not receiving FATCA notification emails regarding the FI’s status and account updates? Updated: 8-1-2014

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

Over 600 pages of in-depth analysis of the practical compliance aspects of financial service business providing for exchange of information of information about foreign residents with their national competent authority or with the IRS (FATCA).

Posted in FATCA | Tagged: FATCA, FFI, GIIN, IGA | Leave a Comment »

FINCEN Issues New Due Diligence for Beneficial Owners of US Accounts to Provide FATCA Reciprocity to Foreign Governments

Posted by William Byrnes on August 4, 2014

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM) to amend existing Bank Secrecy Act (BSA) regulations to help prevent the use of anonymous companies to engage in or launder the proceeds of illegal activity in the U.S. financial sector. See Proposed Rules and New Beneficial Ownership Form (Appendix A) here.

The proposed rule would clarify and strengthen customer due diligence obligations of banks and other financial institutions (including brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities).

The proposed amendments would add a new requirement that these entities know and verify the identities of the real people (also known as beneficial owners) who own, control, and profit from the companies they service to facilitate reporting and investigations in support of tax compliance, and advancing international commitments made to foreign counterparts in connection with the provisions commonly known as the Foreign Account Tax Compliance Act (FATCA).

FATCA’s USA Reciprocity to Report Foreign Nationals Financial Information to Foreign Governments

The United States has collaborated with foreign governments to enter into intergovernmental agreements that facilitate the effective and efficient implementation of these requirements. Pursuant to many of these agreements, the United States has committed to pursuing reciprocity with respect to collecting and reporting to the authorities of the FATCA partner information on the U.S. accounts of residents of the FATCA partner. A general requirement for U.S. financial institutions to obtain beneficial ownership information for AML purposes advances this commitment, and puts the United States in a better position to work with foreign governments to combat offshore tax evasion and other financial crimes.

Required Due Diligence by US Financial Institutions

The rulemaking clarifies that customer due diligence includes four core elements:

identifying and verifying the identity of customers;
identifying and verifying the beneficial owners of legal entity customers;
understanding the nature and purpose of customer relationships; and
conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions.

The proposed requirement to identify and verify the identity of beneficial owners is addressed through the proposal of a new requirement for covered financial institutions to collect beneficial ownership in a standardized format.

Those financial institutions will have to identify and verify any individual who owns 25 percent of more of a legal entity, and an individual who controls the legal entity.

Determining Beneficial Ownership

The second element of CDD requires financial institutions to identify and verify the beneficial owners of legal entity customers. FinCEN proposes a new requirement that financial institutions identify the natural persons who are beneficial owners of legal entity customers, subject to certain exemptions.

The definition of “beneficial owner” proposed herein requires that the person identified as a beneficial owner be a natural person (as opposed to another legal entity). A financial institution must satisfy this requirement by obtaining at the time a new account is opened a standard certification form (Appendix A of Proposed Rules) directly from the individual opening the new account on behalf of the legal entity customer.

Financial institutions would be required to verify the identity of beneficial owners consistent with their existing CIP practices. However, FinCEN is not proposing to require that financial institutions verify that the natural persons identified on the form are in fact the beneficial owners. In other words, the requirement focuses on verifying the identity of the beneficial owners, but does not require the verification of their status as beneficial owners. This proposed requirement states minimum standards.

In order to identify the beneficial owner, a covered financial institution must obtain a certification from the individual opening the account on behalf of the legal entity customer (at the time of account opening) in the form of Appendix A. The form requires the individual opening the account on behalf of the legal entity customer to identify the beneficial owner(s) of the legal entity customer by providing the beneficial owner’s

name,
date of birth,
address and
social security number (for U.S. persons).

This information is consistent with the information required under the CIP rules for identifying customers that are natural persons. The form also requires the individual opening the account on behalf of the legal entity customer to certify, to the best of his or her knowledge, that the information provided on the form is complete and correct. Obtaining a signed and completed form from the individual opening the account on behalf of the legal entity customer shall satisfy the requirement to identify the beneficial owners.

This section also requires financial institutions to verify the identity of the individuals identified as beneficial owners on the certification form. The procedures for verification are to be identical to the procedures applicable to an individual opening an account under the existing CIP rules.

Accordingly, the financial institution must verify a beneficial owner’s identity using the information provided on the certification form. For foreign persons, the form requires –

a passport number and country of issuance, or
other similar identification number (name, date of birth, address, and social security number (for U.S. persons), etc.),

according to the same documentary and non-documentary methods the financial institution may use in connection with its customer identification program (to the extent applicable to customers that are individuals), within a reasonable time after the account is opened.

A financial institution must also include procedures for responding to circumstances in which it cannot form a reasonable belief that it knows the true identity of the beneficial owner, as described under the CIP rules.

Definition of Beneficial Owner

The proposed definition of “beneficial owner” includes two independent prongs:

(a) an ownership prong and

(b) a control prong.

A covered financial institution must identify each individual under the ownership prong (i.e., each individual who owns 25 percent or more of the equity interests), in addition to one individual for the control prong (i.e., any individual with significant managerial control).

If no individual owns 25 percent or more of the equity interests, then the financial institution may identify a beneficial owner under the control prong only. If appropriate, the same individual(s) may be identified under both criteria.

Purpose of New CDD Rules

Clarifying and strengthening CDD requirements for U.S. financial institutions, including an obligation to identify beneficial owners, advances the purposes of the BSA by:

Enhancing the availability to law enforcement, as well as to the federal functional regulators and SROs, of beneficial ownership information of legal entity customers obtained by U.S. financial institutions, which assists law enforcement financial investigations and regulatory examinations and investigations;
Increasing the ability of financial institutions, law enforcement, and the intelligence community to identify the assets and accounts of terrorist organizations, money launderers, drug kingpins, weapons of mass destruction proliferators, and other national security threats, which strengthens compliance with sanctions programs designed to undercut financing and support for such persons;
Helping financial institutions assess and mitigate risk, and comply with all existing legal requirements, including the BSA and related authorities;
Facilitating reporting and investigations in support of tax compliance, and advancing international commitments made to foreign counterparts in connection with the provisions commonly known as the Foreign Account Tax Compliance Act (FATCA); and
Promoting consistency in implementing and enforcing CDD regulatory expectations across and within financial sectors.

Cost of New Compliance?

FinCEN believes that there are approximately eight million such accounts opened annually by covered financial institutions. Based on the total number of covered financial institutions,65 this would result in each covered financial institution opening approximately 368 such accounts per year, or 1.5 per day. Estimating an average time for a covered financial institution to receive the certification and verify the information of 20 minutes and an average cost of $20 per hour, this results in a cost of approximately $54 million.

I will draft a topic chapter on the new FINCEN Beneficial Ownership Due Diligence requirements for the Winter release of LexisNexis’ Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide

LexisNexis’ Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide – This eBook with commentary and analysis by hundreds of AML experts from over 100 countries, is designed to provide the compliance officer accurate analyses of the AML/CTF Financial and Legal Intelligence, law and practice in the nations of the world with the most current references and resources. The eBook is organized around five main themes: 1. Money Laundering Risk and Compliance; 2. The Law of Anti-Money Laundering and Compliance; 3. Criminal and Civil Forfeiture; 4. Compliance and 5. International Cooperation. As these unlawful activities can occur in any given country, it is important to identify the international participants who are cooperating to develop methods to obstruct these criminal activities.

Posted in FATCA, Money Laundering | Tagged: beneficial ownership, CDD, due diligence, FATCA, FINCEN, IGA, reciprocity | 1 Comment »

August FATCA GIIN list analysed by country and by IGA

Posted by William Byrnes on August 1, 2014

By William Byrnes and Haydon Perryman

The IRS published its August list of 95,239 FATCA registered FFIs, including entities that completed the registration process by July 25^th. The increase has been disappointing to say the least. Only 7,246 additional entities completed registration this past month, up from 87,993 in July.

89,718 FFIs (94%) are registered from the 101 IGA countries on the GIIN list. Only 4,801 FFI (5%) registered from the 143 countries without an IGA for which FATCA withholding began July 1^st.

June GIINs 77,354 -> July GIINs 87,993 -> August GIINs 95,239 (7,246 increase)

How Many Foreign Financial Institutions Are Still Not Registered? Most!

Most pundits thought at least 20% of the FFIs requiring FATCA registration would have done so by now. We were wrong. I was personally thinking that 110,000 would be registered for the August 1^st FFI list. The small increase of just 7,246 is troubling. Total global compliance remains in the single digits by both the IRS and foreign government estimated numbers.

The 30% FATCA withholding began July 1st on 143 countries (101 have IGAs that forestall withholding until January 1, 2015). Only 4,801 FFI (5%) registered from these 143 countries. Thus, FATCA compliance is running in the low, single digits for these countries.

read our analysis and a country-by-country, and IGA, breakdown at International Financial Law Professor

Who We Are?

Haydon Perryman, FATCA Compliance expert of Strevus, and I have been undertaking (and publishing) the leading, same-day, analysis of the previous June 2^nd and the July 1^st of the FATCA FFI GIIN list by country, by IGA, by EAG, as well as exploring other interesting aspects of registered FFIs, and FATCA compliance documentation (e.g. W-8s and equivalent forms allowed by IGA). Haydon brings the practical side to bear having established the FATCA compliance system for Tier 1 UK institutions and Tier 1 EU ones, and I the academic side being the primary author of Lexis’ Guide to FATCA Compliance and an international tax professor.

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

http://www.youtube.com/watch?v=klTK_LsrwV0

Posted in FATCA | Tagged: FATCA, FFI, GIIN, IGA | 2 Comments »

more Guns & Money, Bribery, Money Laundering, Major Insolvencies, Drug Dealing … and the week is just half way over

Posted by William Byrnes on July 31, 2014

Wednesday’s articles

the secret language of LIBOR traders exposed

DOJ wants more time to examine Barclays

Morgan Stanley pays $275 million fine & disgorgement for $2.5 billion of sub-prime backed securities sales

Analysis of the 88,000 Financial Firms on the IRS’ GIIN List for FATCA

FATCA Expanded Affiliated Group (EAG) by Country – the FFI List

FACTA in Swiss Finance Transactions

FATCA Compliance Guide Download

MOnday and Tuesday articles

Guns & Money – Smith & Wesson pays $2 million for bribery

Banco Espírito Santo’s former CEO arrested for Money Laundering & Tax Evasion as bank reports Portugal’s largest loss, Espirito Santo Financial Group seeks creditor protection

Guinea mining FCPA bribery investigation nets first jail sentence

Substantial money laundering penalties but not tax collection from OVDI disclosures

4th guilty plea in Indonesia bribery FCPA case

BOA settles alleged narco kingpin violations for $16 million

SunTrust Admits Issuing Mass Denials After Throwing Away Thousand of Customers Unopened Files

Lloyds Banking Group Will Pay $370 Million, Admits Criminal Wrongdoing

FTC seizes law firm assets, alleges $35 million fees bilked from distressed homeowners

Is FedEx a drug dealer? The $2.4 billion question

Tax Inversions: The Basics

Lionel Messi to be Prosecuted for Alleged Tax Evasion of $5.4 million

Posted in Uncategorized | Tagged: Banco Espírito Santo, Barclays, BOA, Bribery, Drug Dealing, FATCA, FCPA, FFI, Guns, Insolvencies, Lloyds, Money, Money Laundering, Morgan Stanley, Smith Wesson, Sun Trust, Tax Evasion | 1 Comment »

BVI Guidance Notes for the US and UK FATCA Agreements

Posted by William Byrnes on July 30, 2014

This document is a DRAFT of the proposed Guidance Notes for the US and UK FATCA Agreements with the Government of the British Virgin Islands and at this stage it is for discussion purposes ONLY!

153 page draft FATCA guidance issued by BVI available > here <.

3. DEEMED COMPLIANT FINANCIAL INSTITUTIONS – US AGREEMENT ONLY

4. NON-REPORTING FINANCIAL INSTITUTIONS – UK AGREEMENT ONLY

13.4. Pre-existing Cash Value Insurance Contracts or Annuity Contracts unable to be sold to US residents – US Agreement only

13.4.1. Assignment of Pre-existing Insurance Contracts

13.5. Lower Value Accounts
13.6. Electronic Record Searches and Lower Value Accounts
13.6.1. Identifying Indicia – US Agreement
13.6.2. Curing Indicia – US Agreement
13.6.3. Identifying Indicia – UK Agreement
13.6.4. Curing Indicia – UK Agreement

UK AGREEMENT – SPECIFIC ELEMENTS
1. Annex IV – Alternative Reporting Regime for UK Resident
Non-Domiciled Individuals
2. Other differences to the US Agreement

Posted in FATCA | Tagged: BVI, FATCA, Guidance Notes, IGA | Leave a Comment »

Guns & Money, Bribery, Money Laundering, Major Insolvencies, Drug Dealing … and the week has just begun

Posted by William Byrnes on July 30, 2014

Links to Articles –

Guns & Money – Smith & Wesson pays $2 million for bribery

Banco Espírito Santo’s former CEO arrested for Money Laundering & Tax Evasion as bank reports Portugal’s largest loss, Espirito Santo Financial Group seeks creditor protection

Guinea mining FCPA bribery investigation nets first jail sentence

Substantial money laundering penalties but not tax collection from OVDI disclosures

4th guilty plea in Indonesia bribery FCPA case

BOA settles alleged narco kingpin violations for $16 million

SunTrust Admits Issuing Mass Denials After Throwing Away Thousand of Customers Unopened Files

Lloyds Banking Group Will Pay $370 Million, Admits Criminal Wrongdoing

FTC seizes law firm assets, alleges $35 million fees bilked from distressed homeowners

Is FedEx a drug dealer? The $2.4 billion question

Analysis of the 88,000 Financial Firms on the IRS’ GIIN List for FATCA

Tax Inversions: The Basics

Lionel Messi to be Prosecuted for Alleged Tax Evasion of $5.4 million

Posted in Uncategorized | Tagged: Banco Espírito Santo, BOA, Bribery, Drug Dealing, FATCA, FCPA, FFI, Guns, Insolvencies, Lloyds, Money, Money Laundering, Smith Wesson, Sun Trust, Tax Evasion | Leave a Comment »

FATCA download makes top 10 list on SSRN

Posted by William Byrnes on July 29, 2014

Your paper, “LEXISNEXIS® GUIDE TO FATCA COMPLIANCE (CHAPTER 1, BACKGROUND AND CURRENT STATUS OF FATCA)”, was recently listed on SSRN’s Top Ten download list…

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

Posted in FATCA | Tagged: FATCA, IGA, SSRN | Leave a Comment »

FATCA FAQs Updated by IRS

Posted by William Byrnes on July 23, 2014

FATCA Q&A Updated by IRS – the updates are below. Link to New and Updated FAQs have been Posted with Regard to QI Agreements, Financial Institutions, and General Compliance

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

Posted in FATCA | Tagged: FATCA, GIIN, IGA, W-8BEN-E | Leave a Comment »

new FATCA PodCast (#4) from expert Haydon Perryman

Posted by William Byrnes on July 22, 2014

An esteemed FATCA expert Haydon Perryman, who is director of FATCA compliance solutions of Strevus, designed the FATCA programs for two Global Banks, and managed the FATCA programs for over three years for Barclays, Lloyds Banking Group and RBS.

He shares his thoughts about designing a FATCA compliance system in his latest podcast: http://justcast.herokuapp.com/shows/haydon-perryman-gatcast/audioposts/7063

Posted in FATCA | Tagged: FATCA, IGA | Leave a Comment »

OECD releases Standard for Automatic Exchange of Financial Account Information in Tax Matters

Posted by William Byrnes on July 21, 2014

The OECD today released the full version of a new global standard for the exchange of information between jurisdictions.

I have posted Notes on the Common Reporting Standard for Automatic Information Exchange on my new International Financial Professor Law Blog at

http://lawprofessors.typepad.com/intfinlaw/2014/07/the-oecd-today-released-the-full-version-of-a-new-global-standard-for-the-exchange-of-information-between-jurisdictions.html

CRS Due Diligence Standards similar but not identical to FATCA

The CRS contains a reporting and a due diligence standard that underpins the automatic exchange of information, very similar to FATCA.

Due diligence distinguishes between pre-existing accounts and new accounts, individual accounts and entity accounts.

Individual Accounts

Pre-existing accounts do not have a de minimis amount but are divided between low value and high value accounts.

Low Value

Low value accounts have a permanent residency based test based on documentation or, failing that, based upon indicia. If indicia are found, then either the account holder must provide self-certification or the account must be reported to all jurisdictions to which the indicia attach.

High Value

High value accounts are defined as having an aggregate balance or value of $1 million US dollars by December 31 of a calendar year. High value accounts require a paper based search as well as the test of actual knowledge of the relationship manager.

New Accounts

All new individual accounts (no de minimis) require self-certification, with confirmation of its reasonableness, which can be performed at the time of account onboarding.

Entity Accounts

Preexisting entity accounts

Preexisting entity accounts firstly need to determine if the entity is a reportable person, generally using available AML/KYC information, and if such information is not available, then a self certification will be required from the entity.

However, a preexisting entity account de minimis size of US$250,000 is available at the option of the jurisdiction adopting the CRS.

Passive entity

If the entity is a passive entity then the residency of the controlling members of the entity must be determined. Passive entity status may be determined by self-certification unless the financial institution has contra-indication information, or information is otherwise publicly available to refute the self-certification. Controlling members of the entity may be determined based upon the AML/KYC information available. Control must be interpreted in a manner consistent with the FATF standard.

New entity accounts

For new accounts, the de minimis option is not available because self-certification is easily obtainable at account opening.

See full comments at http://lawprofessors.typepad.com/intfinlaw/2014/07/the-oecd-today-released-the-full-version-of-a-new-global-standard-for-the-exchange-of-information-between-jurisdictions.html

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

Posted in FATCA, OECD | Tagged: AEOI, common reporting standards, CRS, exchange of information, FATCA, GATCA, OECD | Leave a Comment »

Taxpayer Advocate Chimes In On Taxpayer Identification Numbers (TINs)

Posted by William Byrnes on July 21, 2014

On July 16, 2014 Nina Olson, the Taxpayer Advocate released her midyear report to Congress. Volume 2 of the report contains the IRS’s responses to the administrative recommendations the National Taxpayer Advocate made in her 2013 annual report to Congress, along with additional TAS comments.

Individual Taxpayer Identification Numbers (ITINs)

The Taxpayer Advocated noted that in November 2012, the IRS announced permanent changes to its application procedures for ITINs. As a result, found the Taxpayer Advocate, dependent ITIN applicants now face a substantial burden because they can no longer use a certifying acceptance agent (CAA) to certify their documents. Dependents must mail original documents or copies certified by the issuing agency, or have the documents certified at an IRS taxpayer assistance center (TAC) or at one of just four U.S. tax attaché offices overseas.

What is an ITIN?

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine-digit number that always begins with the number 9 and has a range of 70-88 in the fourth and fifth digit. The range was extended to include 900-70-0000 through 999-88-9999, 900-90-0000 through 999-92-9999 and 900-94-0000 through 999-99-9999.

The IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA). ITINs are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code. Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception.

What is an ITIN used for?

ITINs are for federal tax reporting only, and are not intended to serve any other purpose. IRS issues ITINs to help individuals comply with the U.S. tax laws, and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs). See my previous article on completing the W-8BEN.

An ITIN does not authorize work in the U.S. or provide eligibility for Social Security benefits or the Earned Income Tax Credit.

Who needs an ITIN?

IRS issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs. A non-resident alien individual not eligible for a SSN who is required to file a U.S. tax return only to claim a refund of tax under the provisions of a U.S. tax treaty needs an ITIN. IRS processes returns showing SSNs or ITINs in the blanks where tax forms request SSNs. IRS does not accept, and will not process, forms showing “SSA”, 205c”, “applied for”, “NRA”, & blanks, etc.

Other examples of individuals who need ITINs include:

A nonresident alien required to file a U.S. tax return
A U.S. resident alien (based on days present in the United States) filing a U.S. tax return
A dependent or spouse of a U.S. citizen/resident alien
A dependent or spouse of a nonresident alien visa holder

If a person does not have a SSN and is not eligible to obtain a SSN, but has a requirement to furnish a federal tax identification number or file a federal income tax return, then that person must apply for an ITIN. By law, an alien individual cannot have both an ITIN and a SSN.

Why Are ITIN Applications Falling, ITIN Application Rejections Increasing?

From January through October 2013, applicants filed only one million ITIN applications with returns, compared to 1.8 million during the same period in 2012. During this period, ITIN applications and accompanying returns declined nearly 50%, while the percentage of applications rejected by the IRS soared to 50.2%.

The Taxpayer Advocate reports that an explanation for these numbers is the burden caused by the new ITIN procedures.

ITIN applicants report problems, including a lack of communication about why the IRS suspended or rejected an application, an inability to speak with IRS employees, a lack of notice about the status of the application, the rejection of applications with legitimate supporting documents, and lost original documents. The IRS’s policy of generally accepting ITIN applications only during the filing season forces the IRS to process applications under short timelines and does not provide sufficient time to review them for potential fraud.

The IRS stated in response that it does not plan to pursue electronic filing of the ITIN application. The IRS provided several reasons why its Form W-7, Application for IRS Individual Taxpayer Identification Number (ITIN) is not a suitable candidate for electronic filing:

In order to strengthen the ITIN program, when requesting an ITIN taxpayers are required to submit documentation that supports the information provided on the Form W-7. The applicant can submit original documents or certified copies from the issuing agency. The attachment of an electronic copy of the documents, such as a .pdf version of the supporting documentation, will not allow IRS to authenticate the documents as outlined in IRM 3.21.263. In addition, taxpayers are required to submit their original tax return(s) for which the ITIN is needed with the W-7 attached. The Modernized e-File (MeF) system is not able to accept both the W-7 and associated tax return(s) in the same transaction.

IRS Cancelling Unused ITINs

Individual Taxpayer Identification Numbers (ITINs) will expire if not used on a federal income tax return for five consecutive years, the Internal Revenue Service announced today. To give all interested parties time to adjust and allow the IRS to reprogram its systems, the IRS will not begin deactivating ITINs until 2016.

The new, more uniform policy applies to any ITIN, regardless of when it was issued. Only about a quarter of the 21 million ITINs issued since the program began in 1996 are being used on tax returns. The new policy will ensure that anyone who legitimately uses an ITIN for tax purposes can continue to do so, while at the same time resulting in the likely eventual expiration of millions of unused ITINs.

