21.12.2016
8'
Important Updates and Dates for the Implementation of the Regulatory Requirements for 2017
FATCA
Registration of Sponsored Entities and Request of Sponsored Entity GIINs
To provide sufficient time for sponsoring entities to complete the registration of sponsored entities, the IRS issued with Notice 2015-66 transitional rules which extended the deadline for the registration of sponsored registered deemed-compliant FFIs and sponsored direct reporting NFFEs from January 1, 2016 to January 1, 2017.
Sponsoring Entities are required to register their sponsored entities until that date and to issue updated withholding certificates (for example forms W-8) to their withholding agents.
Withholding agents that are participating FFIs which did not receive updated withholding certificates from clients that are sponsored registered deemed-compliant FFIs and sponsored direct reporting NFFEs are therefore required to
request updated withholding certificates from their clients until January 1, 2017 (which include the Sponsored Entity’s GIIN) or;
if the withholding agent already has on file a withholding certificate for the payee that includes the GIIN of the sponsoring entity, oral or written confirmation of the payee’s GIIN (please refer with this regard to Notice 2015-66, Part V, or contact us for more information).
Clients for which this information could not be received have to be classified as not correctly documented under FATCA by their Withholding Agents starting January 1, 2017.
Update of FATCA XML Schema to v2.0
Beginning on January 16, 2017, all FATCA Reports (new, nil, corrected, void and amended) must be created using the FATCA XML schema version 2.0. We recommend that Withholding agents make sure with their systems providers that the new schema is in use and reports can be generated correctly. The IRS will have a reporting test session open from Monday, December 19, 2016 to Monday, January 30, 2017.
QI
Start of Section 871(m) Withholding
With Notice 2016-76 the IRS issued phase-in rules in order to facilitate the implementation of the Section 871(m) rules. Starting January 1, 2017, withholding agents will only be required to withhold on Section 871(m) transactions that have a delta of one. During the phase-in period the IRS will consider the extent to which a withholding agent made a good faith effort to comply with the regulations.
PEQ will be able to provide strategic support to Financial Intermediaries in order to facilitate the rollout of Section 871(m) and to develop a reasonable implementation approach.
Removal of QI, WP and WT questions from the IRS Portal
The IRS announced that it will launch a new Qualified Intermediary (QI), Withholding Foreign Partnership (WP) and Withholding Foreign Trust (WT) system allowing entities that have these statuses to manage that information in a portal separate from the FFI registration portal. Users will access the QI/WP/WT system to create and update their information and complete tasks such as applying for, renewing, or terminating their QI, WP, or WT status.
Renewal of the QI-Agreement
All QIs will have to renew their QI Agreement until March 31, 2017. The QI Agreement (which has been issued in proposed form only so far) will be valid retroactively on or after January 1, 2017.
If a prospective QI applies for QI status after March 31, 2017, the effective date the agreement comes into force will depend on whether the QI has already received reportable payments for the current calendar year or not.
The most important changes in the QI Agreement are the inclusion of the new QDD status under Section 871(m), collecting LOB information from entity account holders that receive benefits under an applicable tax treaty (see below) and updated QI Compliance Review requirements.
It is expected that the QI Agreement will be renewed via the new QI Portal.
Provide updated Forms W-8IMY to Withholding Agents
In September 2016, the IRS published a revised version of form W-8IMY. The most important changes are related to the new QDD status introduced by the new QI Agreement. In addition, greater clarity has been provided regarding the status of non-reporting IGA FFIs under applicable IGAs and the FATCA Final Regulations. New forms W-8IMY shall be consistently requested and provided starting April 2017.
The revision of the form W-8IMY is also relevant for QIs that ceased (or intend to cease) their 1099 reporting obligation if they already report reportable accounts over form 8966. As we have mentioned in PEQ CRS/FATCA/QI Information 06/2016, under certain circumstances withholding agents can cease the reporting of reportable payments made to accounts held by U.S. non-exempt recipients over form 1099 to the extent a reporting FFI has already reported the account and payments to the IRS over form 8966. In order to do so, a bank, if it is a Reporting Model 2 FFI and also a QI will need to contact their custodian and provide them with revised Forms W-8IMY and Withholding Statements in due course.
Reminder: Requesting LOB Information
Please be reminded that under the new QI Agreement, Qualified Intermediaries will be required to request from entity account holders which apply for treaty benefits to provide information regarding the Limitation on Benefits Provision (LoB Provision) of the respective Double Tax Agreement they satisfy and therefore:
request, when opening an account, the respective LoB Information from every beneficial owner that is an entity account holder which applies for treaty benefits;
if the QI does not document with form W-8BEN-E, to amend existing treaty forms (“Treaty Statements”) in order to allow beneficial owners to provide the LoB Information;
under certain circumstances, to redocument preexisting accounts held by entities that apply for treaty benefits.
Please refer to PEQ CRS/FATCA/QI Information 05/2016 for more information.
Reminder: QI Compliance Review and Waiver
As part of his/her periodic certification which will have to be performed on July 1, 2018, a QI Responsible Officer must consider the results of a formal QI Compliance Review. For the performance of a QI Compliance Review, a QI must decide on a year which the Review will be performed for. The QI Compliance Review must be performed once in a three-year certification period and covers the period of one calendar year, which results in QIs with a QI Agreement in force from June 2014 to choose years 2015, 2016 or 2017 as review years. The timing of the QI Compliance Review should be chosen in a way to allocate sufficient time for account healing procedures. We therefore recommend to perform the QI Compliance Review within the next 15 months. PEQ will be able to perform the QI Compliance Review as external reviewer.
QIs that meet the requirements under Sec. 10.07(B) of the QI Agreement may be eligible to apply for a waiver to waive the requirement of a formal QI Compliance Review. However, even if the QI fulfils all the eligibility requirements, it will still be required to provide certain factual information along with its periodic certification. Therefore, a QI Responsible Officer may consider to perform (or have performed on his/her behalf) a review in a modified form by an internal or external party in order to receive purposeful documentation to rely on and to be sufficiently documented for the upcoming certification.