FATCA & CRS News

New draft Form W-9 released

On July 26, 2023, the IRS released a new draft Form W-9, Request for Taxpayer Identification Number and Certification. The most significant change relates to flow-through entities indicating the existence of direct or indirect foreign partners, owners, or beneficiaries. All updates to the form and general instructions are outlined below:

• A new line 3b is added to allow partnerships, trusts, and estates to indicate that they have foreign partners, owners, or beneficiaries when receiving a request for a Form W-9 from a partnership, trust, or estate. This disclosure is intended to allow the form recipient to satisfy applicable reporting requirements including the completion of Schedules K-2 and K-3 (Form 1065). New instructions have been added to clarify that a filer of Form W-9 should check the box in 3b if it has received a Form W-8 (or documentary evidence) from any partner, owner, or beneficiary establishing foreign status or if it has received a Form W-9 that also has the box in 3b checked.
• The draft form removes the specific instructions about the use of the form to avoid withholding under section 1446. It now includes broader language on furnishing a Form W-9 to certify non-foreign status for purposes of any applicable withholding under chapter 3 and chapter 4. The text indicates that section 1446 withholding is considered chapter 3 withholding in this context.
• Text has been added to clarify that a qualified foreign pension fund or a partnership wholly owned by qualified foreign pension funds should not use Form W-9 to claim non-foreign status and should instead use Form W‑8EXP or other certification of non-foreign status.
• The draft form also adds a note that a filer should review the Instructions for Form 1041 for more information on optional filing methods for grantor trusts.

The draft indicates an October 2023 version date. Note that the draft instructions for requesters have not yet been published at this time.

New draft Form W-8EXP

On June 28, 2023, the IRS released the new draft for Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting. The draft instructions have not yet been published at this time. The updates to the form are mainly related to FIRPTA withholding (section 1445) and contains the following amendments:

• Even though Form W-8EXP is not to be used by foreign partnerships in most cases, the draft form clarifies that, if the foreign partnership is a withholding qualified holder under section 1445, a Form W-8EXP would be usable by a foreign partnership.

• “Withholding qualified holder under section 1445” is added to line 3 (Type of entity).

• New boxes are added to line 10:
  • Box 10d can be used by a beneficial owner that is a controlled entity of a foreign sovereign (other than a foreign central bank of issue wholly owned by a foreign sovereign) to certify that the beneficial owner is not engaged in commercial activities within or outside the United States.
  • Box 10e can be used by a beneficial owner that is a foreign central bank of issue and a controlled entity of a foreign sovereign to certify that the beneficial owner is not engaged in commercial activities within the United States.

• New line 15 is added for a withholding qualified holder to certify the following:
  • Box 15a: that the entity identified in Part I is treated as a non-foreign person for purposes of sections 897 and 1445 because it is a qualified holder under Regulations section 1.897(I)-1(d).
  • Box 15b: that the entity identified in Part I is treated as a non-foreign person for purposes of sections 897 and 1445 because it is a foreign partnership all of the interests of which are held by qualified holders (under Regulations section 1.897(I)-1(d)), including through one or more partnerships.

• The certification language under Part IV is amended to include certification that the organization for which the form is being signed is a withholding qualified holder because it is a qualified holder under Regulations section 1.897(I)-1(d) or it is a partnership and all of its interests are held, directly or indirectly, by qualified holders under Regulations section 1.1445-1(g)(11). This portion of the certification is only applicable if the organization is not both the beneficial owner of the income and other payments to which this form relates and is not a U.S. person.

The draft indicates an October 2023 version date. Assuming the date remains, the prior version of the form can generally be used for 6 months after the revision date.

OECD Updates CARF with Implementation Guidance, MCAA and Revised Council Recommendations

On June 8, 2023, the Organisation for Economic Co-operation and Development (OECD) released updates to the Crypto-Asset Reporting Framework (CARF) and amendments to the Common Reporting Standard (CRS).

This update, detailed further in the linked document, now includes a Multilateral Competent Authority Agreement on Automatic Exchange of Information and related commentary, as well as commentary on Section V of the CARF rules regarding implementation. The updates also make a minor amendment to the CRS MCAA to ease adoption of amendments of the CRS.