ITINs play a critical role in the tax administration system and assist with the collection of taxes from foreign nationals, resident and nonresident aliens and others who have filing or payment obligations under U.S. law. Designed specifically for tax administration purposes, ITINs are only issued to people who are not eligible to obtain a Social Security Number.

Under the new policy:

An ITIN will expire for any taxpayer who fails to file a federal income tax return for five consecutive tax years.
Any ITIN will remain in effect as long as a taxpayer continues to file U.S. tax returns. This includes ITINs issued after Jan. 1, 2013. These taxpayers will no longer face mandatory expiration of their ITINs and the need to reapply starting in 2018, as was the case under the old policy.
To ease the burden on taxpayers and give their representatives and other stakeholders time to adjust, the IRS will not begin deactivating unused ITINs until 2016. This grace period will allow anyone with a valid ITIN, regardless of when it was issued, to still file a valid return during the upcoming tax-filing season.
A taxpayer whose ITIN has been deactivated and needs to file a U.S. return can reapply using Form W-7. As with any ITIN application, original documents, such as passports, or copies of documents certified by the issuing agency must be submitted with the form.

Practical Compliance Aspects of FATCA

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

Posted in Compliance, FATCA, W-8BEN-E | Tagged: FATCA, ITIN, taxpayer identification number, TIN | Leave a Comment »

3rd GATCAst is out

Posted by William Byrnes on July 18, 2014

FATCA expert Haydon Perryman’s 3rd GATCAst is out. <– Link to his GATCA blog to listen to the webcast ….

Posted in FATCA | Tagged: FATCA | Leave a Comment »

Offshore Voluntary Disclosure Initiative (OVDI) leads to average $2,220 a year FBAR penalty for $17 dollar tax understatement

Posted by William Byrnes on July 18, 2014

Disclosures and Amount Recovered Thus Far by OVDI from Non-Compliant Taxpayers

On June 18, 2014, IRS Commissioner John Koskinen disclosed that the 2009, 2011, and ongoing 2012 OVDIs have generated more than 45,000 disclosures and the collection of about $6.5 billion in taxes, interest and penalties. Thus, on its face, the OVDIs look to be batting an average of approximately 9,000 taxpayers a year with approximately $1.3 billion revenue.

However, at the beginning of the year it was reported that (OVDI) have led to 43,000 taxpayers paying back taxes, interest and penalties totaling $6 billion to date. The past 6 months only generating 2,000 additional disclosures and $500 million additional revenue may lead one to speculate that the OVDI, at least for high net wealth disclosures, is petering out. Regarding the 2012 IRS Streamlined OVD program, the Taxpayer Advocate found that as of September 2013, 2,990 taxpayers submitted returns reporting only an additional $3.8 million in taxes.

Substantial Money Laundering Penalties – But Not Tax Collection

The substantial majority of the $6.5 billion OVDI revenue is FBAR penalty, not tax collection and not tax penalty.

In the July 16, 2014 report, the Taxpayer Advocate found that the 2009 OVD program, the median offshore penalty paid by those with the smallest accounts ($87,145 or less) was nearly 6x the tax on their unreported income. Among unrepresented taxpayers with small accounts it was nearly 8x the unpaid tax. The penalty was also disproportionately greater than the amount paid by those with the largest accounts (more than $4.2 million) who paid a median of about 3x their unreported tax.

GAO-13-318, Offshore Tax Evasion: IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion

Table 2: Selected Penalty Information for 2009 OVDP Individual Taxpayers with Closed Cases as of November 29, 2012
	10th percentile	25th percentile	Median	75th percentile	90th percentile
Offshore account(s) balance	$78,315	$190,365	$568,735	$1,595,805	$4,054,505
2009 OVDP penalty	$13,320	$35,670	$107,949	$310,476	$793,166
Additional tax owed, tax years 2003-2008	$103	$1,661	$12,748	$60,449	$190,399
Interest, tax years 2003-2008	$52	482	3,486	17,398	57,129
Other penalties	84	605	3,457	14,290	45,163
Total penalties, interest and taxes	$2,318	$22,120	$95,982	$330,185	$923,300
Source: GAO analysis of IRS’s Enforcement Revenue Information System (ERIS) and Individual Returns Transaction File.

In her January 9, 2014 report, the Taxpayer Advocate previously found that for noncompliant taxpayers with small accounts, the FBAR and tax penalties reached nearly 600% of the actual tax due! The median offshore penalty was about 381% of the additional tax assessed for taxpayers with median-sized account balances. The GAO Report of 2013 found that for small accounts of less than $100,000 that over a six year period had only an average of $103 tax owing ($17 a year additional tax revenue), the IRS imposed a FBAR penalty of $13,320 (i.e. $2,220 a year FBAR penalty on average for $17 dollar tax understatement, in additional to the tax penalty and interest). The 25% percentile paid on average a $5,945 FBAR penalty for an average annual $277 tax understatement. The median paid a FBAR penalty $17,991 a year for $2,125 a year understatement.

When the IRS audited taxpayers who opted out (or were removed), on average, it assessed smaller, but still severe, penalties of nearly 70% of the unpaid tax and interest. Given the harsh treatment the IRS applied to benign actors, the Taxpayer Advocate reported that non-compliant taxpayers have made quiet disclosures by correcting old returns or by complying in future years without subjecting themselves to the lengthy and seemingly-unfair OVD process. Still others have not addressed FBAR compliance problems, and the IRS has not done enough to help them comply.

Have These Efforts Substantially Increased Taxpayer Compliance?

The Taxpayer Advocate, replying on State Department statistics, cited that 7.6 million U.S. citizens reside abroad and many more U.S. residents have FBAR filing requirements, yet the IRS received only 807,040 FBAR submissions as recently as 2012 (see Report Volume 1, Page 229). The Taxpayer Advocate noted that in Mexico alone, more than one million U.S. citizens reside, and many Mexican citizens reside in the U.S. (and thus are required to file a FBAR for any Mexican accounts of $10,000 or greater). Thus, currently, less than 10% of taxpayers with FBAR filing requirements are probably compliant.

The Taxpayer Advocate noted that “more than one million U.S. citizens reside in Mexico and many Mexican citizens reside in the U.S.” The Report pointed out that most persons that worked in Mexico had to pay into a government mandated retirement account (known as an AFORES), and that this retirement account may be reportable to the IRS as a foreign trust.

The GAO reviewed the 2009 OVDP and found that some immigrants stated in their 2009 OVDP applications that they were unaware of their FBAR filing requirements. The GAO found that the immigrants had opened banks accounts in their home country prior to immigrating. The GAO Report revealed:

IRS officials from the Offshore Compliance Initiative office stated that although there are several FBAR education programs, none are specifically targeted at new immigrants. These officials stated that one of the challenges that they face in their office, which is part of IRS’s Large Business and International Division, is that taxpayer education and outreach is the responsibility of IRS’s Wage and Investment Division and that issues concerning FBARs fall under IRS’s Small Business/Self-Employed Division.

The IRS reported to the Taxpayer Advocate that its FY2014 FBAR Communication Strategy includes efforts to reach U.S. citizens residing abroad via Internet, social media, and collaboration with the State Department.

The IRS also responded as follows (excerpted):

Congress enacted both the Title 31 and the Title 26 provisions regarding the reporting requirements of the FBAR … and Form 8938 (Statement of Specified Foreign Financial Assets). Reporting on the FBAR is required for law enforcement purposes under the Bank Secrecy Act, as well as for purposes of tax administration. As a consequence, different policy considerations apply to Form 8938 and FBAR reporting. These are reflected in the different categories of persons required to file Form 8938 and the FBAR, the different filing thresholds for Form 8938 and FBAR reporting, and the different assets (and accompanying information) required to be reported on each form. Although certain information may be reported on both Form 8938 and the FBAR, the information required by the forms is not identical in all cases, and reflects the different rules, key definitions (for example, “financial account”), and reporting requirements applicable to Form 8938 and FBAR reporting.

These differing policy considerations were recognized by Congress during the passage of the HIRE Act and the enactment of Section 6038D. Congress’s intention to retain FBAR reporting requirements, notwithstanding the enactment of section 6038D, was specifically noted in the Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310, the “Hiring Incentives To Restore Employment Act,” …

The Technical Explanation states that “[n]othing in this provision [section 511 of the HIRE Act enacting new section 6038D] is intended as a substitute for compliance with the FBAR reporting requirements, which are unchanged by this provision.” (Technical Explanation at p. 60.) …

How Much Tax Revenue Did Congress Expect

The Senate Permanent Subcommittee on Investigations issued a report March 4, 2009 entitled “Tax Haven Banks and U.S. Tax Compliance.” This report examined how tax haven banks facilitate tax evasion by U.S. clients that cost U.S. taxpayers an estimated “$100 billion each year”. This Report has been widely cited as authority for the claim that $100 billion is lost in taxes because of evasion of tax through tax havens.

However, the reports citation for this $100 billion figure is only its footnote 1 that cites five magazine articles unsubstantiated information, that also varied widely in terms of opinions regarding the amount of tax losses the U.S. incurs. The five articles mentioned as the foundation for the $100 billion amount do not refer to any empirical study, do not provide any empirical evidence, and do not provide any statistical methodology.

IRS Commissioner Charles Shulman, in testifying before the Permanent Subcommittee on Investigations on March 4, 2009, was questioned on the analysis of hidden money criminally held overseas:

Senator McCaskell: “Has there been any analysis done of how much of this money that is being hidden overseas is, in fact, a result of criminal activity?”

Mr. Shulman: “Not that I am aware of. I mean, estimating how much money that is overseas and not being paid to the government. As far as I am aware, there is no credible estimate because it is kind of a chicken and egg. It is over there and we have not found it, it is hard to estimate what is there. And all estimates that I have seen have not broken down criminal versus civil because, again, until we see the cases, it is hard to say.”

In the February 25, 2014 175-page bipartisan staff report the Senate Subcommittee increased the $100 billion to $150 billion. “Contributing to that annual tax gap are offshore tax schemes responsible for lost tax revenues totaling an estimated $150 billion each year.” To justify the reporting of this $150 billion a year of lost tax revenue due to “offshore tax schemes”, the Senate Report cites its previous investigatory reports supported by third party articles that refer to transfer pricing issues, not to studies about individual taxpayer offshore noncompliance.

Relative to the reported figure of $150 billion, the additional OVDI tax collection of approximately $500 million a year is just .003% (a third of one percent) of the goal. The FBAR money laundering penalties prop up the overall collection amount, but it’s a drop in the bucket of the Senate estimate.

How Much Did the Congressional Joint Committee on Tax Estimate FATCA Will Bring in Annually?

The Congressional Joint Committee on Tax estimated that FATCA will only generate $8.7 billion over ten years or average revenue $870 million per year. The $870 million annually appears not too far out of line with the tax collections generated by the OVDI the past six years, albeit the compliance costs to global industry to prepare for FATCA is currently estimated near this same amount based on government reports from the UK, Canada, Spain, among other trade partners of the US.

The Florida Bankers Association reported to Fitch that $60 billion and $100 billion in foreign deposits are held in Florida banks, close to 20% of the state’s total deposits. In 2012, Fitch estimated that a substantial portion of these deposits would NOT expatriate from Florida. But according to the Texas Bankers Association, FATCA has resulted in an outflow of $500 million of deposits from the Texas banking system already.

Based on a rate of the 15% long terms capital gain that applies to that money over the past six look-back years of Statute of Limitation, the currently cited $150B of lost annual tax revenue would require $1 trillion of annual taxable (hidden) income. To generate $1 trillion of capital gains income at a 5% rate of return requires $20 trillion of “noncompliant” offshore dollars. Is it likely that noncompliant money represents almost double the M2 money supply (Federal Reserve data of March 6, 2014 about $11T, see http://www.federalreserve.gov/releases/h6/current/) and about 20 times the actual amount of paper dollars that are in circulation?

Fifty contributing authors from the professional and financial industry provide 600 pages of expert analysis within the LexisNexis® Guide to FATCA Compliance (2^nd Edition): many perspectives – one voice crafted by the primary author William Byrnes.

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

Posted in FATCA | Tagged: FATCA, FBAR, Offshore Voluntary Disclosure, OVDI | 1 Comment »

IRS Canceling Unused ITINS – 16 Million At Risk

Posted by William Byrnes on July 10, 2014

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

Under the new policy:

An ITIN will expire for any taxpayer who fails to file a federal income tax return for five consecutive tax years.
Any ITIN will remain in effect as long as a taxpayer continues to file U.S. tax returns. This includes ITINs issued after Jan. 1, 2013. These taxpayers will no longer face mandatory expiration of their ITINs and the need to reapply starting in 2018, as was the case under the old policy.
To ease the burden on taxpayers and give their representatives and other stakeholders time to adjust, the IRS will not begin deactivating unused ITINs until 2016. This grace period will allow anyone with a valid ITIN, regardless of when it was issued, to still file a valid return during the upcoming tax-filing season.
A taxpayer whose ITIN has been deactivated and needs to file a U.S. return can reapply using Form W-7. As with any ITIN application, original documents, such as passports, or copies of documents certified by the issuing agency must be submitted with the form.

What is an ITIN?
An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine-digit number that always begins with the number 9 and has a range of 70-88 in the fourth and fifth digit. Effective April 12, 2011, the range was extended to include 900-70-0000 through 999-88-9999, 900-90-0000 through 999-92-9999 and 900-94-0000 through 999-99-9999.

What is an ITIN used for?
ITINs are for federal tax reporting only, and are not intended to serve any other purpose. IRS issues ITINs to help individuals comply with the U.S. tax laws, and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs). See my previous article on completing the W-8BEN.

An ITIN does not authorize work in the U.S. or provide eligibility for Social Security benefits or the Earned Income Tax Credit.

Who needs an ITIN?
IRS issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs. A non-resident alien individual not eligible for a SSN who is required to file a U.S. tax return only to claim a refund of tax under the provisions of a U.S. tax treaty needs an ITIN. IRS processes returns showing SSNs or ITINs in the blanks where tax forms request SSNs. IRS does not accept, and will not process, forms showing “SSA”, 205c”, “applied for”, “NRA”, & blanks, etc.

Other examples of individuals who need ITINs include:
• A nonresident alien required to file a U.S. tax return
• A U.S. resident alien (based on days present in the United States) filing a U.S. tax return
• A dependent or spouse of a U.S. citizen/resident alien
• A dependent or spouse of a nonresident alien visa holder

How to apply for an ITIN?
Use the latest revision of Form W-7, Application for IRS Individual Taxpayer Identification Number to apply. Attach a valid federal income tax return, unless qualifying by exception, and include your original proof of identity or copies certified by issuing agency and foreign status documents.

Do not mail the income tax return to the address listed in the Form 1040, 1040A or 1040EZ instructions. Instead, send the tax return with the Form W-7 and proof of identity and foreign status documents to:

Internal Revenue Service
Austin Service Center
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342

Applicants outside the United States should contact U.S. Tax Attachés in Beijing, Frankfurt, London, or Paris.

Practical Compliance Aspects of FATCA and GATCA

Posted in FATCA | Tagged: FATCA, Individual Taxpayer Identification Number, ITIN | Leave a Comment »

FATCA Chapter 1 complementary download

Posted by William Byrnes on July 9, 2014

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

The second edition of the “LexisNexis® Guide to FATCA Compliance,” discussing the Foreign Account Tax Compliance Act of 2010 (FATCA), has been vastly improved based on over thirty in-house workshops and interviews with tier 1 banks, company and trust service providers, government revenue departments, and central banks. The enterprises are headquartered in the Caribbean, Latin America, Asia, Europe, and the United States, as are the revenue departments and the central bank staff interviewed.Chapter 1 of the book, “Background and Current Status of FATCA,” is available here for free download on SSRN, and also from LexisNexis. The full book is available for purchase from LexisNexis. See weblinks provided in attached PDF. Chapter 1 is primarily authored by Associate Dean William H. Byrnes, IV, of Thomas Jefferson School of Law’s Walter H. & Dorothy B. Diamond International Tax & Financial Services Program, with contributions by Professor Denis Kleinfeld and Dr. Alberto Gil Soriano. The lead author and editor of the overall book is Dean Byrnes (with Dr. Robert J. Munro).

The second edition of the book has been expanded from 25 to 34 chapters, with 150 new pages of regulatory and compliance analysis based upon industry feedback of internal challenges with systems implementation. The 25 chapters in the previous edition have been substantially updated, including many more practical examples, to assist a compliance officer in contextualizing the relevant regulations, provisions of inter-governmental agreements (IGAs), and national rules enacted pursuant to IGAs.

The nine new chapters in this second edition include, for example, an in-depth analysis of the categorization of trusts pursuant to the regulations and IGAs, operational specificity of the mechanisms of information capture, management, and exchange by firms and between countries, insights as to the application of FATCA, and the IGAs within new BRIC (Brazil, Russia, India, China) and European country chapters.

This second edition will provide the financial enterprise’s FATCA compliance officer with the tools needed for developing and maintaining a best practices compliance strategy, starting with determining what information is needed for planning the meetings with outside FATCA experts.

Practical Compliance Aspects of FATCA and GATCA

free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671

Number of Pages in PDF File: 58

Posted in book, FATCA | Tagged: Common Reporting System, FATCA, GATCA, IGA, intergovernmental agreement, international tax, OECD, offshore, tax compliance, tax haven | Leave a Comment »

Do the West Bank and Gaza need separate IGAs from the State of Palestine?

Posted by William Byrnes on July 8, 2014

Quick update Tuesday night, July 8th. Besides Brazil being decimated this afternoon 7 to 1 by Germany (leading to a very unhappy spouse and mother-in-law) …

Anguilla and Uzbekistan entered the Model 1 IGA list Monday (albeit dated June 30). Thus, 101 countries and jurisdictions have IGAs and 143 do not, based on the IRS’ revised country list published July 1. Approximately 95% of the 87,993 registered FFIs are from these IGA countries. Only 13 of the IGAs are Model 2, with 15,239 FFIs registered. The remainder 88 are Model 1 IGAs.

Curious if the IRS intends to treat the West Bank and Gaza as dependencies of the State of Palestine with each requiring a distinct IGA – being that all three are included on the IRS list (and yet not on the US State Department list as discussed in my early June articles). Or whether, a “Palestine” IGA will cover all three territories. If any readers know, please comment below and inform me.

I am also curious of the following: in Treasury’s opinion, IGAs do not require either Congressional approval or Senatorial consent. That we all know. Is it also Treasury’s opinion that it can enter into an IGA with Palestine and Cuba? What is State’s perspective of the IRS including the “State of” Palestine, as well as Gaza and the West Bank, on the FATCA country and jurisdiction list. Enough cynicism.

My previous articles on this subject of the IRS versus State department include my June 17 State Department listing and my June 8 discussion of the FFI GIIN List of June.

Model 1 IGA – 34

Jurisdictions that have reached agreements in substance:

Model 1 IGA – 54 (followed by number of registered FFIs)

Algeria (6-30-2014)
Anguilla (6-30-2014)
Antigua and Barbuda (6-3-2014)
Azerbaijan (5-16-2014)
Bahamas (4-17-2014)
Bahrain (6-30-2014)
Barbados (5-27-2014)
Belarus (6-6-2014)
Brazil (4-2-2014):
Bulgaria (4-23-2014)
Cabo Verde (6-30-2014)
China (6-26-2014)
Colombia (4-23-2014)
Croatia (4-2-2014)
Curaçao (4-30-2014)
Czech Republic (4-2-2014)
Cyprus (4-22-2014)
Dominica (6-19-2014):
Dominican Republic (6-30-2014)
Georgia (6-12-201)
Greenland (6-29-2014)
Grenada (6-16-2014)
Guyana (6-24-2014)
Haiti (6-30-2014)
India (4-11-2014)
Indonesia (5-4-2014):
Kosovo (4-2-2014)
Kuwait (5-1-2014)
Lithuania (4-2-2014)
Malaysia (6-30-2014)
Montenegro (6-30-2014)
Panama (5-1-2014)
Peru (5-1-2014):
Poland (4-2-2014):
Portugal (4-2-2014):
Qatar (4-2-2014):
Romania (4-2-2014):
St. Kitts and Nevis (6-4-2014)
St. Lucia (6-12-2014):
St. Vincent and the Grenadines (6-2-2014)
Saudi Arabia (6-24-2014):
Serbia (6-30-2014)
Seychelles (5-28-2014)
Singapore (5-5-2014):
Slovak Republic (4-11-2014)
South Korea (4-2-2014)
Sweden (4-24-2014)
Thailand (6-24-2014):
Turkey (6-3-2014)
Turkmenistan (6-3-2014)
Turks and Caicos Islands (5-12-2014):
Ukraine (6-26-2014)
United Arab Emirates (5-23-2014)
Uzbekistan (6-30-2014)

Model 2 IGA – 5

Jurisdictions that have reached agreements in substance:

Model 2 IGA – 8

Armenia (5-8-2014)
Hong Kong (5-9-2014)
Iraq (6-30-2014)
Moldova (6-30-2014)
Nicaragua (6-30-2014
Paraguay (6-6-2014):
San Marino (6-30-2014)
Taiwan (6-23-2014)

FATCA by the Numbers….

Haydon Perryman, FATCA Compliance expert of Strevus, and I are undertaking an analysis of this July 1^st FATCA FFI list release by country, by IGA, by EAG – already published in earlier articles July 1 and July 2nd. Check out Haydon Perryman’s blog at http://haydonperryman.wordpress.com/

IRS Registered FFI List (Sum of Registrations)	July ’14#	County #
Model 1A IGA	48,265	85
Model 1B IGA	19,580	2
Model 2 IGA	15,239	13
US	620	1
US Territory	61	5
No IGA	4,228	144
Total	87,993	250
Non IGA	4,228	143
Non IGA%	5%
IGA	83,084	101
IGA%	94%
US and US Territories	681	6

Posted in FATCA | Tagged: FATCA, Gaza, IGA, Palestine, West Bank | 2 Comments »

Has Treasury Changed Its Position Regarding Capital Flight Resulting from FATCA?

Posted by William Byrnes on July 5, 2014

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

In 2013, I participated in a constitutional law conference regarding international agreements, held in Siberia, Russia. My invited role was to discuss FATCA’s IGAs basis in US domestic law and international law policy, and comparatively discuss IGAs in the context of various EU countries. Some of those slides are available in my broader FATCA lecture at the University of Amsterdam International Tax Program Winter Session at http://www.slideshare.net/williambyrnes1/uv-a-winter-2014-fatca-and-eoi

In light of my academic interest in this subject matter, today I came across two pertinent blog posts that I share below, wherein Treasury justifies its policy based upon the potential for capital flight, followed by the Treasury opposite stance to the Court just months before in Florida Bankers Assn v Treasury. Below I post some of my lecture comments from 2010 regarding FATCA and capital flight.

