QI: Requesting LOB Information and new Proposed Regulations
Please be reminded that under the QI Agreement (Rev. Proc 2017-15), Qualified Intermediaries are required to request from entity account holders which apply for tax treaty benefits 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, and
amend existing treaty forms (“Treaty Statements”) to allow beneficial owners to provide the LoB Information if the QI does not document its entity account holders with Form W-8BEN-E. According to the original text of the QI Agreement, updated Treaty Statements must be obtained until January 1, 2019 for such entity accounts without a Form W-8BEN-E.
According to the new Proposed Regulations recently issued by the IRS, the time to obtain Treaty Statements with specific LoB provisions for accounts opened before January 1, 2017 and documented without Form W-8BEN-E, was extended until January 1, 2020 (instead of January 1, 2019). Since QIs may rely on the proposed regulations until the final regulations are issued, QIs are allowed to make use of this extension.
FATCA: Extension of the FFI Agreement
As described in Section 12.01 of the current revision of the FFI Agreement (Rev. Proc 2017-16), an FFI Agreement with effective date January 1, 2017 will remain in force only until the end of this year, December 31, 2018.
In this regard, the IRS recently announced that for all FFIs that had a valid registration on December 31, 2018 the FFI Agreement remains valid after this date. Therefore, no formal application for this extension will be required. The IRS will treat a participating FFI’s continued registration as its agreement with the terms of the FFI agreement until December 31, 2022, or until the IRS publishes further guidance with respect to the renewal of the FFI agreement.
FATCA: New Proposed Regulations
The IRS recently published the new Proposed Regulations.
The most important FATCA-related changes introduced by the Proposed Regulations are the following:
Elimination of withholding on payments of gross proceeds
Deferring of withholding on foreign passthru payments
Elimination of the withholding on certain insurance premiums
Clarification of the definition of investment entities.
FATCA / QI: Update of Client Onboarding Documentation
The IRS recently updated Form W-9 and the corresponding instructions. Withholding Agents will have to request new forms W-9 from their U.S. account holders starting April 1, 2019. Reason for the new revision was the change in the rate of backup withholding from 28 to 24 percent. We would like to remind withholding agents that this change of backup withholding rate should be reflected in other forms that are in use (e.g. withholding statements).
CRS: Abolition of the Whitelist Approach in Switzerland
From January 1, 2019, Art. 1 of the Swiss AEOI Ordinance, which has expanded the list of participating jurisdictions to those that have only signed a commitment to implement the AEOI vis-à-vis the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, will no longer be in force.
As a consequence, professionally managed investment companies which are situated in a country with which Switzerland has not entered into an AEOI agreement will not qualify as financial institution anymore, but have to be treated as passive NFEs instead. As this constitutes a change in circumstances, FIs will have to obtain a valid self-declaration from the account holder within 90 days, otherwise the FI will have to treat the account holder as passive NFE and therefore identify controlling persons and the tax domiciles based on indicia.