FATCA Responsible Officer Certifications & GIIN Terminations

The IRS has begun terminating the Global Intermediary Identification Number (“GIIN”) for certain Model 2 Foreign Financial Institutions (“FFIs”) that have failed to complete the required FATCA Responsible Officer (“RO”) Certifications.

All Model 2 FFIs are encouraged to confirm the required FATCA RO certifications are complete and to review the FFI’s FATCA Registration System Message Board for any missed IRS notices or other communications. We also recommend the FFI’s points of contacts, FATCA governance model, and FATCA controls framework are reviewed to ensure these are sufficiently robust and appropriate for the FFI’s structure and operating model.

RO Certification Requirement

Under the FATCA regulations, FFIs located in Model 2 and non-IGA countries are required to appoint an RO, who must submit a certification of compliance with the FATCA requirements regarding the certification of pre-existing accounts (“COPA”) as well as the FFI’s compliance with various FATCA requirements (“Periodic Certification”). As part of the Periodic Certification, the RO must certify that he/she has conducted a periodic review of the sufficiency of the FFI’s FATCA compliance program and the FFI’s compliance with the requirements of the FFI agreement during the certification period.

Generally, the due date for the submission of the COPA and the Periodic Certification is July 1st following the third full calendar year after the entity registered and received a GIIN. The COPA was a one-time certification, whereas the Periodic Certification must be completed every three years.

Events of Default & GIIN Termination

The IRS released guidance on the procedures for FATCA certification event of default notices, which outlines the approach the IRS will take for identifying non-compliance with the FATCA certification requirements. After the deadline for submitting the FATCA certifications, the IRS will review the list of entities that have been identified as requiring a FATCA certification for the certification period, and will identify events of default for which a notice of default will be issued (via the FFI’s FATCA registration system message board).

Events of default for which a notice of default will be issued include when the entity:

1. Failed to complete and submit a required FATCA certification by the due date;
2. Indicated they were unable to complete and submit a required certification;
3. Indicated they were not required to submit a certification, contrary to the requirement indicated by their FATCA classification, country/jurisdiction of tax residence, or registration of any branches or sponsored entities for which the FFI needs to certify; or
4. Completed and submitted a certification that had a “failure to certify” result.

For entities that are identified as having an event of default, the IRS issues a notice of default, specifying the event of default and requesting that the entity remediate this within 60 days. If there was a failure to respond to the notice of default, the IRS delivers either a second notice of default or a notice of termination to the entity (if the entity did not respond to the second notice).

The notice of termination advises the FFI that the IRS is terminating the entity’s FATCA status, which will result in removal of the entity’s GIIN from the FFI list. Upon issuance of a notice of termination, the entity is provided with a final 90-day period to remediate the event(s) of default, otherwise its FATCA status will be terminated and its GIIN removed from the FFI list, which could have withholding implications.

An entity that has had its registration terminated and GIIN removed from the FFI List due to non-compliance with the FATCA certification requirement should not re-register for a new GIIN, but instead will be required to contact the IRS to request a reinstatement.

How Deloitte Can Help

Our experienced professionals are able to assist you with your FATCA compliance program, and specifically:

• Advising on the remediation plan and reinstatement process for terminated GIINs
• Conducting the required Periodic Reviews
• Developing or reviewing the FATCA controls framework
  

QI-Login only with Login.gov or ID.me account by to May 17, 2023

On May 3, 2023, the IRS announced that beginning May 17, 2023, they will no longer support the use of existing IRS accounts to access Qualified Intermediary, Withholding Foreign Partnership, Withholding Foreign Trust Application and Account Management System (QAAMS). The IRS has instructed users to create a Login.gov or ID.me account using the same first name, last name, and email account, by May 17, 2023. Please note, a taxpayer identification number (TIN) is not needed to access QAAMS.

Login.gov is an account created, maintained, and secured by the U.S. government and ID.me is an account created, maintained, and secured by a technology provider. For questions and assistance regarding Login.gov, visit Help | Login.gov. For questions and assistance regarding ID.me, visit Verifying for the Internal Revenue Service – ID.me Help Site.