Does Treasury have new information / data that it did not previously have, leading to its change of stance? Should we (voters with an interest in a stable financial system) be concerned? I am being facetious because Treasury (the IRS) does from time to time, in tax cases on an identical issue, advance opposing arguments (I have heard even in front of the same judge), depending on what outcome it wants from the taxpayer. After all, in law school, we teach our students to argue for both sides on every issue.

Treasury Argues Capital Flight Requires FATCA IGAs With Other Countries

Professor Jack Townsend’s Blog wherein he posts a letter from Treasury’s Asst. Secretary for Legislative Affairs to a Congressman (Bill Posey) wherein Treasury states its authority to create and enter into IGAs with other nations and their dependencies: http://federaltaxcrimes.blogspot.com/2014/07/irs-letter-to-congressman-defending-its.html

Treasury’s stated authority is: “Your letter also asks about statutory authority to enter into and implement the IGAs. The United States relies, among other things, on the following authorities to enter into and implement the IGAs: 22 USC Section 2656; Internal Revenue Code Sections 1471, 1474(f), 6011, and 6103(k)(4) and Subtitle F, Chapter 61, Subchapter A, Part III, Subpart B (Information Concerning Transactions with Other Persons).”

Professor Townsend (Houston) includes in the comments to the letter a rebuttal by Professor Allison Christians (McGill) “None of these sources of law contain any authorization to enter into or implement the IGAs. It is patently clear that no such authorization has been made by Congress, and that the IGAs are sole executive agreements entered into by the executive branch on its own under its “plenary executive authority”. As such the agreements are constitutionally suspect because they do not accord with the delineated treaty power set forth in Article II.” See Professor Christians full response at http://taxpol.blogspot.com.au/2014/07/irs-claims-statutory-authority-for.html

The above highlight is interesting enough mind you. But I must point out another aspect of the Treasury justification for IGAs. Treasury states that: “Suspending further negotiation of IGAs would negatively affect the United States’ ability to enforce the provisions of FATCA without the imposition of substantial withholding tax. … This could result in harm to the interests of the United States because it could prompt divestment from U.S. investments by affected financial institutions.” (emphasis added)

Treasury Argues Capital Flight Is Not a FATCA Concern

But Treasury argued quite the opposite in its recent, successful defense against the Florida and Texas Bankers Associations in Florida Bankers Assn v Treasury.

Quoting the Court:

“The IRS admits that it does not know exactly how much money non-resident aliens have deposited in U.S. banks. …

Instead of using exact data, the IRS estimated, based on a mountain of existing information from the Treasury Department, that non-resident alien deposits in U.S. banks amounted to no more than $400 billion. …

… The IRS was unconcerned because it had determined that very little of this mo.ney would be affected – namely, because these regulations would not deter any rational actor other than a tax fraud from using U.S. banks.

4. Capital Flight

At the heart of the Bankers Associations’ argument – albeit buried somewhat in their brief – is the contention that the regulations should not have been issued given the negative impact they may have on banks. Plaintiffs claim that the IRS “disregarded” a flood of comments arguing that the new regulations would cause non-residents to withdraw their deposits en masse and thereby trigger substantial and harmful capital flight. The IRS, however, did not ignore those comments; indeed, it dedicated a majority of the preamble to addressing concerns about capital flight.

… As a result of those protections, the Government concluded that the “regulations should not significantly impact the investment and savings decisions of the vast majority of non-residents.”

Plaintiffs raise one additional, related issue: They claim that the IRS ignored the massive capital flight that took place after the Canadian reporting requirements became effective in January 2000. The IRS, by contrast, contends that the alleged Canadian capital flight is a fiction: While the amount of Canadian interest-bearing deposits may have dipped after the reporting requirements were issued, they climbed back up shortly after that.”

See the full article at https://profwilliambyrnes.com/2014/02/25/court-upholds-irs-regulations-for-foreign-taxpayer-interest-reporting-by-us-banks/

Comments from my 2010 lecture on tax elasticity of deposits

Tax Elasticity Of Deposits

In the 2002 article International Tax Co-operation and Capital Mobility, prepared for an ECLAC report, from analysing data from the Bank for International Settlements (“BIS”) on international bank deposits, Valpy Fitzgerald found “that non-bank depositors are very sensitive to domestic wealth taxes and interest reporting, as well as to interest rates, which implies that tax evasion is a determinant of such deposits….”[1] Non-bank depositors are persons that instead invest in alternative international portfolios and financial instruments.

Estimating How Much Latin American Tax Evasion are US Banks Involved With?

Some Miami based commentators, like the renown author Professor Marshall Langer, estimated that at least $300B of capital outflow will occur from the USA pursuant to its exchange of tax information with Brazil and other Latin American countries, like Argentina and Venezuela. Based on their discussions with South Florida real estate firms, information exchange will lead to a withdrawal of Latin American interest in its real estate market. (Note that since 2010, we now know that US information collection will not look through company entities as is required by FATCA from FFIs, and because most real estate for estate tax purposes is held via corporate structures, it will not capture information on most real estate investment.)

Three historical benchmarks regarding the imposition of withholding tax on interest illustrate the immediate and substantial correlation that an increase in tax on interest has on capital flight. The benchmarks are (1) the 1964 US imposition of withholding tax on interest that immediately led to the creation of the London Euro-dollar market;[2] (2) the 1984 US exemption of withholding tax on portfolio interest that immediately led to the capital flight from Latin America of US$300 billion to US banks;[3] and (3) the 1989 German imposition of withholding tax that led to immediate capital flight to Luxembourg and other jurisdictions with banking secrecy[4]. The effect was so substantial that the tax was repealed only four months after imposition.

The Establishment of London as an International Financial Center

The 1999 IMF Report on Offshore Banking concluded that the US experienced immediate and significant capital outflows in 1964 and 1965 resulting from the imposition of a withholding tax on interest. Literature identifies the establishment of London as a global financial centre as a result of the capital flight from the US because of its imposition of Interest Equalisation Tax (IET) of 1964.[5] The take off of the embryonic London eurodollar market resulted from the imposition of the IET.[6] IET made it unattractive for foreign firms to issue bonds in the US. Syndicated bonds issued outside the US rose from US$135 million in 1963 to US$696 million in 1964.[7] In 1964-65, the imposition of withholding tax in Germany, France, and The Netherlands, created the euromark, eurofranc and euroguilder markets respectively.[8]

The Establishment of Miami as an International Financial Center

Conversely, when in 1984 the US enacted an exemption for portfolio interest from withholding tax, Latin America experienced a capital flight of $300 billion to the US.[9] A substantial portion of these funds were derived from Brazil. In fact, some pundits have suggested that Miami as a financial center resulted not from the billions generated from the laundering of drug proceeds which had a tendency to flow outward, but from the hundreds of billions generated from Latin inward capital, nearly all unreported to the governments of origination.

The Establishment of Luxembourg as an International Financial Center

In January of 1989, West Germany imposed a 10% withholding tax on savings and investments. In April it was repealed, effective July 1st, because the immediate cost to German Banks had already reached DM1.1 billion.[10] The capital flight was so substantial that it caused a decrease in the value of the Deutsche mark, thereby increasing inflation and forcing up interest rates. According to the Financial Times, uncertainty about application of the tax, coupled with the stock crash in 1987, had caused a number of foreign investment houses to slow down or postpone their investment plans in Germany. A substantial amount of capital went to Luxembourg, as well as Switzerland and Lichtenstein.

Switzerland’s Fisc May Come Out Ahead

Perhaps ironically given the nature of the UBS situation currently unfolding, a Trade Based Money Laundering study by three prominent economists and AML experts focused also on measuring tax evasion uncovered that overvalued Swiss imports and undervalued Swiss exports resulted in capital outflows from Switzerland to the United States in the amount of $31 billion within a five year time span of 1995-2000.[11] That is, pursuant to this transfer pricing study, the Swiss federal and cantonal revenue authorities are a substantial loser to capital flight to the USA. The comparable impact of the lost tax revenue to the much smaller nation of Switzerland upon this transfer pricing tax avoidance (and perhaps trade-based money laundering) may be significantly greater than that of the USA from its lost revenue on UBS account holders. Certainly, both competent authorities will have plenty of work on their hands addressing the vast amount of information that needs to be exchanged to stop the bleeding from both countries’ fiscs.

[1] International Tax Cooperation and Capital Mobility, Valpy Fitzgerald, 77 CEPAL Review 67 (August 2002) p.72.

[2] See Charles Batchelor, European Issues Go from Strength to Strength: It began with Autostrade’s International Bond in 1963, The Financial Times (September 25, 2003) p.33; An E.U. Withholding Tax?

[3] Globalisation, Tax Competition, and the Fiscal Crisis of the Welfare State, Reuven Avi-Yonah, 113 HVLR 1573, 1631 (May 2000).

[4] Abolition of Withholding Tax Agreed in Bonn Five-Month-Old Interest Withholding To Be Repealed, 89 TNI 19-17.

[5] See Charles Batchelor, European Issues Go from Strength to Strength: It began with Autostrade’s International Bond in 1963, The Financial Times (September 25, 2003) p.33; An E.U. Withholding Tax?

[6] 1999 IMF Offshore Banking Report p.16.

[7] 1999 IMF Offshore Banking Report p.16-17.

[8] 1999 IMF Offshore Banking Report p.17.

[9] Globalisation, Tax Competition, and the Fiscal Crisis of the Welfare State, Reuven Avi-Yonah, 113 HVLR 1573, 1631 (May 2000).

[10] Abolition of Withholding Tax Agreed in Bonn Five-Month-Old Interest Withholding To Be Repealed, 89 TNI 19-17.

[11] Maria E. de Boyrie, Simon J. Pak and John S. Zdanowicz The Impact Of Switzerland’s Money Laundering Law On Capital Flows Through Abnormal Pricing In International Trade Applied 15 Financial Economics 217–230 (Rutledge 2005).

Practical Compliance Aspects of FATCA and GATCA

Posted in FATCA, information exchange | Tagged: capital flight, Christians, FATCA, Florida Bankers V Treasury, IGA, Texas Bankers v Treasury, Townsend | 2 Comments »

66th country signs OECD Convention on Tax Information Exchange

Posted by William Byrnes on July 4, 2014

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

The OECD announced yesterday that Gabon became the 66th country to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Gabon is the seventh African country to sign the Convention since it was opened for signature to all countries in June 2011. (previous article on tax information exchange)

“Already a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes since October 2012, Gabon’s commitment today plays an important role for regional co-operation in tax matters and demonstrates effective action towards greater exchange of information”, said Pascal Saint-Amans. “We hope it will act as an encouragement to other African and developing countries to also join this important area of international co-operation in the fight for a fairer and more transparent international tax system”.

The Convention provides for all forms of mutual assistance: exchange on request, spontaneous exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection , while protecting taxpayers’ rights. It also provides the option to undertake automatic exchange, requiring an agreement between the Parties interested in adopting this form of assistance.

Automatic Exchange of Information for Tax Purposes

47 countries and major financial centers on May 6, 2014 committed to automatic exchange of information between their jurisdictions, announced the OECD. All 34 OECD member countries, as well as Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa endorsed the Declaration on Automatic Exchange of Information in Tax Matters that was released at the May 6-7, 2014 Meeting of the OECD at a Ministerial Level.

The Declaration commits countries to implement a new single global standard on automatic exchange of information (“CRS” or “GATCA”). The OECD stated that it will deliver a detailed Commentary on the new standard, as well as technical solutions to implement the actual information exchanges, during a meeting of G20 finance ministers in September 2014.

Common Reporting and Due Diligence Standards (“CRS”)

February 13 the OECD released the Standard for Automatic Exchange of Financial Account Information Common Reporting Standard. The Draft Commentaries for the CRS, developed by the Working Party No. 10 on Exchange of Information and Tax Compliance, and discussed at its May 26-28, 2014 meeting, are expected to be released very shortly, in July.

The CRS calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. Part I of the report gives an overview of the standard. Part II contains the text of the Model Competent Authority Agreement (CAA) and the Common Reporting and Due Diligence Standards (CRS) that together make up the standard.

What are the main differences between the CRS (“GATCA”) and FATCA?

The CRS is also informally called “GATCA”, referring to the “globalization” of FATCA.

The CRS consists of a fully reciprocal automatic exchange system from which US specificities have been removed. For instance, it is based on residence and unlike FATCA does not refer to citizenship. Terms, concepts and approaches have been standardized allowing countries to use the system without having to negotiate individual Annexes.

Unlike FATCA the CRS does not provide for thresholds for pre-existing individual accounts, but it includes a residence address test building on the EU savings directive. The CRS also provides for a simplified indicia search for such accounts. Finally, it has special rules dealing with certain investment entities where they are based in jurisdictions that do not participate in the automatic exchange under the standard.

Single Global Standard for Automatic Exchange (“GATCA”)

Under GATCA jurisdictions obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. Part I of this report gives an overview of the standard. Part II contains the text of the Model Competent Authority Agreement (CAA) and the Common Reporting and Due Diligence Standards (CRS) that together make up the standard.

The Report sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.

To prevent taxpayers from circumventing the CRS it is specifically designed with a broad scope across three dimensions:

The financial information to be reported with respect to reportable accounts includes all types of investment income (including interest, dividends, income from certain insurance contracts and other similar types of income) but also account balances and sales proceeds from financial assets.
The financial institutions that are required to report under the CRS do not only include banks and custodians but also other financial institutions such as brokers, certain collective investment vehicles and certain insurance companies.
Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the standard includes a requirement to look through passive entities to report on the individuals that ultimately control these entities.

The CRS also describes the due diligence procedures that must be followed by financial institutions to identify reportable accounts.

If CRS and IGAs are Universally Adopted, Then Why is the Multilateral Convention on Mutual Administrative Assistance in Tax Matters Necessary?

Both the CRS model, which is currently being developed by the OECD with G20 countries, and the IGAs are based on the automatic exchange of information from the tax administration of one country to the tax administration of the residence country. As with other forms of exchange of information, a legal basis is needed to carry out automatic exchange. While bilateral treaties such as those based on Article 26 of the OECD Model Tax Convention would permit such exchanges, it may be more efficient to implement a single global standard through a multilateral instrument. See OECD Information Brief

Global Forum Peer Reviews and Monitoring Of Automatic Exchange

G20 governments have mandated the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes to monitor and review implementation of the standard. More than 60 countries and jurisdictions of the 121 Global Forum members have now committed to early adoption of the standard, and additional members are expected to join this group in the coming months. See the link for Country Peer Reviews and the Global Forum list of ratings chart.

Practical Compliance Aspects of FATCA and GATCA

34 chapters by 50 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 requirements (Chapters 17–34), including information exchange protocols and systems.

Posted in FATCA, information exchange, OECD | Tagged: AEOI, CRS, exchange of information, FATCA, GATCA, Global Forum on Transparency and Exchange of Information for Tax Purposes, Multilateral Convention on Mutual Administrative Assistance in Tax Matters, OECD | Leave a Comment »

FATCA Expanded Affiliated Group (EAG) by Country – the FFI List

Posted by William Byrnes on July 2, 2014

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

3,778 Lead Entities of EAGs among the approximately 88,000 FFI registrations from 250 countries. Haydon Perryman, FATCA Compliance expert of Strevus, and I are undertaking an analysis of this July 1^st FATCA FFI list release by country and by IGA, and now by EAG. Haydon has put together the below chart based upon the excel formulae he created. Check out Haydon Perryman’s FATCA blog at http://haydonperryman.wordpress.com/

FATCA EAG Definition

The FFI and its branches and affiliates are defined as an “expanded affiliated group” (“EAG”). An entity is a part of an EAG if it is affiliated with a common parent that directly or indirectly owns over 50% of the stock by vote and value of such corporation, or in the case of a partnership or non-corporate entity, owns over 50% by value of the beneficial interest of such partnership or non-corporate entity.[1]

Subject to certain phase-in provisions regarding “Limited Branches” and “Limited Affiliates, discussed below, each FFI that is a member of an EAG must obtain the status of either a PFFI or RDCFFI before any of the other group members are able to obtain the benefit of either such status. Said another way, one bad apple poisons the barrel, and leads to FATCA withholding for all.

Except to the extent that the rules allowing limited branches and limited affiliates apply (described below the chart), each member of an EAG (including all of its branches, units, offices, and divisions) must conduct due diligence on its accounts, enact FATCA policies and procedures, abide by the terms of the FFI-agreement, and close U.S. accounts if the holder fails to provide required disclosure and reporting information.

	Model 1A IGA	Model 1B IGA	Model 2 IGA	No IGA	US	Grand Total
Andorra				4		4
Angola				2		2
Anguilla				3		3
Antigua and Barbuda	1					1
Argentina				17		17
Armenia			2			2
Aruba				1		1
Australia	52					52
Austria			71			71
Bahamas	23					23
Bahrain	27					27
Bangladesh				22		22
Barbados	7					7
Belarus	1					1
Belgium	12					12
Belize				5		5
Benin				1		1
Bermuda			103			103
Bolivia, Plurinational State Of				3		3
Botswana				3		3
Brazil	51					51
Brunei Darussalam				2		2
Bulgaria	4					4
Cambodia				2		2
Canada	92					92
Cayman Islands		813				813
Chile			26			26
China	3					3
Colombia	7					7
Cook Islands				36		36
Costa Rica	15					15
Croatia	1					1
Curacao	13					13
Cyprus	12					12
Czech Republic	3					3
Denmark	10					10
Djibouti				1		1
Dominica	1					1
Dominican Republic	2					2
Ecuador				4		4
Egypt				12		12
El Salvador				4		4
Finland	13					13
France	106					106
Georgia	2					2
Germany	65					65
Ghana				4		4
Gibraltar	1					1
Greece				12		12
Guatemala				10		10
Guernsey	98					98
Guyana	2					2
Haiti	1					1
Honduras	6					6
Hong Kong			77			77
Hungary	4					4
Iceland				1		1
India	1					1
Indonesia	9					9
Iraq			3			3
Ireland	37					37
Isle of Man	16					16
Israel	24					24
Italy	33					33
Jamaica	6					6
Japan			167			167
Jersey	92					92
Jordan				10		10
Kazakhstan				9		9
Kenya				11		11
Korea, Republic of	21					21
Kuwait	15					15
Latvia	4					4
Lebanon				18		18
Libya				2		2
Liechtenstein	11					11
Luxembourg	166					166
Macao				2		2
Malawi				1		1
Malaysia	29					29
Malta	19					19
Marshall Islands				3		3
Mauritius	16					16
Mexico	14					14
Monaco				1		1
Mongolia				3		3
Morocco				10		10
Mozambique				1		1
Namibia				4		4
Netherlands	62					62
New Zealand	12					12
Nicaragua			3			3
Nigeria				12		12
Norway	15					15
Oman				3		3
Pakistan				14		14
Panama	32					32
Papua New Guinea				1		1
Peru	8					8
Philippines				15		15
Poland	12					12
Portugal	14					14
Qatar	8					8
Romania	4					4
Russian Federation				42		42
Saint Kitts and Nevis	4					4
Saint Lucia	1					1
Saint Vincent and The Grenadines	2					2
San Marino			5			5
Saudi Arabia	1					1
Serbia	1					1
Seychelles	1					1
Sierra Leone				1		1
Singapore	17					17
Slovenia	3					3
South Africa	16					16
Spain	41					41
Sri Lanka				3		3
Sweden	20					20
Switzerland			157			157
Taiwan			41			41
Tajikistan				1		1
Tanzania, United Republic Of				1		1
Thailand	22					22
Trinidad and Tobago				7		7
Turkey	11					11
Uganda				1		1
Ukraine	3					3
United Arab Emirates	14					14
United Kingdom	290					290
United States					101	101
Uruguay				7		7
Venezuela, Bolivarian Republic Of				4		4
Viet Nam				21		21
Virgin Islands (British)	85					85
WEST BANK AND GAZA				1		1
Yemen				3		3
Zambia				1		1
Grand Total	1847	813	655	362	101	3778

Limited Branches and Affiliates Exceptions Under Regs

A FFI is, however, allowed to be a PFFI even if one or more of its branches cannot satisfy all of the requirements of an FFI-agreement under important exceptions to the general rule regarding “limited branch” and “limited FFI affiliates”.

An FFI is permitted to obtain “participating FFI” status if one or more of its branches are non-compliant under the “limited branch” exception. The limited branch exception applies to those FFIs that are in a jurisdiction that has applicable law that prohibits the FFI from reporting, closing, or transferring U.S. accounts, or withholding, closing, blocking, or transferring recalcitrant or nonparticipating FFI accounts. In such case, the limited branch is treated as a “nonparticipating FFI” even though it is an affiliated branch of the “participating FFI.” The other branches with “participating FFI” status must withhold on payments to the limited branch. The limited branch must not open U.S. accounts and must identify itself as a “nonparticipating FFI” to withholding agents.

The exception to the EAG requirements for “limited FFI” affiliates is similar to the regulatory scheme for limited branches. Under the relevant transition rule, a “participating FFI” may be permitted to have an affiliated FFI that is not compliant with FATCA until December 31, 2015 provided that such affiliates are separately identified as a nonparticipating FFI and the PFFI agrees to withhold on payments it makes to, or receives on behalf of, that branch or affiliate and agrees to report (or provide sufficient information to its U.S. withholding agents to allow them to report) payments made to these limited branches and affiliates as required on Forms 8966 or 1042/1042-S.

A Reporting Model IGA FFI may continue to treat branches and affiliates as compliant under the limited branch and limited FFI exceptions even after the expiration of the transitional rule, provided that the branch or affiliate is still unable to comply with FATCA due to restrictions under local law and the Reporting Model FFI continues to comply with its obligations under the IGA with respect to such limited branches or affiliates.

Read a detailed analysis of the EAG with many examples in the LexisNexis® Guide to FATCA Compliance (2^nd 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.

[1] 26 U.S. Code § 1471 – Withholdable payments to foreign financial institutions

(e) Affiliated groups (1) In general

The requirements of subsections (b) and (c)(1) shall apply—

(A) with respect to United States accounts maintained by the foreign financial institution, and

(B) except as otherwise provided by the Secretary, with respect to United States accounts maintained by each other foreign financial institution (other than any foreign financial institution which meets the requirements of subsection (b)) which is a member of the same expanded affiliated group as such foreign financial institution.

(2) Expanded affiliated group

For purposes of this section, the term “expanded affiliated group” means an affiliated group as defined in section 1504 (a), determined—

(A) by substituting “more than 50 percent” for “at least 80 percent” each place it appears, and

(B) without regard to paragraphs (2) and (3) of section 1504 (b).

