20.01.2021

16'

Reporting Reminder 2021

CRS

Important changes in brief

Periodic filing requirements

Swiss financial institutions must report CRS data to the SFTA. To do so, Swiss Reporting FIs must register on the Swiss registration and filing portal.

The reporting FIs must transmit the reportable information to the SFTA by June 30, 2021 the latest.

Reporting FIs registered with the SFTA, regardless of whether they maintained reportable accounts in the respective calendar year or not, must submit a reporting file to the SFTA. If the reporting FI did not have any reportable accounts, a nil reporting is required.

The reports must be filed according to the SFTA technical guidance.

Additionally, the SFTA has released a data transmission guide outlining technical specifications on how to transmit data to the FTA.

The data can be filed in three ways:

  1. Upload of encrypted XML-file via SFTA Portal (XML Data-Upload)

  2. Manual data entry via SFTA Portal (Online form)

  3. Machine-to-machine webservice interface (M2M)

If a FI chooses the third option, the interface must be activated first. The reports cannot be filed in paper form.

Should you seek assistance in preparing the CRS reporting, please do not hesitate to contact us.

FATCA

Important reminders in brief  

Reporting on accounts held by Non-Participating FFIs
We would like to remind that since the FATCA reporting for tax year 2016, Reporting Model 2 FFIs that reported Non-Participating FFIs as part of their non-consenting reporting are not required to report such accounts anymore.

Reporting Model 2 FFIs reporting on non-consenting U.S. accounts
For preexisting accounts that are non-consenting U.S. accounts reported by Reporting Model 2 FFIs, the following pooled reporting categories should be used:

▪ Category “recalcitrant account holders that are U.S. persons” or

▪ Category “recalcitrant account holders with U.S. indicia”.

For cases where a newly opened individual account has a change in circumstances that causes the original self-certification to be incorrect or unreliable, and where the Reporting Model 2 FFI is unable to obtain a valid self-certification establishing whether the account holder is a U.S. citizen or resident, the pooled reporting category “recalcitrant account holders with U.S. indicia” should be used.

Identifying numbers for paper Forms 8966
A unique identifying number must be assigned to each Form 8966 filed on paper. Starting 2018, the three-digit identifying number must be entered in the box for “Identifier” at the top of the form. This number must be used for amendments, corrections and voidings of the submitted FATCA reporting.

Periodic Filing Requirements

Swiss Reporting Model 2 FFIs have the following two reporting deadlines for the reporting year 2020:

It is within the responsibilities of the FFI to perform the 8966 FATCA reporting, and a delegation of the responsibility to a custodian is not possible.

As a Swiss Reporting Model 2 FFI, the 8966 FATCA reporting is performed electronically through the International DataExchange Service (IDES). The FATCA XML Schemas and Business Rules for Form 8966 and the publications contained therein provide guidelines to meet the FATCA reporting requirements.

Please be reminded that the certificates used for the encryption of FATCA XML-files may expire: Before starting to prepare the 8966 reporting please verify that all certificates are up to date.

PEQ Solutions LLC has acquired the status “Third Party Preparer” with the IRS and can encrypt FATCA reportings from reporting financial institutions with its own certificate and submit the reportings to the IRS through its IDES account.

Should you seek assistance in generating the FATCA XML-file or the encrypted file to be submitted onto IDES through your or our IDES account, please do not to hesitate to contact us.

FATCA Group Requests

In addition, the aggregated reporting of non-consenting accounts may result in a group request from the U.S., which, in turn, may require a Reporting Swiss Financial Institution to transmit account data to the SFTA. The data and documentation needed to be sent to the SFTA additionally include a SEI-XML file, a FATCA-XML file and further documentation in pdf format. More information can be found in our newsletters “U.S. Senate Approval of Amendment to the DTA - FATCA Group Requests”, “Important Updates and Dates for the Implementation of the Regulatory Requirements for 2020” and “Important Update on Swiss FFIs” or on the website “Administrative assistance to FATCA“ of the SFTA.

After making experiences with processing the first FATCA group requests, we strongly recommend Swiss financial institutions to start gathering the required information and documentation for a possible transmission to the SFTA and to test the prepared information packages with the SFTA prior to the receipt of any request.