Qualified Intermediary Renewal Deadline extended to May 1, 2023

On January 20, 2023, the IRS extended the due date for Qualified Intermediaries (QIs) to renew their QI agreements under Rev. Proc. 2022-43 to May 1, 2023, from the previous March 31, 2023 deadline. Therefore, a QI seeking to renew its QI agreement with an effective date of January 1, 2023, must do so through the Qualified Intermediary Application and Account Management System (QAAMS) by May 1, 2023. The IRS is aware that the renewal link is not available for some QIs on the QAAMS and is working to get it restored. Withholding Foreign Partnerships (WPs) and Withholding Foreign Trusts (WTs) are not required to submit requests to renew their WP/WT agreements at this time. The IRS will treat existing WP/WT agreements as remaining in effect until December 31, 2023.

Finalized 2023 QI Agreement released

On December 13, 2022, Treasury and the IRS issued Rev. Proc. 2022-43 finalizing the 2023 qualified intermediary (QI) withholding agreement. The 2023 QI Agreement contains significant changes from the 2017 QI Agreement, and the new rules will apply to QI agreements in effect on or after January 1, 2023. Read more

European Commission releases DAC 8 proposal

On December 8, 2022, the European Commission released a Proposal for DAC 8 to extend automatic exchange of information among Member States in the field of taxation to transactions in Crypto-Assets and E-Money. The majority of the regulations is based on the CARF (Crypto Asset Reporting Framework) and amendments to CRS (Common Reporting Standard) released by the OECD on October 10, 2022. 

IRS Releases Draft Instructions for 2023 Form 1042-S

On November 2, 2022, the IRS released draft 2023 Instructions for Form 1042 S, Foreign Person’s U.S. Source Income Subject to Withholding. The draft instructions include new codes and several changes related to withholding and reporting under sections 1446(a) and (f) starting in 2023. Read More

BMF ersucht um Beauftragung durch das Parlament zur Verhandlung eines FATCA IGA Model 1 zur Ablösung des bestehenden FATCA IGA Model 2

Derzeit sind Österreichs Finanzinstitute durch das bestehende Abkommen zwischen der Republik Österreich und den Vereinigten Staaten von Amerika über die Zusammenarbeit für eine erleichterte Umsetzung von FATCA nach dem Model 2 genötigt, direkt mit der US-Steuerbehörde, dem Internal Revenue Service (IRS) zu kontrahieren und meldepflichtige Finanzkonten zu melden. Durch die direkte Anwendung des US-Rechts und den erschwerten Compliance-Bedingungen besteht sohin im internationalen Kontext ein erheblicher Wettbewerbsnachteil für die österr. Bankenlandschaft.

Das BMF hat daher am 10. Oktober das Parlament um Ermächtigung ersucht, mit den USA den Umstieg auf das Model 1 IGA zu verhandeln.

Nach dem angestrebten IGA Model 1 würden heimische Finanzinstitute US-Konten künftig an die österreichische Steuerverwaltung melden, anstatt wie bisher an den IRS. Der Informationsaustausch erfolge dann automatisch vermittels des österr. BMFs. Komplizierte direkte Verständigungen mit dem IRS würden idR vermieden werden. Darüber hinaus – so der Wunsch des BMFs - soll Österreich künftig auch Informationen über US-Bankkonten von in Österreich steuerpflichtigen Personen erhalten (Reziprozität), was aktuell nicht der Fall ist.

Noch ist offen, wann mit der Umstellung zu rechnen ist. In einem ersten Schritt stehen Österreich Verhandlungen mit den USA über die Änderung des Abkommens bevor. Wir werden die Entwicklungen weiterhin verfolgen und Sie auf dem Laufenden halten. Mehr Informationen
 

The OECD finalized CARF and CRS Amendments

On October 10, 2022, the Organization for Economic Co-operation and Development (“OECD”) released the final guidance on the Crypto-Asset Reporting Framework (“CARF”) and amendments to the Common Reporting Standard (“CRS”). The initial draft was released as a public consultation document on March 22, 2022, with a request for industry comments.
Read more
 

Proposed amendments to QI agreement for sections 1446(a) and (f) withholding and reporting on PTP interests

On 3 May 2022, Treasury and the IRS published Notice 2022-23 proposing amendments to the qualified intermediary (QI) withholding agreement. The amendments in Notice 2022-23 will expand the scope of the QI agreement to permit a QI to assume withholding and reporting responsibilities under sections 1446(a) and (f) in limited instances. Once finalized, the new rules will apply to QI agreements in effect on or after 1 January 2023. Read more
 

U.S. Treasury Green Book proposes information reporting expansions for U.S. financial institutions and FATCA for digital assets

On 28 March 2022, the Treasury Department released revenue proposals and explanations in the fiscal year 2023 “Green Book.” Included among the proposals is a significant expansion of US financial institution reporting obligations on non-US account holders, with the goal of more robust reciprocal tax information exchange between the US and jurisdictions with which it maintains reciprocal income tax treaties or intergovernmental agreements under FATCA.