A partnership or any other entity (other than a corporation) shall be treated as a member of an expanded affiliated group if such entity is controlled (within the meaning of section 954 (d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence).

26 U.S. Code § 1504 – Definitions

(a) Affiliated group defined

For purposes of this subtitle—

(1) In general

The term “affiliated group” means—

(A) 1 or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation, but only if—

(B)

(i) the common parent owns directly stock meeting the requirements of paragraph (2) in at least 1 of the other includible corporations, and

(ii) stock meeting the requirements of paragraph (2) in each of the includible corporations (except the common parent) is owned directly by 1 or more of the other includible corporations.

(2) 80-percent voting and value test

The ownership of stock of any corporation meets the requirements of this paragraph if it—

(A) possesses at least 80 percent of the total voting power of the stock of such corporation, and

(B) has a value equal to at least 80 percent of the total value of the stock of such corporation.

Posted in FATCA | Tagged: EAG, Expanded affiliated group, FATCA, FFI, IGA | Leave a Comment »

July 1st FATCA FFI List Analysis by Country and by IGA

Posted by William Byrnes on July 1, 2014

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

Haydon Perryman, FATCA Compliance expert of Strevus, and I are undertaking an analysis of this July 1^st FATCA FFI list release by country and by IGA. Haydon has put together the below hard work of the list based upon the excel formulae he created. (Updated with comments as of 19:00 Washington, D.C. time). Check out Haydon Perryman’s blog at http://haydonperryman.wordpress.com/

What I find surprising thus far is that I thought (as did many large firm attorneys) many, many more registrations would have pushed themselves through the keyhole. I was thinking in the range of 100,000 to 110,000 would be registered for the July 1 FFI list. Only 10,000 additional registrations was not even in my lowest estimates. I wouldn’t call 88,000 FFI registrations a great success at this stage, considering that nearly 150 countries do not have an IGA and thus FATCA 30% withholding starts today. While the IRS suggested a 500,000 potential FFI registration figure, many industry stakeholders suggest that 800,000 – 900,000 firms fall under the expansive definition of financial institution.

The 82,994 FFIs (approx. 95%) from the 98 IGA countries registration is due by December 31. Only 4,318 FFI (5%) registered from the remaining 152 countries. We do not know what FFIs may have registered between June 3rd and now because that will fall into the August list). Still, based on the current July 1st figures, FATCA registration (indicative of compliance) in a best case scenario is running at less than 20%. It may be as low as 10% FFI registration thus far based on the what industry stakeholders think is more likely the range.

Why is the Range for Potential FFI Registration so Expansive?

Given the broad definition of financial institution (explained below) that requires a FATCA GIIN for the W-8BEN-E or other appropriate W-8, such as W-8IMY, the UK HMRC estimated that, even with its IGA and accompanying local regulations, 75,000 UK entities are impacted by FATCA. Probably, though not clearly stated by the HMRC, these entities and firms need to register for a GIIN. But only 6,994 have registered from the UK, and only 730 additional since the June 2nd list (of 6,264). Granted the UK FFI has until October 25th pursuant to HMRC announcement (albeit January 1st under the FATCA regulations). If the UK has 75,000 or even just half that entities requiring FFI registration, then extrapolated among other large and sophisticated financial service economies like Japan, China, Germany etc – clearly, more than 500,000 entities will need to inevitably register. The question is: how many more?

What is the Definition of Financial Institution?

The definition of ‘financial institution’ is very broad. Thus, entities and firms that may not traditionally (such as a banking enterprise or investment fund) be considered a financial institution are subject to FATCA registration and reporting – such as trust companies, certain insurance companies, holding companies, treasury centers. Moreover, the industry, especially the trust industry, is experiencing some confusion over which entities must register as an FFI, and which do not need to register, or are instead an NFFE.

FFIs are primarily banking and financial institutions, as well as certain investment entities, which are defined by FATCA and separated into three broad categories: (i) primarily traditional banks that accept deposits and perform related banking services in their ordinary course of business, (ii) entities a substantial part of the business of which involves holding financial assets for others, and (iii) entities engaged in the business of investing, reinvesting, and trading in securities, partnership interests, commodities, derivatives, and other passive financial assets.

The first category of FFI describes traditional banks. This FFI is defined as a financial institution that accepts deposits in the ordinary course of a banking or similar business. An entity is engaged in a “banking or similar business” if the entity:

accepts deposits or similar investments of funds;
makes personal, mortgage, industrial, or other loans;
provides credit extension;
purchases, sells, discounts, or negotiates account receivables, installment obligations, notes, drafts, checks, bills of exchange, acceptances, or other evidences of indebtedness;
issues letters of credit and negotiates drafts drawn on accounts;
provides trust or fiduciary services;
finances foreign exchange transactions; or
enters into, purchases, or disposes of finance leases or leased assets.

The second category of FFI captures “asset holding” companies. This type of FFI holds financial assets for the account of others as a “substantial” portion of its business. An entity is an asset holding company if more than 20 percent of its gross income is from holding financial assets and related financial services during a three-year period ending on December 31 of the year preceding that in which the determination is made (or the period of the entity’s existence, if shorter).

The final category of FFI captures “investment funds”, and is broadly defined. Thus, this category includes certain securitization vehicles, certain pension funds, and can potentially include certain other private structures that hold investments such as trusts and underlying holding companies. This category of FFI is primarily engaged in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest (including futures or forward contracts or options). An investment entity is primarily engaged in one or more of the following activities:

trading in money market instruments, foreign currency, foreign exchange, interest rates, index instruments, transferable securities, or commodity futures;
managing individual or collective portfolios;
investing, administering or managing funds, money, or financial assets on behalf of others; or
functioning as a collective investment vehicle, mutual fund, exchange traded fund, private equity fund, hedge fund, venture capital fund, leveraged buyout fund, or any similar investment vehicle.

An entity is primarily engaged in these activities if more than 50% of its gross income is from such activities during a three-year period.

Example of an Investment Advisor. A Fund Manager is an investment entity that organizes and manages various types of funds including Fund A. Fund A invests primarily in equities. An Investment Advisor (a foreign entity) is hired by the Fund Manager to advise and provide discretionary management of a portion of the financial assets held by Fund A. More than 50% of the Investment Advisor’s gross income was earned for the last three years from providing similar services. The Investment Advisor is an investment entity as described in this section and an FFI as well since it primarily conducts a business of managing financial assets on behalf of clients.

Example of a Trust managed by a Trust Company. On January 1, 2013, a Trust (a nongrantor foreign trust) was formed by X (an individual) for the benefit of his or her children. The Trustee (a Trust Company) was appointed by X to act as the Trustee. A Trust Company is an FFI. Under the terms of the Trust Instrument, the Trust Company manages the assets of the Trust as Trustee for the benefit of X’s children. Because the Trust is managed by a FFI (the Trust Company), the Trust is an investment entity, and an FFI.

Trust compliance and FATCA expert Peter Cotorceanu (and Lexis author) has raised four interesting issues with the last example, being:

Is the “Managed By” test met if some but not all a trust managers are depository institutions, custodial institutions, specified insurance companies, or Type A IEs, e.g., a trust with a commercial trust company serving a co-trustee with an individual?
Is the “Managed By” test met if some but not all of a trust’s investments are managed by depository institutions, custodial institutions, specified insurance companies, or IEs, e.g., a trust with one account managed by a bank and other accounts managed by an individual?
How is a trust classified if it meets the “Managed By” test for only part of a year, e.g., because a commercial trust company is replaced by an individual as trustee, or a bank is replaced by an individual as asset manager?
Does a trust holding, its only asset the share of an underlying company (“UC”), meet the “Managed By” test if the UC’s assets are professionally managed but the trust is not (i.e., the trustee is an individual)?

FATCA IGA FACTS as of July 1st at World Cup Game time USA Match (4 pm Washington, D.C.)

IGAs: 98

Model 1: 85

Model 2: 13

Non-IGAs: 250 – 98 = 152 countries for withholding from July 1, 2014

Registered: 87,993 (July 1st) (an increase of approximately 10,000 from 77,353 of June 2nd) FFI/branches from 250 countries/jurisdictions

Jurisdiction	July FFI #	IGA Scenario	Signed/Substance	Date
Afghanistan	8	No IGA
Albania	16	No IGA
Algeria	9	Model 1A IGA	Substance	June 30, 2014
Andorra	35	No IGA
Angola	10	No IGA
Anguilla	120	No IGA
Antigua and Barbuda	39	Model 1A IGA	Substance	June 03, 2014
Argentina	401	No IGA
Armenia	34	Model 2 IGA	Substance	May 08, 2014
Aruba	16	No IGA
Australia	2,073	Model 1A IGA	Signed	April 28, 2014
Austria	3,010	Model 2 IGA	Signed	April 29, 2014
Azerbaijan	34	Model 1A IGA	Substance	May 16, 2014
Bahamas	646	Model 1A IGA	Substance	April 17, 2014
Bahrain	165	Model 1A IGA	Substance	June 30, 2014
Bangladesh	81	No IGA
Barbados	146	Model 1A IGA	Substance	May 27, 2014
Belarus	68	Model 1A IGA	Substance	June 06, 2014
Belgium	256	Model 1A IGA	Signed	April 23, 2014
Belize	135	No IGA
Benin	8	No IGA
Bermuda	1,579	Model 2 IGA	Signed	December 19, 2013
Bhutan	1	No IGA
Bosnia and Herzegovina	23	No IGA
Botswana	20	No IGA
Brazil	2,362	Model 1A IGA	Substance	April 02, 2014
British Indian Ocean Territory	1	No IGA
Brunei Darussalam	21	No IGA
Bulgaria	96	Model 1A IGA	Substance	April 23, 2013
Burkina Faso	6	No IGA
Burundi	3	No IGA
Cambodia	82	No IGA
Cameroon	10	No IGA
Canada	2,566	Model 1A IGA	Signed	February 05, 2014
Cape Verde	6	Model 1A IGA	Substance	June 30, 2014
Cayman Islands	17,207	Model 1B IGA	Signed	November 29, 2013
Central African Republic	2	No IGA
Chad	4	No IGA
Chile	342	Model 2 IGA	Signed	March 05, 2014
China	213	Model 1A IGA	Substance	June 26, 2014
Christmas Island	1	No IGA
Colombia	184	Model 1A IGA	Substance	April 23, 2014
Comoros	1	No IGA
Congo	5	No IGA
Cook Islands	87	No IGA
Costa Rica	116	Model 1A IGA	Signed	November 26, 2013
Cote d’Ivoire	18	No IGA
Croatia	67	Model 1A IGA	Substance	April 02, 2014
Curacao	189	Model 1A IGA	Substance	April 30, 2014
Cyprus	330	Model 1A IGA	Substance	April 22, 2014
Czech Republic	115	Model 1A IGA	Substance	April 02, 2014
Denmark	204	Model 1A IGA	Signed	November 19, 2012
Djibouti	2	No IGA
Dominica	18	Model 1A IGA	Substance	June 19, 2014
Dominican Republic	75	Model 1A IGA	Substance	June 30, 2014
Ecuador	27	No IGA
Egypt	109	No IGA
El Salvador	41	No IGA
Equatorial Guinea	1	No IGA
Estonia	33	Model 1A IGA	Signed	April 11, 2014
Falkland Islands (Malvinas)	1	No IGA
Fiji	5	No IGA
Finland	482	Model 1A IGA	Signed	March 05, 2014
France	2,422	Model 1A IGA	Signed	November 14, 2013
French Polynesia	3	No IGA
French Southern Territories	1	No IGA
Gabon	4	No IGA
Gambia	11	No IGA
Georgia	26	Model 1A IGA	Substance	June 12, 2014
Germany	2,894	Model 1A IGA	Signed	May 31, 2013
Ghana	51	No IGA
Gibraltar	116	Model 1A IGA	Signed	May 08, 2014
Greece	103	No IGA
Greenland	1	Model 1A IGA	Substance	June 30, 2014
Grenada	33	Model 1A IGA	Substance	June 16, 2014
Guadeloupe	1	No IGA
Guam	4	US Territory
Guatemala	81	No IGA
Guernsey	2,585	Model 1A IGA	Signed	December 13, 2013
Guinea	7	No IGA
Guyana	7	Model 1A IGA	Substance	June 24, 2014
Haiti	13	Model 1A IGA	Substance	June 30, 2014
Honduras	50	Model 1A IGA	Signed	March 31, 2014
Hong Kong	2,008	Model 2 IGA	Substance	May 09, 2014
Hungary	115	Model 1A IGA	Signed	February 04, 2014
Iceland	12	No IGA
India	321	Model 1A IGA	Substance	April 11, 2014
Indonesia	351	Model 1A IGA	Substance	May 04, 2014
Iraq	49	Model 2 IGA	Substance	June 30, 2014
Ireland	2,007	Model 1A IGA	Signed	January 23, 2013
Isle of Man	355	Model 1A IGA	Signed	December 13, 2013
Israel	352	Model 1A IGA	Substance	June 30, 2014
Italy	587	Model 1A IGA	Signed	January 10, 2014
Jamaica	42	Model 1A IGA	Signed	May 01, 2014
Japan	3,390	Model 2 IGA	Signed	June 11, 2013
Jersey	1,974	Model 1A IGA	Signed	December 13, 2013
Jordan	48	No IGA
Kazakhstan	96	No IGA
Kenya	54	No IGA
Kuwait	84	Model 1A IGA	Substance	May 01, 2014
Kyrgyzstan	29	No IGA
Lao People’s Democratic Republic	13	No IGA
Latvia	50	Model 1A IGA	Signed	June 27, 2014
Lebanon	122	No IGA
Lesotho	2	No IGA
Liberia	29	No IGA
Liechtenstein	291	Model 1A IGA	Signed	May 19, 2014
Lithuania	29	Model 1A IGA	Substance	April 02, 2014
Luxembourg	4,061	Model 1A IGA	Signed	March 28, 2014
Macao	64	No IGA
Madagascar	7	No IGA
Malawi	10	No IGA
Malaysia	437	Model 1A IGA	Substance	June 30, 2014
Maldives	6	No IGA
Mali	5	No IGA
Malta	348	Model 1A IGA	Signed	December 16, 2013
Marshall Islands	80	No IGA
Martinique	1	No IGA
Mauritania	6	No IGA
Mauritius	872	Model 1A IGA	Signed	December 27, 2013
Mexico	410	Model 1A IGA	Signed	April 09, 2014
Monaco	105	No IGA
Mongolia	15	No IGA
Montenegro	7	Model 1A IGA	Substance	June 30, 2014
Montserrat	12	No IGA
Morocco	133	No IGA
Mozambique	15	No IGA
Myanmar	6	No IGA
Namibia	26	No IGA
Nepal	33	No IGA
Netherlands	2,280	Model 1A IGA	Signed	December 18, 2013
New Caledonia	5	No IGA
New Zealand	396	Model 1A IGA	Signed	June 12, 2014
Nicaragua	15	Model 2 IGA	Substance	June 30, 2014
Niger	4	No IGA
Nigeria	76	No IGA
Norway	349	Model 1A IGA	Signed	April 15, 2013
Oman	25	No IGA
Pakistan	89	No IGA
Panama	484	Model 1A IGA	Substance	May 01, 2014
Papua New Guinea	4	No IGA
Paraguay	17	Model 2 IGA	Substance	June 06, 2014
Peru	172	Model 1A IGA	Substance	May 01, 2014
Philippines	178	No IGA
Poland	180	Model 1A IGA	Substance	April 02, 2013
Portugal	287	Model 1A IGA	Substance	April 02, 2014
Puerto Rico	4	US Territory
Qatar	52	Model 1A IGA	Substance	April 02, 2014
Reunion	1	No IGA
Romania	114	Model 1A IGA	Substance	April 02, 2014
Russian Federation	729	No IGA
Rwanda	9	No IGA
Saint Kitts and Nevis	106	Model 1A IGA	Substance	June 04, 2014
Saint Lucia	66	Model 1A IGA	Substance	June 12, 2014
Saint Martin (French part)	3	No IGA
Saint Pierre and Miquelon	1	No IGA
Saint Vincent and The Grenadines	124	Model 1A IGA	Substance	June 02, 2014
Samoa	51	US Territory
San Marino	15	Model 2 IGA	Substance	June 30, 2014
Saudi Arabia	21	Model 1A IGA	Substance	June 24, 2014
Senegal	10	No IGA
Serbia	32	Model 1A IGA	Substance	June 30, 2014
Seychelles	43	Model 1A IGA	Substance	May 28, 2014
Sierra Leone	9	No IGA
Singapore	1,072	Model 1A IGA	Substance	May 05, 2014
Sint Maarten (Dutch part)	17	No IGA
Slovakia	63	Model 1A IGA	Substance	April 11, 2014
Slovenia	32	Model 1A IGA	Signed	June 02, 2014
Solomon Islands	3	No IGA
South Africa	395	Model 1A IGA	Signed	June 09, 2014
South Sudan	5	No IGA
Spain	1,227	Model 1A IGA	Signed	May 14, 2013
Sri Lanka	42	No IGA
Suriname	9	No IGA
Swaziland	5	No IGA
Sweden	414	Model 1A IGA	Substance	April 24, 2014
Switzerland	4,279	Model 2 IGA	Signed	February 14, 2013
Taiwan	481	Model 2 IGA	Substance	June 23, 2014
Tajikistan	19	No IGA
Thailand	823	Model 1A IGA	Substance	June 24, 2014
Timor-Leste	2	No IGA
Togo	6	No IGA
Tonga	2	No IGA
Trinidad and Tobago	59	No IGA
Tunisia	10	No IGA
Turkey	210	Model 1A IGA	Substance	June 03, 2014
Turkmenistan	1	Model 1A IGA	Substance	June 03, 2014
Turks and Caicos Islands	35	Model 1A IGA	Substance	May 12, 2014
Uganda	19	No IGA
Ukraine	187	Model 1A IGA	Substance	June 28, 2014
United Arab Emirates	204	Model 1A IGA	Substance	May 21, 2014
United Kingdom	6,994	Model 1A IGA	Signed	September 12, 2012
United States	620	US
Uruguay	142	No IGA
Uzbekistan	2	No IGA
Vanuatu	5	No IGA
Viet Nam	129	No IGA
Virgin Islands (British)	2,373	Model 1B IGA	Signed	June 30, 2014
Wallis and Futuna	1	No IGA
Yemen	18	No IGA
Zambia	13	No IGA
Zimbabwe	6	No IGA
Other	32	No IGA		January 01, 1904
Korea, Republic of	448	Model 1A IGA	Substance	April 02, 2014
Bolivia, Plurinational State Of	31	No IGA
Congo, Democratic Republic Of The	9	No IGA
Macedonia, The Former Yugoslav Republic Of	18	No IGA
Moldova, Republic Of	20	Model 2 IGA	Substance	June 30, 2014
Venezuela, Bolivarian Republic Of	49	No IGA
Tanzania, United Republic Of	16	No IGA
Libya	7	No IGA
Bonaire, Sint Eustatius And Saba	12	No IGA
Korea, Democratic People’s Republic Of	1	No IGA
Virgin Islands (U.S.)	2	US Territory
Guinea-Bissau	1	No IGA
Kiribati	1	No IGA
Sao Tome and Principe	1	No IGA
WEST BANK AND GAZA	23	No IGA
Grand Total	87,993
IRS Registered FFI List (Sum of Registrations)	July ’14#	County #
Model 1A IGA	48,175	85
Model 1B IGA	19,580	2
Model 2 IGA	15,239	13
US	620	1
US Territory	61	5	Note 1
No IGA	4,318	144	Note 2
Total	87,993	250	Notes 1, 2 & 3
Non IGA	4,318	144
Non IGA%	5%	58%
IGA	82,994	98
IGA%	94%	39%
US and US Territories	681	6
1%	2%
There is only 1 jurisdiction with an IGA that has zero registrations: Kosovo, implying that registration is a lead indicator of an IGA being signed

Note 1
This does not include:
Baker Island, Howland Island, Jarvis Island, Johnston Atoll, Kingman Reef, Midway Islands, Navassa Island, Palmyra Atoll, Wake Island
Note 2
This does not include:
Akrotiri, Ashmore and Cartier Islands, Clipperton Island, Coral Sea Islands, Dhekelia, Jan Mayen, Paracel Islands, Spratly Islands, Svalbard
Note 3
WEST BANK AND GAZA is not on the ISO list provided by the IRS. However, the IRS have allowed use of ISO 3166-1 Code “275” for this territory on their list of approved FFIs.
FYI: The US Department of State does not recognize Palestine, much less Gaza and the West Bank. But since the IRS does for purposes of FATCA, these are included for completeness.

Complying with FATCA?

The LexisNexis® Guide to FATCA Compliance (2^nd 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

Model 1 IGA – 34 (followed by number of registered FFIs as of July 1^st at 1 pm Washington, D.C.)

