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Perspectives

Global Information Reporting (GIR)

Service Offerings

Increased global transparency of account information presents unique challenges and requires a global, scalable solution. By reducing manual tasks and addressing risks, Deloitte’s GIR team can provide strategic value to clients.

Section 871(m) impacts

On September 17, 2015 the US Department of the Treasury and the IRS released final section 871(m) regulations under the Internal Revenue Code. The regulations expand the scope of withholding on US-sourced dividend equivalents paid to non-US holders of equity linked instruments.

Learn more about how 871(m) impacts the tax operations lifecycle and how the impact is defined by the role played by the parties in a transaction.

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FATCA

Deloitte’s global FATCA practice is comprised of professionals focused on helping financial institutions worldwide address the issues arising from FATCA. FATCA, a US law, may be in conflict with local laws and regulations, impacting entities outside of the US and departments and functions outside of tax. To address FATCA, a strong team with knowledge and experience across multiple disciplines is required. Deloitte provides an end-to-end solution with our global Consulting, Anti-Money Laundering/Know Your Customer, and Tax Matter specialists.

Our professional services include risk and impact assessment, operations and technology change implementation, and business readiness assessment—critical areas to addressing FATCA. We are currently working with other global institutions on their FATCA initiatives, and we have an expansive network of global FATCA specialists who can assist your organization as well.

Download the attached PDFs for industry specific information, or visit our main FATCA page for more information.

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Information reporting & withholding (IRW) advisory

Tax regulators continue to focus heavily on organizations’ procedures to address withholding and reporting requirements. Increased penalties and enforcement efforts necessitate reevaluation of policies and practices. Organizations acting as withholding agents are required to collect documentation, validate tax forms, substantiate payment types and sources and complete applicable withholding and reporting. With the significant changes to the W-8 Series and the additional requirements arising from FATCA, withholding agents are faced with new and unprecedented challenges. Deloitte offers expertise and resources necessary to address these challenges for your organization.

Deloitte’s Global Information Reporting (GIR) practice is comprised of professionals with extensive tax technical knowledge and experience with process change, technology, solution implementation and project management. Our Information Reporting and Withholding (IRW) Advisory Services will help you analyze the impacts and implement solutions for all issues arising under Chapters 3, 4 (FATCA) and 61 of the Internal Revenue Code, including:

  • Document remediation
  • Vendor Payables tax processes
  • Royalties
  • Section 871(m) 
  • Audit Support
  • Platforms and marketplaces
  • Freight costs

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Information reporting (IR) outsourcing

Required information reporting activities, such as (1) the validation of the W-8 / W-9 series Tax Forms and (2) 1042-S / 1099 reporting, can be challenging for organizations with limited information reporting resources. Under Chapters 3, 4, and 61 of the Internal Revenue Code, the collected Tax Forms (W-8 Series and W-9) and attached statements must be initially validated and potentially re-solicited and re-validated at a later date. In addition, the determination must be made concerning whether withholding and reporting of the payment made to the payee is required. For organizations for whom this is not a core competency, completing these tasks in an accurate manner may be challenging.

Deloitte’s Global Information Reporting (GIR) practice offers both the expertise and necessary resources to efficiently complete these functions on behalf of our clients.

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Report of Foreign Bank and Financial Accounts (FBAR)

Individuals and entities that have a financial interest or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account exceeding certain thresholds, may be required to report the account annually to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts.

How will FBAR impact your organization and your employees? The answer depends on the types of accounts held outside of the US, the account balances of those accounts, and whether any exceptions to the reporting requirement apply. Deloitte has substantial experience in navigating these challenges with other organizations and can assist your organization to do the same. Download the attached PDF for more information.

July 31, 2015 FBAR ALERT: The President signed H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the Act), which contains important changes to the due dates for the FinCEN Report 114 (relating to Report of Foreign Bank and Financial Accounts or FBAR), as well as other income tax returns. The Act also makes changes to the extension periods allowed for such filings. Generally, the effective date of the changes will affect filings beginning after December 31, 2015.

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Section 6050W: Information reporting of payments

Internal Revenue Code (IRC) Section 6050W requires certain companies to file information returns—Forms 1099-K—and report payment card transactions, including debit, credit, gift, and flexible spending account cards, as well as third-party network transactions on a gross payment basis. Given the time frame to evaluate processes, procedures, and system capabilities and the potential for penalties, Section 6050W compliance has become an increasingly urgent issue.