The attached PDF describes the Green Book proposals related to US financial institution reporting obligations on non-US account holders.
 

Final 2021 Forms W-8 and Instructions

On November 18, 2021, the IRS published the new Form W-8IMY, finalizing the last of the four W-8 forms—BEN, BEN-E, ECI, and IMY—and associated instructions released in draft over the past several months. There are many changes to the forms and instructions, including the following:

• New certifications and instructions for Internal Revenue Code (IRC) sections 1446(a) and (f) purposes
• Updates to foreign tax identifying number (FTIN) fields
• Form and instruction references for section 6050Y purposes
• Additional guidance for treaty claims requiring special rates and conditions representations
• Form and instruction updates for section 871(m) purposes, including guidance for Qualified Intermediaries (QIs), Qualified Derivatives Dealers (QDDs), and Qualified Securities Lenders (QSLs”)
• New certifications for intermediaries providing alternative withholding statements
• Electronic signature guidance

These and other updates are discussed further in the attached summary. Each of these forms provides a revision date of October 2021 and are the versions required for use for forms signed on or after May 1, 2022, absent an extension for use of the prior form versions.

IRS Releases Final Updated version of Form W-8IMY (Rev. October 2021)

On November 18, 2021, the IRS published the final updated version of Form W-8IMY (Rev. October 2021) Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting. Aside from minor formatting updates, Part III question 14 of the Form W-8IMY has been updated detailing the obligation for a Qualified Intermediary (QI) acting as a disclosing QI for purposes of section 1446(a) or (f) for payments associated with this form to provide the required payee documentation to associate with an amount realized or an amount subject to withholding on a Publicly Traded Partnership (PTP) distribution. Additionally, Line 9b, foreign taxpayer identification number, has been added for a QDD to indicate its foreign taxpayer identification number (FTIN) on the form (with line 9, Global Intermediary Identification Number (GIIN), redesignated as line 9a). The accompanying instructions for the Form W-8IMY (Rev. October 2021) were published on November 3, 2021.

Note that the IRS allows withholding agents to use older versions of Form W-8s for only 6 months after the revision date shown on a more recent published version effectively giving withholding agents until May 1, 2022 to discontinue using the prior 2017 versions.
 

Latest Releases of IRS Forms and Instructions

On October 22, 2021, the IRS released 2021 draft versions for Forms 1042 and 8804, the 2022 draft versions for Forms 1042-S, 1099-G, and 1099-K, and the 2022 draft instructions for Forms 1099-G and 1099-K. More information on the draft forms and draft instructions can be found here.

On October 25, 2021, the IRS published revised instructions for Form W-8IMY (Rev. Oct 2021). The updated instructions include guidance under 1446(f), additional guidance under the Section 871(m) regulations, new line 9b (with the GIIN line being redesignated as line 9a) for qualified derivative dealers to include their foreign tax identification number, guidance for a NQI that provides an alternative withholding statement, and guidance on the use of electronic signatures. The revised version of the Form W-8IMY has not yet been published. Additionally, on November 3, 2021, the IRS published an update to the revised instructions to reflect minor text revisions. More information on the instructions can be found here.

On October 28, 2021, the IRS released draft instructions for the tax year 2022 Form 1042-S. The revised instructions include new income code 56 to report section 871(m) transactions resulting from combining transactions under IRS Regulations Sections 1.871(15n), new income code 57 for brokers required to report or withhold on the transfer of interests in publicly traded partnerships (PTPs), new Chapter 3 status code 38 to report payments to or from PTPs, and new limitation on benefits code 12 to indicate that there is no LOB code in the applicable treaty qualifying the taxpayer for a treaty benefit.

On November 1, 2021, the IRS released draft instructions for the tax year 2022 Form 1099-R. The revised instructions include a requirement that payments from qualified plans to state unclaimed property funds under escheat laws must be reported on the 1099-R pursuant to Rev. Rul. 2020-24, 2020-45 I.R.B. 965.