Australia (4-28-2014)
Belgium (4-23-2014)
British Virgin Islands (6-30-2014) <– moved from below list
Canada (2-5-2014)
Cayman Islands (11-29-2013)
Costa Rica (11-26-2013)
Denmark (11-19-2012)
Estonia (4-11-2014)
Finland (3-5-2014)
France (11-14-2013)
Germany (5-31-2013)
Gibraltar (5-8-2014)
Guernsey (12-13-2013)
Hungary (2-4-2014)
Honduras (3-31-2014)
Ireland (1-23-2013)
Isle of Man (12-13-2013)
Israel (6-30-2014) <– moved from below list
Italy (1-10-2014)
Jamaica (5-1-2014)
Jersey (12-13-2013)
Latvia (6-27-2014):
Liechtenstein (5-19-2014)
Luxembourg (3-28-2014)
Malta (12-16-2013)
Mauritius (12-27-2013)
Mexico (4-9-2014)
Netherlands (12-18-2013)
New Zealand (6-12-2014)
Norway (4-15-2013)
Slovenia (6-2-2014)
South Africa (6-9-2014)
Spain (5-14-2013)
United Kingdom (9-12-2012)

Jurisdictions that have reached agreements in substance:

Model 1 IGA – 52 (followed by number of registered FFIs)

Algeria (6-30-2014) < – new entry
Antigua and Barbuda (6-3-2014)
Azerbaijan (5-16-2014)
Bahamas (4-17-2014)
Bahrain (6-30-2014) < – new entry
Barbados (5-27-2014)
Belarus (6-6-2014)
Brazil (4-2-2014):
Bulgaria (4-23-2014)
Cabo Verde (6-30-2014) <– new entry
China (6-26-2014) <– new entry
Colombia (4-23-2014)
Croatia (4-2-2014)
Curaçao (4-30-2014)
Czech Republic (4-2-2014)
Cyprus (4-22-2014)
Dominica (6-19-2014):
Dominican Republic (6-30-2014) <– new entry
Georgia (6-12-201)
Greenland (6-29-2014) <– new entry
Grenada (6-16-2014)
Guyana (6-24-2014) <– new entry
Haiti (6-30-2014) <– new entry
India (4-11-2014)
Indonesia (5-4-2014):
Kosovo (4-2-2014)
Kuwait (5-1-2014)
Lithuania (4-2-2014)
Malaysia (6-30-2014) <– new entry
Montenegro (6-30-2014) <– new entry
Panama (5-1-2014)
Peru (5-1-2014):
Poland (4-2-2014):
Portugal (4-2-2014):
Qatar (4-2-2014):
Romania (4-2-2014):
St. Kitts and Nevis (6-4-2014)
St. Lucia (6-12-2014):
St. Vincent and the Grenadines (6-2-2014)
Saudi Arabia (6-24-2014):
Serbia (6-30-2014)
Seychelles (5-28-2014)
Singapore (5-5-2014):
Slovak Republic (4-11-2014)
South Korea (4-2-2014)
Sweden (4-24-2014)
Thailand (6-24-2014):
Turkey (6-3-2014)
Turkmenistan (6-3-2014)
Turks and Caicos Islands (5-12-2014):
Ukraine (6-26-2014) < – new entry
United Arab Emirates (5-23-2014)

Model 2 IGA – 5

Jurisdictions that have reached agreements in substance:

Model 2 IGA – 8

Armenia (5-8-2014)
Hong Kong (5-9-2014)
Iraq (6-30-2014) < – new entry
Moldova (6-30-2014) < – new entry
Nicaragua (6-30-2014
Paraguay (6-6-2014):
San Marino (6-30-2014) < – new entry
Taiwan (6-23-2014)

Posted in FATCA | Tagged: FATCA, FFI list, IGA | 1 Comment »

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 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)

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

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

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

Model 2 IGA – 5

Jurisdictions that have reached agreements in substance:

Model 2 IGA – 5

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

Posted in FATCA | Tagged: FATCA, IGA, W-8BEN, W-8BEN- E instructions | Leave a Comment »

Did you file your FBAR today? You still have a couple hours left!

Posted by William Byrnes on June 30, 2014

The FBAR is an annual report and must be filed on or before June 30th! The FBAR must be filed electronically through FinCEN’s BSA E-Filing System. The application to file electronically is available at http://bsaefiling.fincen.treas.gov/

Who is considered an individual filer?

An individual filer is a natural person who owns a reportable foreign financial account or has signature authority but no financial interest in a reportable foreign financial account that
requires the filing of an FBAR for the reportable year. An individual who jointly owns an account with a spouse may file a single FBAR report as an individual filer

What if I file an FBAR with my spouse? How will I be able to meet the two-signature requirement and E-File?

FinCEN’s BSA E-File system’s capability only allows for one digital signature. Although the current FBAR instructions state that a spouse included as a joint owner, who does not file a separate FBAR, must also sign the FBAR in Item 44, the E-Filing process will not allow for both signatures on the same electronic form. So, to use the E-Filing system, a Form 114a (http://www.fincen.gov/forms/files/FBARE-FileAuth114aRecordSP.pdf ) should be completed designating which spouse will file the FBAR. The Form 114a is retained by the filer and not sent to FinCEN. The spouse designated can then use the BSA E-Filing System to E-File the FBAR.

Who Must File an FBAR?

A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year

What is a Financial Account?

A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).

What is a Financial Interest?

A United States person has a financial interest in a foreign financial account for which:

1. the United States person is the owner of record or holder of legal title, regardless of whether the account is maintained for the benefit of the United States person or for the benefit of another person; or

2. the owner of record or holder of legal title is one of the following:

a. An agent, nominee, attorney, or a person acting in some other capacity on behalf of the United States person with respect to the account;

b. A corporation in which the United States person owns directly or indirectly:

(i) more than 50 percent of the total value of shares of stock or

(ii) more than 50 percent of the voting power of all shares of stock;

c. A partnership in which the United States person owns directly or indirectly: (i) an interest in more than 50 percent of the partnership’s profits (e.g., distributive share of partnership income taking into account any special allocation agreement) or (ii) an interest in more than 50 percent of the partnership capital;

d. A trust of which the United States person: (i) is the trust grantor and (ii) has an ownership interest in the trust for United States federal tax purposes. See 26 U.S.C. sections 671-679 to determine if a grantor has an ownership interest in a trust;

e. A trust in which the United States person has a greater than 50 percent present beneficial interest in the assets or income of the trust for the calendar year; or

f. Any other entity in which the United States person owns directly or indirectly more than 50 percent of the voting power, total value of equity interest or assets, or interest in profits.

Are IRA Owners and Beneficiaries included?

An owner or beneficiary of an IRA is not required to report a foreign financial account held in the IRA.

Are Participants in and Beneficiaries of Tax-Qualified Retirement Plans included?

A participant in or beneficiary of a retirement plan described in Internal Revenue Code section 401(a), 403(a), or 403(b) is not required to report a foreign financial account held by or on behalf of the retirement plan.

What if I did not file FBAR in previous years?

See my previous article https://profwilliambyrnes.com/2014/06/18/new-offshore-voluntary-disclosure-program-ovdp-announced-with-50-penalty/

Also see this article: https://profwilliambyrnes.com/2014/06/11/why-is-the-irs-softening-the-offshore-voluntary-compliance-program/

Complying with FATCA?

Posted in FATCA | Tagged: FATCA, FBAR, FINCEN, FinCEN Report 114, Form 8938 | Leave a Comment »

Analysis of FATCA 2014 1042-S Instruction’s

Posted by William Byrnes on June 28, 2014

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

Every person required to deduct and withhold any tax under chapter 3 or chapter 4 is liable for such tax.

Who Must File?

Every withholding agent must file an information return on Form 1042-S to report amounts paid during the preceding calendar year.

However, withholding agents who are individuals are not required to report a payment on Form 1042-S if they are not making the payment as part of their trade or business and no withholding is required to be made on the payment.

For example, an individual making a payment of interest that qualifies for the portfolio interest exception from withholding is not required to report the payment if the portfolio interest is paid on a loan that is not connected to the individual’s trade or business. However, an individual who is a withholding agent paying an amount that actually has been subject to withholding is required to report the payment. Also, an individual paying an amount on which withholding is required must report the payment, whether or not the individual actually withholds.

Who is a Withholding agent?

A withholding agent is any person, U.S. or foreign, that has control, receipt, or custody of an amount subject to withholding under chapter 3, who can disburse or make payments of an amount subject to withholding, or who makes a withholdable payment under chapter 4.

The withholding agent may be an individual, corporation, partnership, trust, association, or any other entity. The term withholding agent also includes, but is not limited to, a qualified intermediary (QI), a nonqualified intermediary (NQI), a withholding foreign partnership (WP), a withholding foreign trust (WT), a flow-through entity, a U.S. branch, a territory FI, a nominee under section 1446, and an authorized agent. A person may be a withholding agent even if there is no requirement to withhold from a payment or if another person has already withheld the required amount from a payment.

In most cases, the U.S. person who pays (or causes to be paid) the item of U.S. source income to a foreign person (or to its agent) must withhold. However, other persons may be required to withhold. For example, if a payment is made by a QI (whether or not it assumes primary withholding responsibility) and the QI knows that withholding was not done by the person from which it received the payment, then that QI is required to do the appropriate withholding. In addition, withholding must be done by any QI that assumes primary withholding responsibility under chapters 3 and 4, a WP, a WT, a U.S. branch that agrees to be treated as a U.S. person, or an authorized agent.

Finally, if a payment is made by an NQI or a flow-through entity that knows, or has reason to know, that withholding was not done, that NQI or flow-through entity is required to withhold since it also falls within the definition of a withholding agent.

What’s New for the 2014 Form 1042-S?

The Form 1042-S for 2014 has been modified to accommodate reporting of payments and amounts withheld under FATCA (chapter 4) in addition to those amounts required to be reported under chapter 3. Form 1042-S requires the reporting of an applicable exemption to the extent withholding under chapter 4 does not apply to a payment of U.S source fixed or determinable annual or periodical (FDAP) income (including deposit interest) that is reportable on Form 1042-S.

When a financial institution reports a payment made to its financial account, Form 1042-S also requires the reporting of additional information about a recipient of the payment, such as the recipient’s account number, date of birth, and foreign taxpayer identification number, if any.

For withholding agents, intermediaries, flow-through entities, and recipients, Form 1042-S requires that the chapter 3 status (or classification) and, when the payment reported is a FATCA withholdable payment, the chapter 4 status be reported on the form according to a code for each type of income.

For withholding agents that report amounts withheld by another withholding agent, Form 1042-S requests the name and EIN of the withholding agent that withheld the tax. This information is optional for 2014.

Electronic filing requirement for financial institutions. Beginning January 1, 2014, financial institutions that are required to report payments made under chapters 3 or 4 must electronically file Forms 1042-S (regardless of the number of forms to file).

Use Form 1042-S to:

report income described under Amounts Subject to Reporting on Form 1042-S, later, and to report amounts withheld under chapter 3 or chapter 4.
report specified Federal procurement payments paid to foreign persons that are subject to withholding.
report distributions of effectively connected income by a publicly traded partnership or nominee.

Do not use Form 1042-S to report an item required to be reported on any of the following forms:

Form W-2 (wages and other compensation made to employees (other than compensation for dependent personal services for which the beneficial owner is claiming treaty benefits), including wages in the form of group-term life insurance).
Form 1099.
FIRPTA: Dispositions by Foreign Persons of U.S. Real Property Interests, or Form 8805 Foreign Partner’s Information Statement of Section 1446 Withholding Tax.
Form 8966, FATCA Report. Foreign financial institutions (FFIs) and withholding agents are required to report on Form 8966 certain account holders and payees. However, an FFI or withholding agent may also be required to file Form 1042-S to report payments of U.S. source FDAP income made to such persons and to report tax deducted and withheld, if any.

Amounts Subject to Reporting on Form 1042-S

Amounts subject to reporting on Form 1042-S are amounts from U.S. sources paid to foreign persons (including persons presumed to be foreign) or included in a U.S. payee pool that are reportable under chapters 3 and 4, even if no amount is deducted and withheld from the payment because of a treaty or Code exception to taxation or if any amount withheld was repaid to the payee. Amounts subject to reporting are amounts from sources within the United States that constitute:

(a) fixed or determinable annual or periodical (FDAP) income (including deposit interest);

(b) certain gains from the disposal of timber, coal, or domestic iron ore with a retained economic interest; and

(c) gains relating to contingent payments received from the sale or exchange of patents, copyrights, and similar intangible property.

A payment is also subject to reporting if withholding under chapter 4 is applied (or required to be applied) to the payment. Amounts subject to reporting on Form 1042-S include, but are not limited to, the following amounts to the extent from U.S. sources:

(a) Interest on deposits paid to certain nonresident aliens. Interest described in section 871(i)(2)(A) aggregating $10 or more paid with respect to a deposit if such interest is paid to a nonresident alien individual who is a resident of a country identified, in Revenue Procedure 2012-24 (or a superseding Revenue Procedure) as of December 31, prior to the calendar year in which the interest is paid.

A payor may elect to report interest described above paid to any nonresident alien individual by reporting all such interest. See Revenue Procedure 2012-24 (or a superseding Revenue Procedure) for the current list of countries with which the United States has in effect an income tax or other convention or bilateral agreement relating to exchange information within the meaning of section 6103(k)(4).

(b) Corporate distributions. The entire amount of a corporate distribution (whether actual or deemed) must be reported, regardless of any estimate of the part of the distribution that represents a taxable dividend. Any distribution, however, that is treated as gain from the redemption of stock is not an amount subject to withholding.

(c) Interest. This includes the part of a notional principal contract payment that is characterized as interest.

(d) Rents.

(e) Royalties.

(f) Compensation for independent personal services performed in the United States.

(g) Compensation for personal services performed in the United States (but only if the beneficial owner is claiming treaty benefits).

(h) Annuities.

(i) Pension distributions and other deferred income.

(j) Most gambling winnings.

(k) Cancellation of indebtedness. Effectively connected income (ECI).

(l) Notional principal contract income.

(m) Insurance premiums.

(n) REMIC excess inclusions.

(o) Students, teachers, and researchers. However, amounts that are exempt from tax under section 117 are not subject to reporting.

(p) Amounts paid to foreign governments, foreign controlled banks of issue, and international organizations.

(q) Foreign targeted registered obligations.

(r) Original Issue Discount (OID) from the redemption of an OID obligation.

(s) Certain dispositions of U.S. real property interests.

(t) Other U.S.-source dividend equivalent payments

(u) Guarantee of indebtedness.

(v) Specified Federal procurement payments.

Amounts That Are Not Subject to Reporting on Form 1042-S

Interest and OID from short-term obligations.
Registered obligations targeted to foreign markets. Reporting will be required on interest paid on any registered obligation (regardless of whether targeted to foreign markets) if the registered obligation is issued after December 31, 2015.
Bearer obligations targeted to foreign markets. Withholding is required on interest paid on any bearer obligations targeted to foreign markets if the obligation is issued after March 18, 2012.
Notional principal contract payments that are not ECI.
Accrued interest and OID.
Certain withholdable payments. Withholdable payments not subject to reporting for chapter 3 purposes (other than bank deposit interest paid to certain nonresident aliens) are not required to be reported if withholding is not applied (or required to be applied) under chapter 4.

How Are Disregarded Entities Reported?

If a U.S. withholding agent makes a payment to a disregarded entity (other than a limited branch of an FFI) that is not a hybrid entity making a treaty claim, and receives a valid Form W-8BEN-E or W-8ECI from a foreign person that is the single owner of the disregarded entity, the withholding agent must file a Form 1042-S in the name of the foreign single owner. The taxpayer identifying number (TIN) on the Form 1042-S, if required, must be the foreign single owner’s TIN.

Example. WA, a withholding agent, makes a withholdable payment of interest to LLC, a foreign limited liability company that is not an FFI. LLC is wholly-owned by FC, a foreign corporation that is an excepted non-financial foreign entity. LLC is treated as a disregarded entity. WA has a Form W-8BEN-E from FC on which it states that it is the beneficial owner of the income paid to LLC. WA reports the interest payment on Form 1042-S showing FC as the recipient. The result would be the same if LLC was a domestic entity.

How Are Amounts paid to a NQI or Flow-Through Entity Reported?

If a U.S. withholding agent makes a payment to an NQI or a flow-through entity (other than a nonparticipating FFI) with respect to a withholdable payment, it must complete a separate Form 1042-S for each recipient on whose behalf the NQI or flow-through entity acts as indicated by its withholding statement and the documentation associated with its Form W-8IMY.

Example. WA, a withholding agent, makes a withholdable payment of interest to FFI 1, a reporting model 1 FFI. FFI 1 provides WA with a valid Form W-8IMY with which it associates a withholding statement that allocates 80% of the payment to FFI 2, a participating FFI, and 20% of the payment to a pool of nonparticipating FFIs. FFI 1 also provides WA with FFI 2’s Form W-8IMY with which it associates a withholding statement that allocates 100% of the payment to recalcitrant pool-no U.S. indicia. WA must complete a Form 1042-S for the interest allocated to a pool of nonparticipating FFIs with FFI 1 as the recipient and must complete another Form 1042-S for the interest allocated to a pool of recalcitrant account holders-no U.S. indicia with FFI 2 as the recipient.

Lexis Guide to FATCA Compliance – 2015 Edition

1,200 pages of analysis of the compliance challenges, over 54 chapters by 70 FATCA contributing experts from over 30 countries. Besides in-depth, practical analysis, the 2015 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers. The Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments. No filler of forms and regs – it’s all beef ! See Lexis’ order site and request a copy of the forthcoming 2015 edition – http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327

A free download of the first of the 34 chapters is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671

<— Subscribe by email on the left menu to the FATCA Updates on this blog: https://profwilliambyrnes.com/category/fatca/

If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

Chapter 1 Background and Current Status of FATCA
Chapter 1A The International Financial System and FATCA
Chapter 2 Practical Considerations for Developing a FATCA Compliance Program
Chapter 2A FATCA Internal Policy
Chapter 3 FATCA Compliance and Integration of Information Technology
Chapter 4 Financial Institution Account Remediation
Chapter 4A FATCA Customer Outreach
Chapter 5 FBAR and Form 8938 Reporting and List of International Taxpayer IRS Forms
Chapter 6 Determining U.S. Ownership of Foreign Entities
Chapter 7 Foreign Financial Institutions
Chapter 7A Account reporting under FATCA
Chapter 8 Non-Financial Foreign Entities
Chapter 9 FATCA and the Offshore Trust Industry
Chapter 10 FATCA and the Insurance Industry
Chapter 11 Withholding and Qualified Intermediary
Chapter 12 FATCA Withholding Compliance
Chapter 13 “Withholdable” Payments
Chapter 13A Reporting Payments
Chapter 14 Determining and Documenting the Payee
Chapter 14A W8 Equivalents
Chapter 15 Framework of Intergovernmental Agreements
Chapter 16 Analysis of Current Intergovernmental Agreements
Chapter 17 European Union Cross Border Information Reporting
Chapter 18 The OECD Role in Exchange of Information: The Trace Project, FATCA, and Beyond
Chapter 19 Germany
Chapter 20 Ireland
Chapter 21 Japan
Chapter 22 Mexico
Chapter 23 Switzerland
Chapter 24 United Kingdom
Chapter 25 Brazil
Chapter 26 British Virgin Islands
Chapter 27 Canada
Chapter 28 Spain
Chapter 29 China
Chapter 30 Netherlands
Chapter 31 Luxembourg
Chapter 32 Russia
Chapter 33 Turkey
Chapter 34 India
Chapter 35 Argentina
Chapter 36 Aruba
Chapter 37 Australia
Chapter 38 Bermuda
Chapter 39 Colombia
Chapter 40 Cyprus
Chapter 41 Hong Kong
Chapter 42 Macau
Chapter 43 Portugal
Chapter 44 South Africa
Chapter 45 France
Chapter 46 Gibraltar
Chapter 47 Guernsey
Chapter 48 Italy

Posted in FATCA | Tagged: 1042-S, 1042-S instructions, FATCA, FDAP, withholdable payments, withholding | Leave a Comment »

Updated 2014 Qualified Intermediary (QI) Agreement released !

Posted by William Byrnes on June 27, 2014

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

Revenue Procedure 2014-39: Application Procedures and Overview of Requirements for Qualified Intermediary Status Under Chapters 3, 4, and 61 and Section 3406; Final Qualified Intermediary Agreement. The effective date of this revenue procedure is June 27, 2014. Revenue Procedure 2014-39 will be published in IRB 2014-29, dated July 14, 2014.

The QI agreement is updated to reflect the enactment of Chapter 4 (§§1471-1474) of the Code, and the issuance of regulations under section 3406 and chapters 3, 4, and 61 of the Code.

Renewal of QI: An FFI that seeks to renew its QI agreement as well as register as a (a) participating FFI, (b) registered deemed-compliant FFI, or (c) limited FFI must do so by submitting a registration form through the FATCA registration website.

An NFFE that is a direct reporting NFFE or a sponsoring entity of a direct reporting NFFE must also renew its QI agreement through the FATCA registration website.

A QI will retain its QI-EIN to be used when it is fulfilling the requirements of a QI under chapters 3, 4, and 61 and section 3406, including making tax deposits and filing Forms 945, 1042, 1042-S, 1099, and 8966.

New QI: A prospective QI must submit Form 14345, Qualified Intermediary Application, to become a QI. The Form 14345 must establish, to the satisfaction of the IRS, that the applicant has adequate resources and Procedures to comply with the terms of the QI agreement.

Once the QI application is approved, the IRS will send an approval notice to the address of the QI provided on Form 14345. The approval notice will include a QI-EIN for fulfilling the requirements of a QI under chapters 3, 4, and 61, and section 3406, including making tax deposits and filing Forms 945, 1042, 1042-S, 1099, and 8966.

It will also instruct a QI (other than an NFFE that is not acting on behalf of its shareholders) to submit the information specified in Form 8957, Foreign Act Tax Compliance Act (FATCA) Registration, (“registration form”) through the FATCA registration website available at www.irs.gov/FATCA, to obtain its chapter 4 status as a (a) participating FFI, (b) registered deemed-compliant FFI, or (c) direct reporting NFFE, and must register as a QI by providing the information specified for renewal of QI status.

An NFFE that is acting as a sponsoring entity of a direct reporting NFFE and that obtains QI status must also register as a QI on the FATCA registration website by providing the information specified for renewal of QI status. Upon completion of the registration process, an FFI (other than a limited FFI or limited branch of an FFI) will be issued a GIIN to be used to identify itself to withholding agents and to tax administrators for FATCA reporting. In the case of an NFFE that is not acting on behalf of its shareholders, the approval notice will provide the date on which the QI-EIN is issued (which will serve as the effective date of the QI agreement).

For future years, the IRS intends to update the online FATCA registration website to allow prospective QIs to submit a QI application electronically and in such manner as the IRS may prescribe in future guidance or other instructions. Until this update to the FATCA registration website occurs, a prospective QI must submit to the IRS address identified above a paper Form 14345.

Complying with FATCA?

Posted in FATCA | Tagged: FATCA, GIIN, QI, QI Agreement, Qualified Intermediary | 1 Comment »

CDOT – Is UK Version of FATCA, FATCA on Steroids?

Posted by William Byrnes on June 26, 2014

It is also worth pointing out that of the 77,353 entities on the June 1st 2014 list, 37% are from the UK and her Crown Dependencies and Overseas Territories, most notably the Cayman Islands.One wonders if, were if not for CDOT, the 77,353 might not be considerably smaller.

via CDOT – Is UK Version of FATCA, FATCA on Steroids?.

Posted in FATCA | Tagged: CDOT, FATCA, IGA | Leave a Comment »

Analysis of new 2014 FATCA W-8BEN-E Instructions

Posted by William Byrnes on June 25, 2014

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

On June 25, 2014 the IRS released the W-8 BEN-E instructions. Read William Byrnes’ previous April 2 analysis of the W-8BEN-E here. Read William Byrnes’ analysis of the W-8IMY instructions here. For analysis of the requirements of the 31 FATCA entity classifications, see William Byrnes’ previous articles: https://profwilliambyrnes.com/category/fatca/

Analysis of W-8BEN-E Instructions …

Who Must Provide W-8BEN-E?