For more information, please contact us. PEQ can provide all types of support in preparing the FATCA group request information packages.

Extension Request

To request an automatic 90-day extension of time to file Forms 8966 to report consenting accounts, use Form 8809-I. Please note that Swiss Reporting Model 2 FFIs cannot request an extension of time to file Form 8966 to report non-consenting accounts.

QI

Important changes in brief

Form 1042-S

New Chapter 3 Status Codes
The chapter 3 status codes 01 U.S. Withholding Agent - FI, 02 U.S. Withholding Agent – Other and 34 U.S. Withholding Agent – Foreign branch of FI were deleted. The following chapter 3 status codes have been added: 36 Foreign Government – Integral Part and 37 Foreign Government – Controlled Entity. The chapter 3 status code 19 has been changed from “Government or International Organization” to “International Organization”.

New checkbox 7c to indicate a subsequent year of partnership withholding
A new box was added for partnerships which signed a withholding partnership agreement with the IRS to indicate if withholding with respect to a partnership interest occurred in the subsequent year.

Adjustments to overwithholding under the reimbursement and set-off procedures
In most cases, an intermediary should not enter an amount in Box 9 “Overwithheld tax repaid to recipient pursuant to adjustment procedures (see instructions)”, unless it is a QI assuming primary withholding responsibility or a withholding foreign partnership or trust. Newly, a QI/WP/WT repaying overwithheld tax to recipients may make adjustments using the reimbursement or set-off procedures until the extended due date for filing Forms 1042-S (unless the form has already been filed or furnished), i.e. April 15, 2021 (in case a request for time extension was filed).

Reminder: U.S. Payee Pools
Please be reminded that forms 1042-S for payments paid out to Chapter 4 U.S. Payees Pools (to accounts held by U.S. persons) must be filed. These forms are usually reported with the chapter 4 exemption code 18 (U.S. Payees of participating FFI or registered deemed-compliant FFI) and the chapter 4 recipient code 48 (U.S. Payees Pool).

Form 1042

No final instructions for Form 1042 were available at the time of this reporting reminder. This information is based on the draft instructions.

Reminder: Schedule Q (Form 1042)
If a QI or any its branch is a Qualified Derivatives Dealer (QDD), the taxpayer must attach to Form 1042 a Schedule Q (Form 1042), Tax Liability of Qualified Derivatives Dealer (QDD), for each QI or its branch that is QDD. The QI must file Form 1042 and must complete and attach Schedule Q (Form 1042) for each QDD, even if the QDD has a tax liability of zero. The new Schedule Q (Form 1042) replaces the previous requirement to attach a statement to the Form 1042 to provide information regarding a QDD's tax liability.

Adjustments to overwithholding under the reimbursement and set-off procedures
A withholding agent may make adjustments to overwithholding using either the reimbursement or set-off procedures until the extended due date for filing Forms 1042-S, unless the Form 1042-S has already been filed or furnished. Additionally, a withholding agent may use the extended due date for filing a Form 1042 to claim a credit for any adjustments made to overwithholding.

Reminder: Rounding
Please be reminded that withholding agents are newly required to round amounts so that only whole dollar amounts are reported. Amounts with 01 to 49 cents are rounded down, while amounts with 50 to 99 cents are increased to the next dollar.

Potential Section 871(m) transactions
Please be reminded that Section 3 of Form 1042 applies to payments made by a withholding agent under any potential section 871(m) transaction (rather than just payments made under notional principal contracts or other derivatives contracts that reference a U.S. stock or underlying security). If you are acting as withholding agent for amounts treated under Section 871(m) (usually under Income Code 40), you should check the Box in Section 3.

Filing Forms

You must file the Form 1042-S and 1042 reporting with the IRS by March 15, 2021. You have the option to request an automatic extension of time to file (see below).

You must file Forms 1042-S electronically as a .txt-file through the FIRE system. You can find the specifications for the electronic filing of Forms 1042-S for the tax year 2020 in Publication 1187.