How is your organization affected by Section 6050W? The answer depends on two key dimensions: an organization’s internal structure and its role in the payment transaction stream. The analysis of these dimensions is a complex challenge with nuanced requirements and numerous exceptions. Deloitte, having assisted a number of organizations address these challenges, is ready and able to help your organization address its unique Section 6050W needs.

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Latest GIR Developments

The focus of the Internal Revenue Service on certain types of US income tax withholding indicates an enhanced scrutiny and potential exposure for organizations’ US tax withholding and information reporting across various industries.

View publications and announcements specific to GIR.

  • December 16, 2019: The IRS released Final Regulations, T.D. 9887, and Notice 2020-02, providing guidance for the treatment of dividend equivalent payments and an implementation timetable. The Final Regulations defines the term "broker" and indicate when the delta of an option that is listed on a foreign regulated exchange may be calculated. For a transaction involving multiple brokers or dealers, the regulations also provide guidance as to which party is responsible for determining whether a transaction is an 871(m) transaction. In conjunction with the release of the Final Regulations, Notice 2020-02 extends the effective phase-in period for certain 871(m) transactions. As it relates to relevant provisions of the 2017 Qualified Intermediary Agreement, the notice extends the period through 2022 in which the IRS will take into account the extent to which a Qualified Derivatives Dealer made a good faith effort to comply. Please refer to the IRS bulletin for details regarding the guidance.
  • October 21, 2019: The IRS Large Business and International (LB&I) published a new Practice Unit—Evaluation of Withholding Agent’s Electronic Books and Records on Reliability of Forms W-8. Practice Units serve as job aids and training materials on tax issues for IRS staff and are not intended to be used, cited, or relied upon as official pronouncements of law or directives. Further, as Practice Units only describe general tax concepts, they do not restrict an IRS examiner’s ability to employ other approaches when examining issues.

    This new Practice Unit relates to audits of withholding agents for Chapter 3 purposes and describes the process and considerations for assessing the reliability of a withholding agent’s electronic systems and procedures for creating, collecting, and storing account holders’ Forms W-8. Where an examiner determines it is more efficient to review a withholding agent’s electronic data instead of hardcopy records, the below eight steps outline how the examiner will obtain the electronic data to determine the reliability of the information provided on the Forms W-8. The Practice Unit provides further detail on each step, including questions for the examiner to consider when assessing the systems and procedures.

    1. Evaluate the withholding agent’s Form 1042-S reporting using IRS systems,

    2. Obtain an understanding of the system's ability to accumulate documentation and assess the reliability of supporting documentation,

    3. Use Information Document Request (IDR) inquiries to assess the reliability of the systems,

    4. Analyze the procedures and systems used for opening accounts,

    5. Review documentation and responses obtained from any introducing brokers,

    6. Review documentation and responses obtained from any third-party repositories,

    7. Review agency agreements between the withholding agent and any agents with which it maintains a shared documentation system, and

    8. Assess the reliability of the withholding agent's books and records by reviewing electronic storage and maintenance of Forms W-8.
  • October 9, 2019: The IRS sent a bulletin alert (Alert 2019-08) informing applicants that November 15, 2019 is the deadline to submit applications to have a Qualified Intermediary (QI) (including Qualified Derivatives Dealer (QDD)), Withholding Foreign Partnership (WP), or Withholding Foreign Trust (WT) agreement in effect in 2019. The application must be submitted through Qualified Intermediary, Withholding Foreign Partnership, Withholding Foreign Trust Application & Account Management System (QAAMS). Prior to submitting an application, applicants must obtain a GIIN.
  • September 20, 2019: The US Treasury Department announced the entry into force of tax treaty protocols with Luxembourg and Switzerland. This announcement comes on the heels of the Treasury’s previous announcement regarding the Protocols to the 2003 tax treaty between Japan the United States and the 1990 tax treaty between Spain and the United States.