A foreign entity must submit a Form W-8BEN-E to the withholding agent if it will receive a FATCA withholdable payment, receive a payment subject to chapter 3 withholding, or if it maintains an account with an FFI.

All Beneficial Owners

Form W-8 BEN-E must be provided by ALL the entities that are beneficial owners of a payment, or of another entity that is the beneficial owner. If the income or account is jointly owned by more than one person, then the income or account will be treated by the withholding agent as owned by a foreign beneficial owner only if Forms W-8BEN or W-8BEN-E are provided by EVERY owner of the account.

Treatment as US 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. An account will be treated as a U.S. account for FATCA by an FFI if any of the account holders is a specified U.S. person or a U.S.-owned foreign entity (unless the account is otherwise excepted from U.S. account status for FATCA purposes).

Hybrids

Hybrid Entity: A hybrid entity should give Form W-8BEN-E on its own behalf to a withholding agent only for income for which it is claiming a reduced rate of withholding under an income tax treaty or to document its chapter 4 status for purposes of maintaining an account with an FFI requesting this form (when it is not receiving withholdable payments or payments subject to chapter 3 withholding).

Reverse Hybrid: A reverse hybrid entity should give Form W-8BEN-E on its own behalf to a withholding agent only for income for which no treaty benefit is being claimed or to establish its status for chapter 4 purposes (when required).

Who Should Not Use Form W-8BEN-E?

US Person: If the filer is a US person (including US citizens, resident aliens, and entities treated as US persons, such as a corporation organized under the law of a state), then submit Form W-9, Request for Taxpayer Identification Number and Certification.

Foreign Insurance Company: A foreign insurance company that has made an election under section 953(d) to be treated as a U.S. person should submit Form W-9 to certify its “U.S. status” even if it is an FFI for FATCA purposes. Certain foreign insurance companies issuing annuities or cash value insurance contracts that elect to be treated as a U.S. person for federal tax purposes but are not licensed to do business in the United States are treated as FFIs for purposes of chapter 4. For purposes of providing a withholding agent with documentation for both chapter 3 and chapter 4 purposes, however, such an insurance company is permitted to use Form W-9 to certify its status as a U.S. person.

NRA: A nonresident alien individual must submit Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).

Disregarded: A U.S. person that is a single owner of a disregarded entity, and that is not also a hybrid entity claiming treaty benefits, should provide Form W-9. A foreign branch of a U.S. financial institution (other than a branch that operates as a qualified intermediary) that is treated as an FFI under an applicable IGA is permitted to use Form W-9 to certify its status as a U.S. person for chapter 3 and chapter 4 purposes.

But if the single owner is not a U.S. person,is not a branch of an FFI claiming FATCA status, and is not a hybrid entity claiming treaty benefits, it should provide either Form W-8BEN or Form W-8BEN-E as appropriate.

Intermediary: Form W-8IMY is submitted generally by a payment recipient 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. Read my analysis of W-8IMY and its instructions in my June 24^th article. An entity treated as a flow-through entity should generally provide Form W-8IMY for chapter 3 or chapter 4 purposes.

Expiration of Form W-8BEN-E.

Generally, a Form W-8BEN-E will remain valid for purposes of both chapters 3 and 4 for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on September 30, 2014 remains valid through December 31, 2017. However, under certain conditions a Form W-8BEN-E will remain in effect indefinitely until a change of circumstances occurs.

Change in circumstances.

If a change in circumstances makes any information on the Form W-8BEN-E incorrect for purposes of either chapter 3 or chapter 4, then the submitting person must notify the withholding agent or financial institution maintaining the account within 30 days of the change in circumstances and you must file a new Form W-8BEN-E (or other appropriate form as applicable).

Certification

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.”

Which of the 30 Parts of the W-8BEN-E to Complete?

The W-8BEN-E form has thirty parts, whereas the former dual-purpose W8BEN in use since 2006 has just four parts. The new 2014 Form W-8BEN-E includes the FATCA and QI entity classification reporting requirements.

All filers of the new W-8BEN-E must complete Parts I and XXIX. The FATCA classification indicated determines which one of the Parts IV through XXVIII must be completed.

Part I – Identification of Beneficial Owner

Part I of the W-8BEN-E requires general information, the QI status, and the FATCA classification of the filer.

Question 1. A disregarded entity or branch enters the legal name of the entity that owns the disregarded entity (looking through multiple disregarded entities if applicable) or maintains the branch.

Question 2. A corporation must enter its country of incorporation. Any other type of entity must instead enter the country under whose laws it is created, organized, or governed.

Question 3. A disregarded entity receiving a payment should only enter its name on line 3 if it is receiving a withholdable payment or hold an account with an FFI and

has registered with the IRS and been assigned a GIIN associated with the legal name of the disregarded entity;
is a reporting Model 1 FFI or reporting Model 2 FFI; and
is not a hybrid entity using this form to claim treaty benefits.

If not required to provide the legal name, then a disregarded entity receiving a payment or maintaining an account may instead enter its name on line 10.

Question 4 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 entity. W-8BEN-E currently lists 31 FATCA classifications of which the entity must check only one box unless otherwise indicated. Completion of the W-8BEN-E other parts depend upon the selection of the FATCA classification.

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 as well as Part XXX if substantial U.S. owners*.
Excepted inter-affiliate FFI. Complete Part XXVII.
Direct reporting NFFE.
Sponsored direct reporting NFFE. Complete Part XXVIII

*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.

FFIs Covered by an IGA and Related Entities

A reporting IGA FFI resident in, or established under the laws of, a jurisdiction covered by a Model 1 IGA should check “Reporting Model 1 FFI.” A reporting FFI resident in, or established under the laws of, a jurisdiction covered by a Model 2 IGA should check “Reporting Model 2 FFI.”

If the FFI is treated as a registered deemed-compliant FFI under an applicable IGA, it should check “Nonreporting IGA FFI” rather than “registered deemed-compliant FFI” and provide its GIIN in Part XII, line 26.

An FFI that is related to a reporting IGA FFI and that is treated as a nonparticipating FFI in its country of residence should check nonparticipating FFI in line 5. An FFI that is related to a reporting IGA FFI and that is a participating FFI, deemed-compliant FFI, or exempt beneficial owner under the U.S. Treasury regulations or an applicable IGA should check the appropriate box for its chapter 4 status.

Requirement to Provide a GIIN

If the entity is in the process of registering with the IRS as a participating FFI, registered deemed-compliant FFI, reporting Model 1 FFI, reporting Model 2 FFI, direct reporting NFFE, or sponsored direct reporting NFFE, but has not received a GIIN, it may complete this line by writing “applied for.” However, the person requesting this form must receive and verify the GIIN within 90 days.

For payments made prior to January 1, 2015, a Form W-8BEN-E provided by a reporting Model 1 FFI need not contain a GIIN. For payments made prior to January 1, 2016, a sponsored direct reporting NFFE or sponsored FFI that has not obtained a GIIN must provide the GIIN of its sponsoring entity.

501(c) Organization

Only foreign entities that are tax-exempt under section 501 should check the 501(c) organization “Tax-exempt organization” box. Such organizations should use Form W-8BEN-E only if they are claiming a reduced rate of withholding under an income tax treaty or a code exception other than section 501. If claiming an exemption from withholding under code section 501, then it must submit Form W-8EXP to document the exemption and chapter 4 status.

Non-Profit Organizations Covered by an IGA

A non-profit entity that is established and maintained in a jurisdiction that is treated as having in effect a Model 1 IGA or Model 2 IGA, and that meets the definition of Active NFFE under Annex I of the applicable IGA, should not check a box for its status on line 5.

Completion of Parts IV through XXVIII

An entity should complete only one part of Parts IV through XXVIII certifying to the chapter 4 status. But an entity that selects nonparticipating FFI, participating FFI, registered deemed-compliant FFI, reporting Model 1 FFI, reporting Model 2 FFI, or direct reporting NFFE (other than a sponsored direct reporting NFFE) is not required to complete any of the certifications in Parts IV through XXVIII.

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 X – Owner-Documented FFI

Line 24a. An owner-documented FFI must check the box to certify that it meets all of the requirements for this status and is providing this form to a U.S. financial institution, participating FFI, reporting Model 1 FFI, or reporting Model 2 FFI that agrees to act as a designated withholding agent with respect to the FFI identified on line 1. Then select either 24b or 24c.

Line 24b. Check this box to certify that the documentation set forth in the certifications has been provided (or will be provided), including the owner reporting statement described in this line 24b, or

Line 24c. Check this box to certify that the auditor’s letter has been provided (or will be provided).

Entities Providing Certifications Under an Applicable IGA

In lieu of the certifications contained in Parts IV through XXVIII of Form W-8BEN-E, a reporting Model 1 FFI or reporting Model 2 FFI in certain cases may request alternate certifications to document its account holders pursuant to an applicable IGA or it may otherwise provide an alternate certification to a withholding agent.

A withholding agent that is an FFI may provide a chapter 4 status certification other than as shown in Parts IX through XXVIII in order to satisfy its due diligence requirements under an applicable IGA. In such a case, attach that alternative certification to this Form W-8BEN-E in lieu of completing a certification otherwise required in Parts IV through XXVIII provided that

1) the certification accurately reflects the chapter 4 status or under an applicable IGA; and

2) the withholding agent provides a written statement that it has provided the certification to meet its due diligence requirements as a participating FFI or registered deemed-compliant FFI under an applicable IGA.

An applicable IGA certification may be provided with the W-8BEN-E if determining chapter 4 status under the definitions provided in an applicable IGA and that certification identifies the jurisdiction that is treated as having an IGA in effect and describes the status as an NFFE or FFI in accordance with the applicable IGA.

However, if under an applicable IGA the entity’s status is determined to be an NFFE, it must still determine if it is an excepted NFFE under the FATCA Regulations. Additionally, the entity must comply with the conditions of its status under the law of the IGA jurisdiction.

Lexis Guide to FATCA Compliance – 2015 Edition

1,200 pages of analysis of the compliance challenges, over 54 chapters by 70 FATCA contributing experts from over 30 countries. Besides in-depth, practical analysis, the 2015 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers. The Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments. No filler of forms and regs – it’s all beef ! See Lexis’ order site and request a copy of the forthcoming 2015 edition – http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327

A free download of the first of the 34 chapters is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671

<— Subscribe by email on the left menu to the FATCA Updates on this blog: https://profwilliambyrnes.com/category/fatca/

Chapter 1 Background and Current Status of FATCA
Chapter 1A The International Financial System and FATCA
Chapter 2 Practical Considerations for Developing a FATCA Compliance Program
Chapter 2A FATCA Internal Policy
Chapter 3 FATCA Compliance and Integration of Information Technology
Chapter 4 Financial Institution Account Remediation
Chapter 4A FATCA Customer Outreach
Chapter 5 FBAR and Form 8938 Reporting and List of International Taxpayer IRS Forms
Chapter 6 Determining U.S. Ownership of Foreign Entities
Chapter 7 Foreign Financial Institutions
Chapter 7A Account reporting under FATCA
Chapter 8 Non-Financial Foreign Entities
Chapter 9 FATCA and the Offshore Trust Industry
Chapter 10 FATCA and the Insurance Industry
Chapter 11 Withholding and Qualified Intermediary
Chapter 12 FATCA Withholding Compliance
Chapter 13 “Withholdable” Payments
Chapter 13A Reporting Payments
Chapter 14 Determining and Documenting the Payee
Chapter 14A W8 Equivalents
Chapter 15 Framework of Intergovernmental Agreements
Chapter 16 Analysis of Current Intergovernmental Agreements
Chapter 17 European Union Cross Border Information Reporting
Chapter 18 The OECD Role in Exchange of Information: The Trace Project, FATCA, and Beyond
Chapter 19 Germany
Chapter 20 Ireland
Chapter 21 Japan
Chapter 22 Mexico
Chapter 23 Switzerland
Chapter 24 United Kingdom
Chapter 25 Brazil
Chapter 26 British Virgin Islands
Chapter 27 Canada
Chapter 28 Spain
Chapter 29 China
Chapter 30 Netherlands
Chapter 31 Luxembourg
Chapter 32 Russia
Chapter 33 Turkey
Chapter 34 India
Chapter 35 Argentina
Chapter 36 Aruba
Chapter 37 Australia
Chapter 38 Bermuda
Chapter 39 Colombia
Chapter 40 Cyprus
Chapter 41 Hong Kong
Chapter 42 Macau
Chapter 43 Portugal
Chapter 44 South Africa
Chapter 45 France
Chapter 46 Gibraltar
Chapter 47 Guernsey
Chapter 48 Italy

Posted in FATCA, W-8BEN-E | Tagged: FATCA, FFI, IGA, NFFE, W-8BEN- E instructions, W-8BEN-E, W-9, Withholding tax | 3 Comments »

5 new IGAs with 3 business days to go until 30% FATCA withholding on remaining 167 countries begins

Posted by William Byrnes on June 25, 2014

(Updated as of 19:00 EDT June 25, 2014, FFI #s updated June 26 with Haydon Perryman, Director of Compliance Solutions, Strevus)

FATCA FACTS

IGAs: 83 (72,034 FFI/branches)

Model 1: 74 (57,492 FFI/branches)

Model 2: 9 (13,834 FFI/branches)

Non-IGAs: 250 – 83 = 167 (5,212 FFI/branches)

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

Approximately 25% (19,046) of the currently 77,353 registered FFIs are impacted by the FFI agreement changes, including FFIs registrations from the current nine Model 2 countries/jurisdictions and the FFI registrations from the 123 countries/jurisdictions without an IGA.

77,353 financial institutions and their branches registered from 205 countries and jurisdictions, of a total of 250 countries and jurisdictions recognized by the USA. 45 countries / jurisdictions do not yet have any FFI registrations. One of these 45 countries, Kosovo, has an IGA.

Of the total FFIs registered, 72,141 FFIs (93%) registered from the 83 countries/jurisdictions that as of June 25^th (at 19:00 EDT) have an IGA. 57,492 FFIs registered from Model I IGA jurisdictions probably most as a category of a Model 1 Deemed Compliant FFI or as a branch. 13,834 (18%) of FFIs registered as Model 2 reporting FFIs or branches. These 13,834 Model 2 FFI registrations are impacted by the FFI Agreement changes of June 24, 2014.

Non IGA Registrations (Participating FFI and other)

The 5,212 FFIs registered either as Participating FFIs or branches from the remaining 123 countries/jurisdictions (without an IGA) currently are also impacted (note that while there are 83 IGAs as of today, no FFI registered from Kosovo as of the June 2^nd GIIN list, thus it is 205 subtracting 82 IGAs).

30% FATCA Withholding Begins July 1st

Meanwhile, 30% withholding on all withholdable payments to nonparticipating FFIs in the 167 non-IGA countries/jurisdictions begins three business days from today, on July 1^st. 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.

Model 2 IGAs – 9 (13,834 FFI Registered)

Armenia (5-8-2014): 28
Austria (4-29-2014): 2,979
Bermuda (12-19-2013): 1,243
Chile (3-5-2014): 325
Hong Kong (5-9-2014): 1.540
Japan (6-11-2013): 3,252
Paraguay (6-6-2014): 17
Switzerland (2-14-2013): 4,041
Taiwan: 409

Below is a selection of the 77,353 registered from 119 of the total 205 countries and jurisdictions on the June 2nd GIIN list.

Afghanistan: 7
Andorra: 34
Anguilla: 71
Antigua & Barbuda: 36
Argentina: 270
Armenia: 28 <– IGA
Aruba: 14
Australia: 1,865 <– IGA
Austria: 2,979
Azerbaijan: 17 <– IGA
Bahamas: 611 <– IGA
Barbados: 124 <– IGA
Belgium: 250 <– IGA
Belarus: 65
Belize: 123
Bermuda: 1,243
Brazil: 2,259 <– IGA
Bulgaria: 73
BVI: 1,838 <– IGA
Canada: 2,265 <– IGA
Cayman Islands: 14,837 <– IGA
China: 212
Christmas Island: 1
Colombia: 173 <– IGA
Comoros Is.: 1
Costa Rica: 123 <– IGA
Cook Is.: 73
Croatia: 51 <– IGA
Curacao: 174 <– IGA
Cyprus: 280 <– IGA
Czech Republic: 93 <– IGA
Denmark: 187 <– IGA
Djibouti: 1
Dominica: 17 <– IGA
Dominican Republic: 68
Ecuador: 22
Egypt: 63
Equatorial Guinea: 1
Estonia: 27 <– IGA
Falkland Islands: 1
Finland: 467 <– IGA
France: 2,290 <– IGA
French Southern Territories: 1
Georgia: 24 <– IGA
Germany: 2,555 <– IGA
Gibraltar: 97 <– IGA
Greece: 92
Greenland: 1
Grenada: 32
Guadeloupe: 1
Guam: 3
Guatemala: 76
Guernsey: 2,396 <– IGA
Honduras: 48 <– IGA
Hong Kong: 1,540 <– IGA
Hungary: 102 <– IGA
Iceland: 5
India: 247 <– IGA
Indonesia: 308 <– IGA
Ireland: 1,757 <– IGA
Isle of Man: 313 <– IGA
Israel: 322 <– IGA
Italy: 457 <– IGA
Jamaica: 42 <– IGA
Japan: 3,252 <– IGA
Jersey: 1,619 <– IGA
North Korea: 4
South Korea: 397
Kuwait: 78
Latvia: 41
Lichtenstein: 240 <– IGA
Lithuania: 22 <– IGA
Luxembourg: 3,561 <– IGA
Macao: 37
Malta: 236 <– IGA
Mauritius: 728 <– IGA
Mexico: 419 <– IGA
Monaco: 99
Netherlands: 2,054 <– IGA
New Zealand: 335 <– IGA
Norway: 313 <– IGA
Other: 23
Panama: 451 <– IGA
Paraguay: 17 <– IGA
Peru: 165 <– IGA
Poland: 165 <– IGA
Portugal: 256 <– IGA
Qatar: 47 <– IGA
Romania: 110 <– IGA
Russia: 515
Saint Pierre & Miquelon: 1
San Marino: 15
Saudi Arabia: 18 <–IGA
Seychelles: 38 <– IGA
Singapore: 784 <– IGA
South Africa: 318 <– IGA
Spain: 1,188 <– IGA
Slovakia: 55 <– IGA
Slovenia: 21 <– IGA
St Kitts & Nevis: 71 <– IGA
St Lucia: 61 <– IGA
St. Vincent and the Grenadines: 105 <– IGA
Sweden: 313 <– IGA
Switzerland: 4,041 <– IGA
Taiwan: 409 <- IGA
Thailand: 768 <-IGA
Timor-Leste: 1
Togo: 4
Tonga: 1
Turkey: 66 <– IGA
Turkmenistan: 1 <-– IGA
Turks & Caicos: 28 <– IGA
Ukraine: 106
United Arab Emirates: 136 <– IGA
United Kingdom: 6,264 <– IGA
USA: 563
Uruguay: 132
Venezuela: 30
Wallis & Fortuna: 1

FFI Registration Among Model 1 IGAs and the Rest

Of a possible 250 countries and jurisdictions recognized by the US State Department and IRS (not including the 14 US dependencies for which FATCA withholding does not apply), 45 do not yet have an FFI registration. But of the 205 countries and jurisdictions with FFI registrations, 20% of the total registered FFIs are Cayman Islands firms (14,837) (see my article of June 8).

There is not one reliable number of how many financial entities in the world qualify as a financial institution requiring FATCA registration. The list of FFIs requiring registration includes, by example, trusts companies, certain trusts, life insurance companies, investment funds, banks. The IRS has said that “At this time, the full FFI list is expected to be less than 500,000 records.”

Some financial pundits are estimating as many as twice this figure. Yet it seems that the categories of ‘certified deemed compliant’ FFIs and exempt FFIs should soak up a number of small, local FFIs. Yet, the UK Revenue HMRC estimates 75,000 of its FFIs are impacted by FATCA (http://www.hmrc.gov.uk/fatca/itc-regs-2013.pdf – page 4) (down from 300,000 prior to the UK-USA IGA). If the UK, as one albeit important financial center, requires anything close to 75,000 FFI registrations, then the IRS figure of 500,000 FFI registrations is far too low. Note that the ‘500,000’ FFI figure, if it excludes the corresponding branch registrations in other jurisdictions, and if it excludes the five classifications of “Certified Deemed Compliant”, seems more realistic.

BRIC Registration

Brazil leads the BRIC countries with 2,258 FFI registered, followed by Russia (515), India (247) with China only having 212.

NAFTA Registrations

2,265 FFIs registered from Canada and Mexico at 419.

Major OECD Countries Registrations

The United Kingdom (6,264) Revenue has recently announced that it will not adopt the IRS issued six-month extension (until December 31, 2014) for entity accounts (see my articles of May 5^th and 2^nd). Thus, from July 1st, UK FFIs must document all personal and entity accounts under the requirements for “new” accounts as opposed as to “pre-existing” account due diligence procedures.

Australia (1,865), France (2,291), Germany (2,255), Ireland (1,757) and Netherlands (2,054).

European Financial Centers Registrations

Switzerland (4,041), Luxembourg (3,561), Austria (2,979), Lichtenstein (240). Guernsey (2,396), Jersey (1,619), Isle of Man (313) and Gibraltar (97).

Caribbean Financial Centers Registrations

BVI (1,838), Bahamas (611), Bermuda (1,243) and Panama (451).

State of Palestine Registrations

23 FFIs registered with the IRS, listed as from the State of Palestine. Primarily MENA banks and a branch of HSBC Middle East Bank. See June 8th article about this contentious issue.

North Korean Registrations

While North Korean remains a sanctioned country by OFAC (see http://www.treasury.gov/resource-center/sanctions/Programs/pages/nkorea.aspx) with a FINCEN AML update available at http://www.fincen.gov/statutes_regs/guidance/pdf/FIN-2013-A005.pdf, it had 4 FFI branches register.

“Other” Registrations

23 financial firms listed “other” as the country / jurisdiction. By example, Harneys Nevis by example should probably register under Nevis (or where it is incorporated, if not Nevis)? Why is the Austrian insurance group, Sigal Life UNIQA group Austria, registered under “Other”? Perhaps the July 1st list will have movement from “Other” to actual countries?

Interesting Research on the UK FFI List (by the subscriber “Edelweiss” in the comments on this blog)

Edelweiss has posted his research on the UK’s 6.264 registered FFIs (under comments to another one of this blog’s articles). I think his research bears repeating in this article. By example, he reviewed the list by GIIN and determined that about 1% of the global sign-ups of the June 2nd GIIN list are affiliated with AXA SA, the French financial services firm.