Comments to the IRS in regard to these instructions can be submitted via https://www.irs.gov/formscomments.

Infrastructure Bill: Reporting of Digital Assets

On Friday, November 5th, U.S. Congress passed the bipartisan infrastructure bill, which includes important provisions relating to information reporting of transactions in cryptocurrency and other digital assets. The bill is expected to be signed by the President into law imminently.

Specifically, section 80603 of the bill amends the definition of “broker” under Internal Revenue Code (IRC) section 6045 to include persons providing services relating to effectuating transfers of cryptocurrency and other digital assets on behalf of third parties.

Amended IRC section 6045 is drafted broadly and seems to incorporate crypto exchanges, custodians, wallet providers and similar businesses who help effectuate exchanges in crypto assets for a fee. Separately, the bill amends IRC section 6050I to include digital assets within the definition of ‘cash’ for purposes of that section, requiring persons receiving greater than FMV $10,000 in digital assets in the course of their trade or business to report such receipts.

A summary of the legislation is included in this PDF.

For questions please feel free to contact us.

IRS releases new Form W-8BEN-E

On October 12, 2021, the IRS released the final version of the Form
W-8BEN-E "Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)" (Rev. October 2021). Note that the IRS allows withholding agents to use older versions of Form W-8s for only 6 months after the revision date shown on a more recent published version effectively giving withholding agents until May 1, 2022 to discontinue using the prior 2017 versions.

The corresponding instructions for Form W-8BEN-E are also now available.

IRS publishes final versions of W-8BEN and W-8ECI

The IRS recently released final versions of Form W-8BEN “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)” (Rev. October 2021) and Form W-8ECI “Certificate of Foreign Person’s Claim that Income is Effectively Connected With the Conduct of a Trade or Business in the United States” (Rev. October 2021). Note that the IRS allows withholding agents to use older versions of Form W-8s for only 6 months after the revision date shown on a more recent published version effectively giving withholding agents until May 1, 2022 to discontinue using the prior 2017 versions.

The corresponding instructions for Form W-8BEN and the corresponding instructions for Form W-8ECI are also now available.

IRS Issues Draft forms W-8BEN, W-8BEN-E, W-8ECI, and W-8IMY

The Internal Revenue Service issued draft forms W-8BEN, W-8BEN-E, W-8ECI and W-8IMY and their corresponding instructions (draft W-8BEN Instructions, draft W-8BEN-E Instructions, draft W-8ECI Instructions, draft W-8IMY Instructions). The W-8BEN draft form was published August 30, 2021, W-8BEN-E draft form was published September 2, 2021, W-8ECI draft form was published August 25, 2021, and W-8IMY draft form was published on August 26, 2021. The comment period for all four forms is currently open with the revision date scheduled for October 2021.

IRS extends Enforcement Date of Amended Regulations regarding Publicly Traded Partnerships (PTP)

On August 22, 2021 the IRS issued Notice 2021-51 which extends the effective date of certain withholding requirements under the final 1446(f) regulations published in November 30, 2020. The new effective date for such withholding has been moved from January 1, 2022 to January 1, 2023. This extension of time was in response to concerns raised by taxpayers on the burden of updating their withholding and reporting systems in time for the January 1, 2022 deadline.

Extended Due Dates for QI certifications

On April 13, 2021, the IRS announced the extension of the Qualified Intermediary (QI)/Withholding Partnership (WP)/Withholding Trust (WT) Certification and Waiver Application due dates for periodic certifications due in 2021. The automatic extended due date for certifications and applications to waive the periodic review requirement for 2018/2019 is December 1, 2021, and for 2020, March 1, 2022.

The IRS also reminded QI/WP/WT that the periodic review year cannot be changed after it is selected and confirmed in the QI system.

More information on the updates can be found here.

Updated FATCA FAQs

On March 12, 2021, the IRS updated and published a new FAQ (Q23) on the FATCA – FAQs General page under the section General Compliance.

The FAQ extends penalty relief for the 2020 and 2021 calendar years in situations where a withholding agent withholds and reports a dividend equivalent payment made with respect to a derivative referencing a partnership, on Forms 1042 and 1042-S to September 15, 2021 (for the 2020 calendar year) or September 15, 2022 (for the 2021 calendar year).

More information on the penalty relief extension can be found here.