Form 1042 must still be filed on paper. You may be required to attach copies of forms 1042-S received by upstream withholding agents. For filing Form 1042, please use the following address:

Internal Revenue Service
P.O. Box 409101
Ogden, UT 84409
USA

Be sure to retain proof that you mailed the tax forms on time. By having proof of filing you can avoid late filing penalties. If you are using a private delivery service (e.g. DHL, FedEx etc.), you can use the following street address:

Ogden - Internal Revenue Submission Processing Centre
1973 Rulon White Blvd.
Ogden, UT 84201
USA

Should you seek assistance in generating the electronic file or preparing form 1042, please do not to hesitate to contact us.

Extension Requests

For an extension request to be accepted you must file it with the IRS by March 15, 2021 for Forms 1042-S and 1042.

For an automatic 30-day extension of time to file Forms 1042-S, use Form 8809. Please note that by filing 8809 you cannot extend the deadline for providing recipient copies, if you are required to file recipient-specific reporting. You may request an extension of time to provide the recipient copies by sending a letter to the following address:

Internal Revenue Service
Information Returns Branch
Attn: Extension of Time Coordinator
240 Murall Drive, Mail Stop 4360
Kearneysville, WV 25430

The letter must include (a) your name, (b) your TIN, (c) your address, (d) type of return, (e) a statement that your extension request is for providing statements to recipients, (f) reason for delay, and (g) the signature of the payer or authorized agent. Your request must be postmarked by the date on which the statements are due to the recipients. If your request for an extension is approved, generally you will be granted a maximum of 30 extra days to furnish the recipient statements.

For an automatic 6-month extension of time to file Form 1042, use Form 7004. Please note that by filing Form 7004 you cannot extend the time to pay your taxes due. The deadline to pay your taxes remains unchanged.

You can complete and submit both forms online and file to the IRS electronically as follows:

If you complete Form 7004 on paper, please use the following address:

Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409
USA

If you are using a private delivery service (e.g. DHL, FedEx etc.), you can use the following street address:

Ogden - Internal Revenue Submission Processing Centre
1973 Rulon White Blvd.
Ogden, UT 84201
USA

Should you seek assistance in generating the requests for extension, please do not to hesitate to contact us.

1099 Reporting

Since the introduction of FATCA, more and more QIs started reporting reportable payments paid out to US non-exempt account holders in pooled via Forms 1042-S form via a so-called “Chapter 4 Pool of U.S. Payees”. A QI is generally permitted to report payments made to a U.S. non-exempt account holder on a pooled basis, if that account holder is otherwise being reported under FATCA.

However, this rule does not apply to all types of account holders and we have seen many QIs applying the abovementioned exception too broadly. Therefore, please be strongly reminded that pooled basis reporting of U.S. non-exempt recipients is not available for payments to certain indirect account holders, such as indirect account holders of nonqualified intermediaries (NQI) or flow-through entities (FTE), if these do not fulfill the required specifications under FATCA. Generally, only payments paid out to FTEs and NQIs are eligible to be reported via a U.S. Payees Pool if they fulfill the following conditions:

If the FTE or NQI does not fulfill that condition, the QI is still required to report the payments via Form 1099.

In addition, we would like to remind that QIs must continue to apply backup withholding on undocumented U.S. accounts under chapter 61 on reportable payments, if applicable, for the period during which an account is treated as undocumented U.S. account. Accounts subject to backup withholding are still subject to reporting via Forms 1099.

In cases where a QI has to file a 1099 reporting, you must meet one of the following deadlines depending on what and how you submit:

Please note that the 1099 reporting on paper cannot be performed using the downloadable PDF. Copies 1, B, 2 and C can be filled out online in a pdf format. You must file the original 1099 paper forms which you have to order from the IRS. Should you require original paper forms for the 1099 reporting, they can be ordered from the IRS or directly from us.

For a 30-day extension of time to file Forms 1099, use Form 8809. You must file Form 8809 electronically through the FIRE system no later than the above-described filing deadlines.

Please remember that it is the primary responsibility of the QI to ensure that the 1099 reporting has been performed, even if the reporting has been delegated to a custodian. Should your custodian fail to report as required under the QI agreement, you must report your reportable payments to U.S. persons directly to the IRS.