He then compares the 6,264 entities registered from the UK with the HMRC estimate (pg. 4) of 75,000 impacted FFIs (down from 300,000 prior to the IGA), finding that less than 10% of UK FFIs registered for the June GIIN list. Either the HMRC estimated horribly wrong, or most UK FFIs are still undertaking initial FATCA preparation (relying on the October 25th registration deadline imposed by HRMC instead).

The UK list is dominated by fund management firms and their various funds, private equity and the plethora of feeder funds investment trusts and quite a few trusts. Bridgepoint, a small UK private equity firm, has 72 entities (globally), while 3i, a similarly small UK private equity firm, has 45 entities (globally).
There are quite a few entities that appear to have names suggesting they are part of a private equity holding company structure.
Globally, he found 26 mentions of “Bidco”, 157 of “Holdco”, 37 “Midco”, 44 “Topco”, 144 “Acquisition”, 156 “Mezzanine”.
He found 321 instances of “LLP” and “265″ instances of partnership
Finally, he found 16 “deceased” and 33 “will trust”

Model 1 IGA – 31 (followed by number of registered FFIs/branches)

Model 2 IGA – 5

Jurisdictions that have reached agreements in substance:

Model 1 IGA – 43 (followed by number of registered FFIs)

Antigua and Barbuda (6-3-2014): 36
Azerbaijan (5-16-2014): 17
Bahamas (4-17-2014): 611
Barbados (5-27-2014): 124
Belarus (6-6-2014): 65
Brazil (4-2-2014): 2,259
British Virgin Islands (4-2-2014): 1,838
Bulgaria (4-23-2014): 73
Colombia (4-23-2014): 173
Croatia (4-2-2014): 51
Curaçao (4-30-2014): 174
Czech Republic (4-2-2014): 93
Cyprus (4-22-2014): 280
Dominica (6-19-2014): 17 < – new entry
Georgia (6-12-201): 25
Grenada (6-16-2014): 32 < – new entry
India (4-11-2014): 247
Indonesia (5-4-2014): 308
Israel (4-28-2014): 322
Kosovo (4-2-2014) – nil
Kuwait (5-1-2014): 78
Latvia (4-2-2014): 41
Lithuania (4-2-2014): 22
Panama (5-1-2014): 451
Peru (5-1-2014): 165
Poland (4-2-2014): 165
Portugal (4-2-2014): 256
Qatar (4-2-2014): 47
Romania (4-2-2014): 110
St. Kitts and Nevis (6-4-2014): 71
St. Lucia (6-12-2014): 61
St. Vincent and the Grenadines (6-2-2014): 105
Saudi Arabia (6-24-2014): 18 < – new entry
Seychelles (5-28-2014): 38
Singapore (5-5-2014): 784
Slovak Republic (4-11-2014): 55
South Korea (4-2-2014): 397
Sweden (4-24-2014): 313
Thailand (6-24-2014): 768 < – new entry
Turkey (6-3-2014): 66
Turkmenistan (6-3-2014): 1
Turks and Caicos Islands (5-12-2014): 28
United Arab Emirates (5-23-2014): 136

Model 2 IGA – 4

Armenia (5-8-2014): 28
Hong Kong (5-9-2014): 1.540
Paraguay (6-6-2014): 18
Taiwan (6-23-2014): 409 < – new entry

Practical Compliance Guide for FATCA

Posted in FATCA | Tagged: FATCA, FFI, GIIN, IGA, Withholding tax | Leave a Comment »

FFI Agreements Amended by IRS One Week Before Withholding Starts

Posted by William Byrnes on June 24, 2014

On June 24, 2014 the IRS released an updated version of the FATCA FFI Agreement for Participating FFI and Reporting Model 2 FFI, just one week before FATCA withholding begins July 1st. The previous FFI agreement version was released January 13^th as Revenue Procedure 2014-13 (see my article link).

The IRS has updated the FFI agreement make it consistent with the coordination temporary regulations under chapter 4 of the Code, chapters 3 and 61 of the Code, and section 3406, which were released on February 20, 2014. (link to my article on these US Withholding and Documentation Rules changes).

This revenue procedure also provides guidance to FFIs and branches of FFIs treated as reporting financial institutions under an applicable Model 2 intergovernmental agreement (IGA) (reporting 2 Model 2 FFIs) on complying with the terms of the FFI agreement, as modified by the Model 2 IGA. The FFI agreement does not apply to a reporting Model 1 FFI, or any branch of such an FFI, unless the reporting Model 1 FFI has registered a branch located outside of a Model 1 IGA jurisdiction so that such branch may be treated as a participating FFI or reporting Model 2 FFI. In such a case, the terms of the applicable FFI agreement apply to the operations of such branch.

A reporting Model 2 FFI should apply the FFI agreement by substituting the term “reporting Model 2 FFI” for “participating FFI” throughout the FFI agreement, except in cases where the FFI agreement explicitly refers to a reporting Model 2 FFI. The FFI agreement in section 5 of this revenue procedure shall apply to an FFI that has submitted a FATCA registration with the IRS to be treated as a participating FFI (including a reporting Model 2 FFI) and that has received a global intermediary identification number (GIIN), regardless of whether the FFI receives a GIIN before or after the effective date of this revenue procedure.

How Many FFIS are Impacted by this Change?

About 26% (19,960) of the registered FFIs are impacted by the FFI agreement changes, in addition to any new registrations from the current 9 Model 2 countries/jurisdictions and 171 countries/jurisdictions without an IGA.

77,353 financial institutions and their branches registered from 205 countries and jurisdictions, of a total of 250 countries and jurisdictions recognized by the USA.

Of this total registered, 71,219 FFIs (92%) registered from the 79 countries and jurisdictions that as of June 23^rd have an IGA. 57,393 FFIs registered from Model I IGA jurisdictions probably either as a category of a Model 1 Deemed Compliant FFI or as a branch. However, 13,826 of these registered as Model 2 reporting FFIs or branches. At least these 13,826 are impacted by the FFI Agreement changes.

Model 2 IGAs – 9 (13,826 FFI Registered)

Armenia (5-8-2014): 27
Austria (4-29-2014): 2,978
Bermuda (12-19-2013): 1,242
Chile (3-5-2014): 324
Hong Kong (5-9-2014): 1.539
Japan (6-11-2013): 3,251
Paraguay (6-6-2014): 17
Switzerland (2-14-2013): 4,040
Taiwan: 408

Non IGA Registrations (Participating FFI and other)

Only 6,134 FFIs registered from the remaining non-IGA countries / jurisdictions either as Participating FFIs or branches. These 6,134 are also impacted by the FFI agreement changes.

45 countries and jurisdictions did not have a single FFI or branch registration on the GIIN List. Presumably, FFIs and / or branches from these countries, such as Kosovo, will find their way unto the July 1^st GIIN list.

Meanwhile, 30% withholding on all withholdable payments to nonparticipating FFIs in the 171 non-IGA countries begins next week on July 1. 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).

Updates to FFI Agreement

Definitions

Several definitions in section 2 of the FFI agreement are updated. For example, the terms chapter 4 withholding rate pool (including the U.S. payee pool) and chapter 4 reporting pool have been redefined and are further clarified.

Incorporating Six Month Extension for Entities

Section 3.02 of the FFI agreement is revised to incorporate the allowance for treating an obligation held by an entity that is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015 as a preexisting obligation for purposes of applying the due diligence procedures under chapter 4 and the regulations thereunder, except that an FFI may not apply the documentation exception.

Back Up Withholding in Certain Situations

Sections 4.01(D), 4.02(B), 6.05(A)(2), 6.07, and 9.02(B) of the FFI agreement are also updated to reflect that a participating FFI may elect to backup withhold under section 3406 rather than to withhold under chapter 4 on a withholdable payment that is a reportable payment made to certain U.S. non-exempt recipients only if the participating FFI complies with the information reporting rules under chapter 61 with respect to payments made to such account holders.

Depositing Withheld Tax

In addition, section 5.02 of the FFI agreement (regarding tax withheld and set aside in escrow with respect to withholdable payments to certain dormant accounts) is revised to conform to the temporary chapter 4 regulations for when the tax must be deposited.

Lead FFI Responsibility

Section 11.02(B) of the FFI agreement is revised to clarify that the responsibilities of a lead FI are only with respect to members of the FFI group that have designated the participating FFI to act as lead FI on their behalf. Additionally, if an FFI group has a consolidated compliance program, the participating FFI that is also the compliance FI for the members of the FFI group that are included in such compliance program must act as the lead FI for each such member of the FFI group.

PFFI Reporting NFFE Account Holder as a U.S. Account

Section 9.02(B) of the FFI agreement also is revised to allow a participating FFI that receives a withholdable payment that is allocable to an account holder of the FFI that is a passive NFFE with one or more substantial U.S. owner(s) (or, in the case of a reporting Model 2 FFI, with one or more controlling persons as defined under the applicable IGA) to certify on a withholding statement provided to the withholding agent that the FFI is reporting the account holder as a U.S. account under the terms of the FFI agreement.

When finalizing the temporary chapter 4 regulations, the Treasury Department and the IRS intend to amend the regulations to allow a withholding agent to rely on such a certification provided by a participating FFI, reporting Model 2 FFI, or reporting Model 1 FFI, which, absent a reason to know that the certificate is incorrect or unreliable, would relieve the withholding agent of its obligation to obtain and report information about a passive NFFE with substantial U.S. owners under section 1472. This amendment is intended to eliminate duplicative reporting of substantial U.S. owners (or controlling persons) of passive NFFEs required under section 1472 as well as under the U.S. account reporting requirements of a participating FFI, reporting Model 2 FFI, or reporting Model 1 FFI under chapter 4 or an applicable IGA.

Portional Allocation of Withholdable Payments

Section 9.02(B) is also revised to provide that a participating FFI may allocate a portion of a withholdable payment to a group of documented account holders (other than nonqualified intermediaries or flow-through entities) for whom withholding and reporting is not required under chapter 3, 4, or 61. For example, a participating FFI may allocate a payment of bank deposit interest to a pool of documented foreign account holders rather than providing specific information and a valid withholding certificate or other appropriate documentation for each such payee. The Treasury Department and the IRS intend to amend the regulations to incorporate this change when the temporary chapter 4 regulations are finalized.

FFI Agreement Sections

Section 1. Purpose And Scope
Section 2. Definitions
Section 3. Due Diligence Requirements For Documentation And Identification Of Account Holders And Nonparticipating FFI Payees
Section 4. Withholding Requirements
Section 5. Deposit Requirements
Section 6. Information Reporting And Tax Return Obligations
Section 7. Legal Prohibitions On Reporting U.S. Accounts And On Withholding
Section 8. Compliance Procedures
Section 9. Participating FFI Withholding Certificate
Section 10. Adjustments For Overwithholding And Underwithholding And Refunds
Section 11. FFI Group
Section 12. Expiration, Modification, Termination, Default, And Renewal Of This Agreement
Section 13. Miscellaneous Provisions

Practical Compliance Aspects of FATCA and GATCA

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Posted in FATCA | Tagged: FATCA, FFI agreement, IGA, Model 2 IGA, NFFE, participating FFI, reporting FFI, withholding | 2 Comments »

New 2014 FATCA Form W-8IMY and Instructions Analysis

Posted by William Byrnes on June 24, 2014

W-8IMY (Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting)

On June 19, 2014 the IRS released the new Form W-8IMY instructions.

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.

Filing Form W-8IMY with the withholding agent before payment.

The filer does not send Form W-8IMY to the IRS. Instead, the filer gives it to the withholding agent who is requesting it. Generally, this withholding agent will be the one from whom the filer receives a payment, who credits the filer’s account, or a partnership that allocates income to the filer. The filer should give Form W-8IMY to the withholding agent requesting it before income is paid, credited, or allocated to the filer account.

Form W-8IMY by Part

Part I Identification of Entity
Part II Disregarded Entity or Branch Receiving Payment.

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 of 25 potential classifications. The classification indicated determines which one of the further W-8IMY Parts IX through XXVII must be completed.

Nonparticipating FFI (including a limited FFI or limited branch). Complete Part IX (if applicable).
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).
Territory financial institution. Complete Part V.
Sponsored FFI that has not obtained a GIIN (other than a certified deemed-compliant sponsored, closely held investment vehicle). Complete Part X.
Certified deemed-compliant nonregistering local bank. Complete Part XII.
Certified deemed-compliant FFI with only low-value accounts. Complete Part XIII.
Certified deemed-compliant sponsored, closely held investment vehicle. Complete Part XIV.
Certified deemed-compliant limited life debt investment entity. Complete Part XV.
Owner-documented FFI. Complete Part XI.
Restricted distributor. Complete Part XVI.
Foreign central bank of issue. Complete Part XVII.
Nonreporting IGA FFI. Complete Part XVIII.
Exempt retirement plans. Complete Part XIX.
Excepted nonfinancial group entity. Complete Part XX.
Excepted nonfinancial start-up company. Complete Part XXI.
Excepted nonfinancial entity in liquidation or bankruptcy. 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.
Direct reporting NFFE.
Sponsored direct reporting NFFE. Complete Part XXVII.

Part II of the W-8IMY 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.

Who Must File W-8IMY?

An entity should provide Form W-8IMY when receiving a reportable amount or withholdable payment on behalf of another person or as a flow-through entity.

A foreign person, or a foreign branch of a U.S. person, to establish that it is a qualified intermediary that is not acting for its own account, to represent that it has provided or will provide a withholding statement, as required, or, if applicable, to represent that it has assumed primary withholding responsibility under chapters 3 and 4 of the Code and/or primary Form 1099 reporting and backup withholding responsibility.
A foreign person to establish that it is a nonqualified intermediary that is not acting for its own account, to certify its chapter 4 status (if required), to certify whether it reports U.S. accounts under chapter 4 (if required), and to indicate, if applicable, that it is using the form to transmit withholding certificates and/or other documentary evidence and has provided, or will provide, a withholding statement, as required. A U.S. person cannot be a nonqualified intermediary.
A U.S. branch that is acting as an intermediary to represent that the income it receives is not effectively connected with the conduct of a trade or business within the United States and either that it is using the form (a) to evidence it is treated as a U.S. person under Regulations section 1.1441-1(b)(2)(iv)(A) with respect to any payments associated with the Form W-8IMY, or (b) to certify to its chapter 4 status and to transmit the documentation of the persons for whom it receives a payment and has provided, or will provide, a withholding statement, as required.
A financial institution incorporated or organized under the laws of a U.S. territory that is acting as an intermediary or is a flow-through entity to represent that it is a financial institution (other than an investment entity that is not also a depository institution, custodial institution, or specified insurance company) and either that it is using the form (a) to evidence it is treated as a U.S. person under Regulations section 1.1441-1(b)(2)(iv)(A) with respect to any payments associated with the Form W-8IMY, or (b) to certify that it is transmitting documentation of the persons for whom it receives a payment and has provided, withholding statement, as required.
A foreign partnership or a foreign simple or grantor trust to establish that it is a withholding foreign partnership or withholding foreign trust under the regulations for sections 1441 and 1442 and to certify its chapter 4 status (if required).
A foreign partnership or a foreign simple or grantor trust to establish that it is a nonwithholding foreign partnership or nonwithholding foreign simple or grantor trust for purposes of sections 1441 and 1442, to certify to its chapter 4 status (if required), and to represent that the income is not effectively connected with a U.S. trade or business, that the form is being used to transmit withholding certificates and/or documentary evidence, and that it has provided or will provide a withholding statement as required.
A foreign partnership or foreign grantor trust to establish that it is an upper-tier foreign partnership or foreign grantor trust for purposes of section 1446 and to represent that the form is being used to transmit withholding certificates and/or documentary evidence and that it has provided, or will provide, a withholding statement, as required.
A flow-through entity (including a foreign reverse hybrid entity) transmitting withholding certificates and/or other documentary evidence to claim treaty benefits on behalf of its owners, to certify its chapter 4 status (if required), and to certify that it has provided, or will provide, a withholding statement, as required.
A nonparticipating FFI acting as an intermediary or that is a flow-through entity using this form to transmit a withholding statement and withholding certificates or other documentation for exempt beneficial owners described in Regulations section 1.1471-6.
A QSL certifying to a withholding agent that it is acting as a QSL with respect to U.S. source substitute dividends received from the withholding agent pursuant to a securities lending transaction (as described in Notice 2010-46).
A foreign intermediary or flow-through entity not receiving withholdable payments or reportable amounts that is holding an account with a participating FFI or registered deemed-compliant FFI providing this form for purposes of documenting the chapter 4 status of the account holder. However, no withholding statement is required to be provided along with Form W-8IMY if it is being provided by an FFI solely to document such an account when no withholdable payments or reportable amounts are made to the account. Also note that the entity may instead provide Form W-8BEN-E when it is not receiving withholdable payments or reportable amounts to document its status as an account holder.

Partnership allocations

Form W-8IMY may be submitted and accepted to satisfy documentation requirements for purposes of withholding on certain partnership allocations to foreign partners under section 1446. Section 1446 generally requires withholding when a partnership is conducting a trade or business in the United States and allocates income effectively connected with that trade or business (ECI) to foreign persons that are partners in the partnership. Section 1446 can also apply when certain income is treated as effectively connected income of the partnership and is so allocated.

Chapter 3 and Chapter 4 status Certification by Filer required with Applicable Documentation

In general, intermediaries and flow-through entities receiving reportable amounts will be required to provide both their chapter 3 status and the chapter 3 status of persons for whom they receive such payments.

An intermediary or flow-through entity receiving a withholdable payment will also be required to provide its chapter 4 status and the chapter 4 status of persons for whom it receives a withholdable payment when required for chapter 4 purposes.

Parts III – VIII: Chapter 3 Status Certifications

Parts III – VIII of this form address the QI Status of the entity.

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

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.

Parts IX – XXVI: Chapter 4 Status Certifications

Parts IX – XXVI of this form address the filer certifying the FATCA Status of the entity, beginning with a check the box selection of “I certify that …”, followed by the definition components of each classification. These classifications include the new classification of a Restricted Distributor (Part XVI), but do not include the new classification of a Reporting NFFE.

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

Part IX is not required to be completed unless the filer is a nonparticipating FFI providing documentation on behalf of an exempt beneficial owner (by example, a local qualifying retirement fund).

Part XI – An owner-documented FFI should only complete Form W-8IMY if it is a flow-through entity receiving income allocable to its partners, owners, or beneficiaries. An owner-documented FFI is not permitted to act as an intermediary with respect to a withholdable payment.

Part XVIII – A nonreporting FFI pursuant to an IGA must indicate that it is to be treated as such under an applicable IGA, including an entity treated as a registered deemed-compliant FFI under an applicable IGA. The nonreporting IGA FFI must identify the applicable IGA by entering the name of the jurisdiction that has the applicable IGA in effect with the United States. It must also provide the withholding agent with the class of entity described in Annex II of the IGA applicable to its nonreporting FFI IGA status. If the nonreporting FFI IGA is claimed pursuant to a Model 2 IGA, then the FFI treated as a registered deemed-compliant FFI under that applicable Model 2 IGA must provide a GIIN in the space provided.

If the filer is a sponsored FFI in a Model 1 IGA jurisdiction or other nonreporting FFI in a Model 1 IGA jurisdiction that is required to report an account, it is not currently required to provide a GIIN in this Part. However, a future version of this form may require it to provide a GIIN.

Entities Providing Certifications Under an Applicable IGA

A withholding agent that is an FFI may provide a chapter 4 status certification other than as shown in Parts IX through XXVII in order to satisfy its due diligence requirements under an applicable IGA. In such a case, attach the alternative certifications to this Form W-8IMY in lieu of completing a certification otherwise required in Parts IX through XXVII provided that the withholding agent:

determine that the certification accurately reflects the status for chapter 4 purposes or under an applicable IGA; and
the withholding agent provides a written statement that it has provided the certification to meet its due diligence requirements as a participating FFI or registered deemed-compliant FFI under an applicable IGA.

The filer may also provide with this form an applicable IGA certification if it determines its chapter 4 status under the definitions provided in an applicable IGA and that certification identifies the jurisdiction that is treated as having an IGA in effect and describes the filer status as an NFFE or FFI in accordance with the applicable IGA. However, if the filer determines its status under an applicable IGA as an NFFE, it must still determine if it is an excepted NFFE under the regulations in order to complete this form. Additionally, it is required to comply with the conditions of its chapter 4 status under the law of the IGA jurisdiction if it determines its status under an applicable IGA.

Entities Providing Alternate Certifications Under Regulations

If the filer qualifies for a chapter 4 status that is not shown in Part I, line 5, of this form, it may attach applicable certifications for such status from any other Form W-8 on which the relevant certifications appear.

For example, if the filer is a certified deemed-compliant investment advisor or investment manager described in Regulations section 1.1471-5(f)(2)(v)
that is a flow-through entity, it may instead attach the certifications found in Part IX of Form W-8BEN-E.

If the applicable certifications do not appear on any Form W-8 (if, for example, new regulations provide for an additional chapter 4 status and this form has not been updated) then the filer may provide an attachment certifying that it qualifies for the applicable status described in a particular Regulations section in lieu of checking a box in Part I, line 5. The filer must also include a citation to the applicable provision in the Regulations.

Final 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.”

Expiration of Form W-8IMY

Generally, a Form W-8IMY remains valid until the status of the person whose name is on the certificate is changed in a way relevant to the certificate or there is a change in circumstances that makes the information on the certificate no longer correct. The indefinite validity period does not extend, however, to any other withholding certificates, documentary evidence, or withholding statements associated with the certificate.

Change in circumstances.

If a change in circumstances makes any information on the Form W-8IMY (or any documentation or a withholding statement associated with the Form W-8IMY) have submitted incorrect for purposes of chapter 3 or chapter 4 (when relevant), the intermediary must notify the withholding agent within 30 days and file a new Form W-8IMY or provide new documentation or a new withholding statement (as applicable).

The information associated with Form W-8IMY must be updated as often as is necessary to enable the withholding agent to withhold at the appropriate rate on each payment and to report such income.

(See Regulations sections 1.1441-1(e)(4)(ii)(D) for the definition of a change in circumstances for purposes of chapter 3. See Regulations section 1.1471-3(c)(6)(ii)(E) for the definition of a change in circumstances for purposes of chapter 4.)

