Update of the Customer Admission Documentation Under FATCA and QI, Lob Factsheet of the SBA

Update of the Client Onboarding Documentation under FATCA and QI

As described in PEQ CRS/FATCA/QI Information 09/2017 the IRS recently updated all forms W-8 and the corresponding instructions due to updates in the final Chapter 3 and 4 regulations. The updates in the forms reflect the changes in the regulations. Consequently, financial institutions that do not use the official forms W-8 and use substitute Forms W-8 or Similar Agreed Forms for QI and FATCA purposes instead, should assess whether any changes on the official forms initiated by the IRS would affect their own forms, if the forms need revisal and if the changes in the regulations are adequately reflected.

Special attention with respect to the updated requirements to the forms should be paid to the revisions to many supplemental forms requested from clients under QI, especially the withholding statements for certain intermediaries and flow-through entities required to be filed together with Form W-8IMY. QIs are likely to be required to update the following withholding statements from different types of clients that are intermediaries for U.S. tax purposes:

• Withholding Statement for flow-through entities (nonwithholding foreign simple trusts, grantor trusts and partnerships)

• Withholding Statement and Written Agreement for flow-through entities that apply the Joint Account Treatment or Agency Option (as outlined in Sec. 4.05 and 4.06 of the QI Agreement)

• Withholding Statement for clients that are Qualified Intermediaries

• Withholding Statement for clients that are Nonqualified Intermediaries

Since withholding statements constitute an integral part of the Form W-8IMY, they need to be updated by January 1, 2018, which is the date when Withholding Agents will have to request new Forms W-8IMY.

LoB Factsheet by the SBA

As outlined in PEQ CRS/FATCA/QI Information 05/2016, all QIs are now required to request an entity beneficial owner to provide information regarding the limitation on benefits provision of a respective Double Tax Agreement with the U.S. they satisfy (“LoB Provision” or “LoB Test”). QIs having in use their own forms for the documentation of entity clients claiming treaty benefits (“Treaty Statement”) are required to update their forms for entity beneficial owners to provide adequate LoB provision information.

The SBA has therefore recently published a factsheet on the LoB provisions (see SBA circular Nr. 7936). The factsheet was designed as a guideline for entity clients that apply for treaty benefits. Apart from the LoB provision options allowed in Form W-8BEN-E (Rev. July 2017) and Instructions for Form W-8BEN-E, the factsheet also covers additional, possible categories of LoB provisions under the Double Tax Agreement between Switzerland and the U.S. 

The SBA points out that the factsheet is a simplified and generalized depiction of the LoB provisions and does not cover all possible cases. It was designed as a voluntary guideline and all SBA member banks are free to decide whether they want to apply it in their daily business.