    The 2009 Protocol to the 1996 tax treaty between the US and Luxembourg entered into force on September 9, 2019. The protocol provides for a more robust exchange of information between the two countries’ tax authorities by bringing the rules into closer conformity with both the US Model Income Tax Convention and the Organization for Economic Cooperation and Development (OECD) standards for the exchange of tax information. The protocol is limited to modernizing the exchange of information rules and does not affect withholding rates or rules. The full text of the Luxembourg protocol and tax treaty are available here: Protocol and Treaty

    The 2009 Protocol to the 1996 tax treaty between the US and Switzerland entered into force on September 20, 2019, and will apply as of January 1, 2020, for withholding tax purposes. The Switzerland protocol also updates the rules governing the exchange of tax information by incorporating current international standards. Additionally, once in effect, the protocol will revise the dividends article by restating the exemption for qualified pension funds and other qualified retirement arrangements in order to provide individual retirement accounts with the same benefits available to pensions under the tax treaty. Specifically, a zero percent withholding tax rate will apply to dividends paid to qualified pension arrangements, other qualified retirement arrangements, and qualified individual retirement savings plans. The protocol will not impact the tax treatment of other dividends, interest, or royalties. The full text of the Switzerland protocol and tax treaty are available here: Protocol and Treaty
  • August 30, 2019: The US Treasury Department announced that the Protocol to the 2003 tax treaty between Japan and the United States entered into force upon the exchange of instruments of ratification in Tokyo on August 30th and will apply as of November 1, 2019, for withholding tax purposes. The protocol introduces important updates to the tax treaty. When in effect, a zero percent withholding tax rate will apply to dividends paid to a qualifying pension fund or to a company that meets one of the specified limitation on benefits provisions and that owns, directly or indirectly, through one or more residents of either contracting state, at least 50 percent of the voting stock of the payer company for the six-month period ending on the date on which entitlement to the dividends is determined, a five percent rate will apply to dividends paid to a company that owns, directly or indirectly, at least 10 percent of the voting stock of the payer company on the date on which entitlement to the dividends is determined, otherwise, the rate will be 10 percent. Where dividends are paid by a Japanese company that is entitled to a deduction for dividends paid to its beneficiaries in computing its taxable income in Japan or by a US regulated investment company (RIC) or real estate investment trust (REIT), the treaty should be consulted for special rules that may limit the applicability of the reduced dividend withholding tax rates under the treaty. A 10 percent rate will apply to certain contingent interest and the domestic rate will apply to certain interest relating to ownership interests in an entity used for the securitization of real estate mortgages or other assets, otherwise, the rate on interest will be zero percent. The interest article of US treaties should be consulted for special rules that may apply to interest on certain back-to-back loans. The withholding tax rate on royalties will not be affected by the protocol. The full text of the Japan protocol and the treaty may be found here: Protocol and Treaty.