Part XXVII Sponsored Direct Reporting NFFE

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Chapter 1 Background and Current Status of FATCA
Chapter 1A The International Financial System and FATCA
Chapter 2 Practical Considerations for Developing a FATCA Compliance Program
Chapter 2A FATCA Internal Policy
Chapter 3 FATCA Compliance and Integration of Information Technology
Chapter 4 Financial Institution Account Remediation
Chapter 4A FATCA Customer Outreach
Chapter 5 FBAR and Form 8938 Reporting and List of International Taxpayer IRS Forms
Chapter 6 Determining U.S. Ownership of Foreign Entities
Chapter 7 Foreign Financial Institutions
Chapter 7A Account reporting under FATCA
Chapter 8 Non-Financial Foreign Entities
Chapter 9 FATCA and the Offshore Trust Industry
Chapter 10 FATCA and the Insurance Industry
Chapter 11 Withholding and Qualified Intermediary
Chapter 12 FATCA Withholding Compliance
Chapter 13 “Withholdable” Payments
Chapter 13A Reporting Payments
Chapter 14 Determining and Documenting the Payee
Chapter 14A W8 Equivalents
Chapter 15 Framework of Intergovernmental Agreements
Chapter 16 Analysis of Current Intergovernmental Agreements
Chapter 17 European Union Cross Border Information Reporting
Chapter 18 The OECD Role in Exchange of Information: The Trace Project, FATCA, and Beyond
Chapter 19 Germany
Chapter 20 Ireland
Chapter 21 Japan
Chapter 22 Mexico
Chapter 23 Switzerland
Chapter 24 United Kingdom
Chapter 25 Brazil
Chapter 26 British Virgin Islands
Chapter 27 Canada
Chapter 28 Spain
Chapter 29 China
Chapter 30 Netherlands
Chapter 31 Luxembourg
Chapter 32 Russia
Chapter 33 Turkey
Chapter 34 India
Chapter 35 Argentina
Chapter 36 Aruba
Chapter 37 Australia
Chapter 38 Bermuda
Chapter 39 Colombia
Chapter 40 Cyprus
Chapter 41 Hong Kong
Chapter 42 Macau
Chapter 43 Portugal
Chapter 44 South Africa
Chapter 45 France
Chapter 46 Gibraltar
Chapter 47 Guernsey
Chapter 48 Italy

Posted in FATCA | Tagged: FATCA, FFI, W-8IMY | 6 Comments »

new Form W-8IMY Instructions released June 19!

Posted by William Byrnes on June 19, 2014

W-8IMY: Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting

On June 19, 2014 the IRS released the new Form W-8IMY instructions.

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.

Who Must File?

An entity should provide Form W-8IMY when receiving a reportable amount or withholdable payment on behalf of another person or as a flow-through entity.

Form W-8IMY must be provided by the following persons:

A foreign person, or a foreign branch of a U.S. person, to establish that it is a qualified intermediary that is not acting for its own account, to represent that it has provided or will provide a withholding statement, as required, or, if applicable, to represent that it has assumed primary withholding responsibility under chapters 3 and 4 of the Code and/or primary Form 1099 reporting and backup withholding responsibility.
A foreign person to establish that it is a nonqualified intermediary that is not acting for its own account, to certify its chapter 4 status (if required), to certify whether it reports U.S. accounts under chapter 4 (if required), and to indicate, if applicable, that it is using the form to transmit withholding certificates and/or other documentary evidence and has provided, or will provide, a withholding statement, as required. A U.S. person cannot be a nonqualified intermediary
A U.S. branch that is acting as an intermediary to represent that the income it receives is not effectively connected with the conduct of a trade or business within the United States and either that it is using the form (a) to evidence it is treated as a U.S. person under Regulations section 1.1441-1(b)(2)(iv)(A) with respect to any payments associated with the Form W-8IMY, or (b) to certify to its chapter 4 status and to transmit the documentation of the persons for whom it receives a payment and has provided, or will provide, a withholding statement, as required.
A financial institution incorporated or organized under the laws of a U.S. territory that is acting as an intermediary or is a flow-through entity to represent that it is a financial institution (other than an investment entity that is not also a depository institution, custodial institution, or specified insurance company) and either that it is using the form (a) to evidence it is treated as a U.S. person under Regulations section 1.1441-1(b)(2)(iv)(A) with respect to any payments associated with the Form W-8IMY, or (b) to certify that it is transmitting documentation of the persons for whom it receives a payment and has provided, withholding statement, as required.
A foreign partnership or a foreign simple or grantor trust to establish that it is a withholding foreign partnership or withholding foreign trust under the regulations for sections 1441 and 1442 and to certify its chapter 4 status (if required).
A foreign partnership or a foreign simple or grantor trust to establish that it is a nonwithholding foreign partnership or nonwithholding foreign simple or grantor trust for purposes of sections 1441 and 1442, to certify to its chapter 4 status (if required), and to represent that the income is not effectively connected with a U.S. trade or business, that the form is being used to transmit withholding certificates and/or documentary evidence, and that it has provided or will provide a withholding statement as required.
A foreign partnership or foreign grantor trust to establish that it is an upper-tier foreign partnership or foreign grantor trust for purposes of section 1446 and to represent that the form is being used to transmit withholding certificates and/or documentary evidence and that it has provided, or will provide, a withholding statement, as required.
A flow-through entity (including a foreign reverse hybrid entity) transmitting withholding certificates and/or other documentary evidence to claim treaty benefits on behalf of its owners, to certify its chapter 4 status (if required), and to certify that it has provided, or will provide, a withholding statement, as required.
A nonparticipating FFI acting as an intermediary or that is a flow-through entity using this form to transmit a withholding statement and withholding certificates or other documentation for exempt beneficial owners described in Regulations section 1.1471-6.
A QSL certifying to a withholding agent that it is acting as a QSL with respect to U.S. source substitute dividends received from the withholding agent pursuant to a securities lending transaction (as described in Notice 2010-46).
A foreign intermediary or flow-through entity not receiving withholdable payments or reportable amounts that is holding an account with a participating FFI or registered deemed-compliant FFI providing this form for purposes of documenting the chapter 4 status of the account holder. However, no withholding statement is required to be provided along with Form W-8IMY if it is being provided by an FFI solely to document such an account when no withholdable payments or reportable amounts are made to the account. Also note that the entity may instead provide Form W-8BEN-E when it is not receiving withholdable payments or reportable amounts to document its status as an account holder.

Giving Form W-8IMY to the withholding agent. Do not send Form W-8IMY to the IRS. Instead, give it to the person who is requesting it. Generally, this person will be the one from whom you receive the payment, who credits your account, or a partnership that allocates income to you.

When to provide Form W-8IMY to the withholding agent? Give Form W-8IMY to the person requesting it before income is paid, credited, or allocated to your account.

Expiration of Form W-8IMY. Generally, a Form W-8IMY remains valid until the status of the person whose name is on the certificate is changed in a way relevant to the certificate or there is a change in circumstances that makes the information on the certificate no longer correct. The indefinite validity period does not extend, however, to any other withholding certificates, documentary evidence, or withholding statements associated with the certificate.

Change in circumstances. If a change in circumstances makes any information on the Form W-8IMY (or any documentation or a withholding statement associated with the Form W-8IMY) have submitted incorrect for purposes of chapter 3 or chapter 4 (when relevant), the intermediary must notify the withholding agent within 30 days and file a new Form W-8IMY or provide new documentation or a new withholding statement (as applicable).

The information associated with Form W-8IMY must be updated as often as is necessary to enable the withholding agent to withhold at the appropriate rate on each payment and to report such income.

See Regulations sections 1.1441-1(e)(4)(ii)(D) for the definition of a change in circumstances for purposes of chapter 3. See Regulations section 1.1471-3(c)(6)(ii)(E) for the definition of a change in circumstances for purposes of chapter 4.

Chapter 3 and Chapter 4 Status

An intermediary or flow-through entity receiving a withholdable payment will be required to provide its chapter 4 status and the chapter 4 status of persons for whom it receives a withholdable payment when required for chapter 4 purposes.

Partnership Allocations

Form W-8IMY

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

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

Practical Compliance Aspects of FATCA and GATCA

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Posted in FATCA | Tagged: FATCA, FFI, W-8IMY, withholding | Leave a Comment »

How Many Countries and Jurisdictions May Have “Foreign” Financial Institutions That May Need to Register for FATCA?

Posted by William Byrnes on June 17, 2014

As mentioned in the June 8th article, the USA recognizes 196 independent states in the world (the IRS recognizes the State of Palestine according to the FATCA GIIN list, otherwise the State Department only recognizes 195), 67 dependencies of states, and has contacts with Taiwan. But 14 of the dependencies are administered by the United States. So with Taiwan and Palestine counted, but exempting the US dependent Islands, 54 jurisdictions have financial institutions that are subject to FATCA registration. Thus, the total is 250.

I list below all the countries and jurisdictions recognized by the US State Department (but for Palestine which is not on the US State Department list).

STATES

Short-form name	Long-form name
Afghanistan *+	Islamic Republic of Afghanistan
Albania *+	Republic of Albania
Algeria *+	People’s Democratic Republic of Algeria
Andorra *+	Principality of Andorra
Angola *+	Republic of Angola
Antigua and Barbuda *+	Antiqua and Barbuda
Argentina *+	Argentine Republic
Armenia *+	Republic of Armenia
Australia *+	Commonwealth of Australia
Austria *+	Republic of Austria
Azerbaijan *+	Republic of Azerbaijan
Bahamas, The *+	Commonwealth of The Bahamas
Bahrain *+	Kingdom of Bahrain
Bangladesh *+	People’s Republic of Bangladesh
Barbados *+	Barbados
Belarus *+	Republic of Belarus
Belgium *+	Kingdom of Belgium
Belize *+	Belize
Benin *+	Republic of Benin
Bhutan +	Kingdom of Bhutan
Bolivia *+	Plurinational State of Bolivia
Bosnia and Herzegovina *+	Bosnia and Herzegovina
Botswana *+	Republic of Botswana
Brazil *+	Federative Republic of Brazil
Brunei *+	Brunei Darussalam
Bulgaria *+	Republic of Bulgaria
Burkina Faso *+	Burkina Faso
Burma *+	Union of Burma
Burundi *+	Republic of Burundi
! Cabo Verde *+	! Republic of Cabo Verde
Cambodia *+	Kingdom of Cambodia
Cameroon *+	Republic of Cameroon
Canada *+	Canada
Central African Republic *+	Central African Republic
Chad *+	Republic of Chad
Chile *+	Republic of Chile
China + (see note 3)*	People’s Republic of China
Colombia *+	Republic of Colombia
Comoros *+	Union of the Comoros
Congo (Brazzaville) + (see note 4)*	Republic of the Congo
Congo (Kinshasa) + (see note 4)*	Democratic Republic of the Congo
Costa Rica *+	Republic of Costa Rica
Côte d’Ivoire *+	Republic of Côte d’Ivoire
Croatia *+	Republic of Croatia
Cuba +	Republic of Cuba
Cyprus *+	Republic of Cyprus
Czech Republic *+	Czech Republic
Denmark *+	Kingdom of Denmark
Djibouti *+	Republic of Djibouti
Dominica *+	Commonwealth of Dominica
Dominican Republic *+	Dominican Republic
Ecuador *+	Republic of Ecuador
Egypt *+	Arab Republic of Egypt
El Salvador *+	Republic of El Salvador
Equatorial Guinea *+	Republic of Equatorial Guinea
Eritrea *+	State of Eritrea
Estonia *+	Republic of Estonia
Ethiopia *+	Federal Democratic Republic of Ethiopia
Fiji *+	Republic of Fiji
Finland *+	Republic of Finland
France *+	French Republic
Gabon *+	Gabonese Republic
Gambia, The *+	Republic of The Gambia
Georgia *+	Georgia
Germany *+	Federal Republic of Germany
Ghana *+	Republic of Ghana
Greece *+	Hellenic Republic
Grenada *+	Grenada
Guatemala *+	Republic of Guatemala
Guinea *+	Republic of Guinea
Guinea-Bissau *+	Republic of Guinea-Bissau
Guyana *+	Co-operative Republic of Guyana
Haiti *+	Republic of Haiti
Holy See *	Holy See
Honduras *+	Republic of Honduras
Hungary *+	Hungary
Iceland *+	Republic of Iceland
India *+	Republic of India
Indonesia *+	Republic of Indonesia
Iran +	Islamic Republic of Iran
Iraq *+	Republic of Iraq
Ireland *+	Ireland
Israel *+	State of Israel
Italy *+	Italian Republic
Jamaica *+	Jamaica
Japan *+	Japan
Jordan *+	Hashemite Kingdom of Jordan
Kazakhstan *+	Republic of Kazakhstan
Kenya *+	Republic of Kenya
Kiribati *+	Republic of Kiribati
Korea, North +	Democratic People’s Republic of Korea
Korea, South *+	Republic of Korea
Kosovo *	Republic of Kosovo
Kuwait *+	State of Kuwait
Kyrgyzstan *+	Kyrgyz Republic
Laos *+	Lao People’s Democratic Republic
Latvia *+	Republic of Latvia
Lebanon *+	Lebanese Republic
Lesotho *+	Kingdom of Lesotho
Liberia *+	Republic of Liberia
Libya *+	Libya
Liechtenstein *+	Principality of Liechtenstein
Lithuania *+	Republic of Lithuania
Luxembourg *+	Grand Duchy of Luxembourg
Macedonia *+	Republic of Macedonia
Madagascar *+	Republic of Madagascar
Malawi *+	Republic of Malawi
Malaysia *+	Malaysia
Maldives *+	Republic of Maldives
Mali *+	Republic of Mali
Malta *+	Republic of Malta
Marshall Islands *+	Republic of the Marshall Islands
Mauritania *+	Islamic Republic of Mauritania
Mauritius *+	Republic of Mauritius
Mexico *+	United Mexican States
Micronesia, Federated States of *+	Federated States of Micronesia
Moldova *+	Republic of Moldova
Monaco *+	Principality of Monaco
Mongolia *+	Mongolia
Montenegro *+	Montenegro
Morocco *+	Kingdom of Morocco
Mozambique *+	Republic of Mozambique
Namibia *+	Republic of Namibia
Nauru *+	Republic of Nauru
Nepal *+	Federal Democratic Republic of Nepal
Netherlands *+	Kingdom of the Netherlands
New Zealand *+	New Zealand
Nicaragua *+	Republic of Nicaragua
Niger *+	Republic of Niger
Nigeria *+	Federal Republic of Nigeria
Norway *+	Kingdom of Norway
Oman *+	Sultanate of Oman
Pakistan *+	Islamic Republic of Pakistan
Palau *+	Republic of Palau
Panama *+	Republic of Panama
Papua New Guinea *+	Independent State of Papua New Guinea
Paraguay *+	Republic of Paraguay
Peru *+	Republic of Peru
Philippines *+	Republic of the Philippines
Poland *+	Republic of Poland
Portugal *+	Portuguese Republic
Qatar *+	State of Qatar
Romania *+	Romania
Russia *+	Russian Federation
Rwanda *+	Republic of Rwanda
Saint Kitts and Nevis *+	Federation of Saint Kitts and Nevis
Saint Lucia *+	Saint Lucia
Saint Vincent and the Grenadines *+	Saint Vincent and the Grenadines
Samoa *+	Independent State of Samoa
San Marino *+	Republic of San Marino
Sao Tome and Principe *+	Democratic Republic of Sao Tome and Principe
Saudi Arabia *+	Kingdom of Saudi Arabia
Senegal *+	Republic of Senegal
Serbia *+	Republic of Serbia
Seychelles *+	Republic of Seychelles
Sierra Leone *+	Republic of Sierra Leone
Singapore *+	Republic of Singapore
Slovakia *+	Slovak Republic
Slovenia *+	Republic of Slovenia
Solomon Islands *+	Solomon Islands
Somalia *+	! Federal Republic of Somalia
South Africa *+	Republic of South Africa
South Sudan *+	Republic of South Sudan
Spain *+	Kingdom of Spain
Sri Lanka *+	Democratic Socialist Republic of Sri Lanka
Sudan *+	Republic of the Sudan
Suriname *+	Republic of Suriname
Swaziland *+	Kingdom of Swaziland
Sweden *+	Kingdom of Sweden
Switzerland *+	Swiss Confederation
Syria *+	Syrian Arab Republic
Tajikistan *+	Republic of Tajikistan
Tanzania *+	United Republic of Tanzania
Thailand *+	Kingdom of Thailand
Timor-Leste *+	Democratic Republic of Timor-Leste
Togo *+	Togolese Republic
Tonga *+	Kingdom of Tonga
Trinidad and Tobago *+	Republic of Trinidad and Tobago
Tunisia *+	Tunisian Republic
Turkey *+	Republic of Turkey
Turkmenistan *+	Turkmenistan
Tuvalu *+	Tuvalu
Uganda *+	Republic of Uganda
Ukraine *+	Ukraine
United Arab Emirates *+	United Arab Emirates
United Kingdom *+	United Kingdom of Great Britain and Northern Ireland
United States +	United States of America
Uruguay *+	Oriental Republic of Uruguay
Uzbekistan *+	Republic of Uzbekistan
Vanuatu *+	Republic of Vanuatu
Venezuela *+	Bolivarian Republic of Venezuela
Vietnam *+	Socialist Republic of Vietnam
Yemen *+	Republic of Yemen
Zambia *+	Republic of Zambia
Zimbabwe *+	Republic of Zimbabwe

OTHER

Short-form name	Long-form name
Taiwan (see note 6)	(no long-form name)

Short-form name	Long-form name	Sovereignty	Administrative Center
Akrotiri (see note 15)	Akrotiri	United Kingdom	Episkopi (see note 16)
American Samoa	Territory of American Samoa	United States	Pago Pago
Anguilla	Anguilla	United Kingdom	The Valley
Antarctica	(no long-form name)	None (see note 2)	None
Aruba	(no long-form name)	Netherlands	Oranjestad
Ashmore and Cartier Islands	Territory of Ashmore and Cartier Islands	Australia	Administered from Canberra
Baker Island	(no long-form name)	United States	Administered from Washington, D.C.
Bermuda	Bermuda	United Kingdom	Hamilton
Bouvet Island	(no long-form name)	Norway	Admin. from Oslo
British Indian Ocean Territory (see note 3)	British Indian Ocean Territory	United Kingdom	None
Cayman Islands	Cayman Islands	United Kingdom	George Town
Christmas Island	Territory of Christmas Island	Australia	The Settlement (Flying Fish Cove)
Clipperton Island	(no long-form name)	France	Administered from Paris
Cocos (Keeling) Islands	Territory of Cocos (Keeling) Islands	Australia	West Island
Cook Islands	(no long-form name)	New Zealand	Avarua
Coral Sea Islands	Coral Sea Islands Territory	Australia	Administered from Canberra
Curaçao (see note 11)	(no long-form name)	Netherlands	Willemstad
Dhekelia (see note 15)	Dhekelia	United Kingdom	Episkopi (see note 16)
Falkland Islands (Islas Malvinas)	Falkland Islands (Islas Malvinas)	United Kingdom (see note 4)	Stanley
Faroe Islands	(no long-form name)	Denmark	Tórshavn
French Guiana (see note 5)
French Polynesia	(no long-form name)	France	Papeete
French Southern and Antarctic Lands (see note 6)	(no long-form name)	France	Administered from Paris
Gibraltar	Gibraltar	United Kingdom	Gibraltar
Greenland	(no long-form name)	Denmark	Nuuk (Godthåb)
Guadeloupe (see note 5)
Guam	Territory of Guam	United States	Hagatna
Guernsey (see note 7)	Bailiwick of Guernsey	British Crown Dependency	Saint Peter Port
Heard Island and McDonald Islands	Territory of Heard Island and McDonald Islands	Australia	Administered from Canberra
Hong Kong	Hong Kong Special Administrative Region	China (see note 8)	None
Howland Island	(no long-form name)	United States	Administered from Washington, D.C.
Isle of Man	(no long-form name)	British Crown Dependency	Douglas
Jan Mayen	(no long-form name)	Norway	Administered from Oslo (see note 9)
Jarvis Island	(no long-form name)	United States	Administered from Washington, D.C.
Jersey	Bailiwick of Jersey	British Crown Dependency	Saint Helier
Johnston Atoll	(no long-form name)	United States	Administered from Washington, D.C.
Kingman Reef	(no long-form name)	United States	Administered from Washington, D.C.
Macau	Macau Special Administrative Region	China (see note 10)	Macau
Martinique (see note 5)
! Mayotte (see note 5)
Midway Islands	(no long-form name)	United States	Administered from Washington, D.C.
Montserrat	Montserrat	United Kingdom	Plymouth
Navassa Island	(no long-form name)	United States	Administered from Washington, D.C.
New Caledonia	(no long-form name)	France	Nouméa
Niue	(no long-form name)	New Zealand	Alofi
Norfolk Island	Territory of Norfolk Island	Australia	Kingston
Northern Mariana Islands	Commonwealth of the Northern Mariana Islands	United States	Saipan
Palmyra Atoll	(no long-form name)	United States	Administered from Washington, D.C.
Paracel Islands	(no long-form name)	undetermined(see note 12)	None
Pitcairn Islands	Pitcairn, Henderson, Ducie, and Oeno Islands	United Kingdom	Adamstown
Puerto Rico	Commonwealth of Puerto Rico	United States	San Juan
Reunion (see note 5)
Saint Barthelemy	Saint Barthelemy	France	Gustavia
Saint Helena (see note 13)	Saint Helena, Ascension, and Tristan da Cunha	United Kingdom	Jamestown
Saint Martin (see note 17)	Saint Martin	France	Marigot
Saint Pierre and Miquelon	Territorial Collectivity of Saint Pierre and Miquelon	France	Saint-Pierre
Sint Maarten (see note 11)	(no long-form name)	Netherlands	Philipsburg
South Georgia and the South Sandwich Islands	South Georgia and the South Sandwich Islands	United Kingdom (see note 4)	None
Spratly Islands	(no long-form name)	undetermined(see note 14)	None
Svalbard	(no long-form name)	Norway	Longyearbyen
Tokelau	(no long-form name)	New Zealand	None
Turks and Caicos Islands	Turks and Caicos Islands	United Kingdom	Grand Turk
Virgin Islands, British	Virgin Islands, British	United Kingdom	Road Town
Virgin Islands, U.S.	United States Virgin Islands	United States	Charlotte Amalie
Wake Island	(no long-form name)	United States	Administered from Washington, D.C.
Wallis and Futuna	(no long-form name)	France	Matâ’utu
Western Sahara	(no long-form name)	To be determined	None

Practical Compliance Aspects of FATCA and GATCA

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

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

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

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Comments from my 2010 lecture on tax elasticity of deposits

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