    On the same date the US Treasury Department announced that the Protocol to the 1990 tax treaty between Spain and the United States will enter into force on November 27, 2019, and will apply as from the same date for withholding tax purposes. When in effect, the protocol provides for a zero percent withholding tax rate on dividends paid to a qualifying pension fund or to a company that meets one of the specified limitation on benefits provisions and that owns, directly or indirectly, through one or more residents of either contracting state, shares representing 80 percent or more of the voting stock of the payer company for a 12-month period ending on the date on which entitlement to the dividends is determined, a five percent rate will apply to dividends paid to a company that owns directly at least 10 percent of the voting stock of the payer company, otherwise, the rate will be 15 percent. Where dividends are paid by a Spanish real estate investment trust (SOCIMI) or investment institution or by a US regulated investment company (RIC) or real estate investment trust (REIT), the treaty should be consulted for special rules that may limit the applicability of the reduced dividend withholding tax rates under the treaty. Interest and royalties generally will be taxable only in the state of residence of the recipient. The interest article of US treaties should be consulted for special rules that may apply to residual interest from real estate mortgage investment conduits, certain contingent interest and interest on certain back-to-back loans. The full text of the Spain protocol and the treaty may be advised here: Protocoland Treaty.
  • August 27, 2019: The IRS circulated a bulletin (PR-2019-23) about amendments made to the Revenue Procedure 2019-23 (Implementation of Nonresident Alien Deposit Interest Regulations). According to this news, Georgia (country) was added to the list of the countries with which the United States has in force an information exchange agreement. As a result of this update, the interest paid to the residents of Georgia must be reported by payors to the extent required under Treas. Reg. §§1.6049-8(a) and 1.6049-4(b)(5) (requiring Form 1042-S reporting of bank deposit interest paid to certain non-resident aliens for deposits maintained within a US office). The same revenue procedures adds Curaçao and Cyprus to the list of jurisdictions with respect to which the Treasury and the IRS have determined that it is appropriate to have an automatic exchange relationship regarding the bank deposit interest income information.
  • August 9, 2019: The IRS has issued long awaited guidance on “cloud transactions” in the form of proposed regulation (REG-130700-14) section 1.861-19 which provides rules for classifying cloud transactions as either a provision of services or a lease of property. A cloud transaction is defined as a transaction through which a person obtains non-de-minimis on-demand network access to computer hardware, digital content, or other similar resources. Proposed regulation section 1.861-19(c)(2) contains a non-exhaustive list of factors for determining whether a cloud transaction is classified as a provision of services or a lease of property including the statutory factors described in section 7701(e)(1). In addition, existing regulation section 1.186-18 was modified through proposed regulation 1.861-18 to broaden its scope and apply to all transfers of “digital content.” Digital content is defined as any content in digital format and that is either protected by copyright law or is no longer protected by copyright law solely due to the passage of time, whether or not the content is transferred in a physical medium. Digital content includes, for example, books, movies, and music in digital format in addition to computer programs. We will follow-up with additional details as they develop.
  • July 24, 2019: The IRS released an early draft version of Form 1099-NEC, Nonemployee compensation. Due to the different deadline for reporting NEC compared to other payments reported on a Form 1099-MISC (January 31 for NEC vs February 28 or March 31 for other payments filed on paper or electronically, respectively), the IRS broke out NEC reporting to a new form to help simplify NEC reporting. Comments on the draft Form 1099-NEC are due by September 30, 2019, and the form is proposed to go-live for the 2020 tax year with first filing in 2021. The draft form can be downloaded from the IRS here: https://www.irs.gov/pub/irs-dft/f1099nec--dft.pdf. We will follow-up with additional details as they develop.
  • November 5, 2018: The IRS issued a bulletin reminding taxpayers with expiring Individual Taxpayer Identification Numbers (ITINs) to complete the renewal process as soon as possible to avoid refund and processing delays in 2019. The requirement to renew ITINs was established as part of the Protecting Americans from Tax Hikes (PATH) Act, which was enacted in December 2015.
  • September 20, 2018: The IRS released Notice 2018-72, announcing they intend to amend the section 871(m) regulations to delay the effective/applicability date of certain rules in those final regulations. Notice 2018-72 also extends the phase-in period provided in Notice 2016-76 for certain provisions of the section 871(m) regulations and permits withholding agents to apply the transition rules from Notice 2010-46 through 2020.
  • May 31, 2018: The US Department of the Treasury (Treasury) published proposed regulations (Proposed Regulations) providing amendments to the rules on electronic filing of information returns. The Proposed Regulations would require that all information returns, regardless of type, be taken into account when determining whether a taxpayer meets the 250 return threshold that triggers the electronic filing requirement. The Proposed Regulations also would obligate any taxpayer required to file information returns electronically to file corrected information returns electronically, regardless of the number of corrected information returns being filed.
  • January 1, 2018: The legislation (P.L. 115-97) commonly referred to as the 2017 Tax Reform Act (the Act) was signed into law by President Trump on December 22, 2017. Portions of the new law change withholding tax rates, effective January 1, 2018, and implement new withholding requirements.

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Latest FATCA and CRS developments

Below are selected publications from the Internal Revenue Service (IRS) and Treasury department providing guidance regarding Foreign Account Tax Compliance Act (FATCA) and selected publications from the Organization for Economic Cooperation and Development (OECD) regarding the Common Reporting Standard (CRS).

To view all posted publications: Click here for FATCA and click here for CRS.

  • December 16, 2019: The IRS released Final Regulations, T.D. 9887, and Notice 2020-02, providing guidance for the treatment of dividend equivalent payments and an implementation timetable. The Final Regulations defines the term "broker" and indicate when the delta of an option that is listed on a foreign regulated exchange may be calculated. For a transaction involving multiple brokers or dealers, the regulations also provide guidance as to which party is responsible for determining whether a transaction is an 871(m) transaction. In conjunction with the release of the Final Regulations, Notice 2020-02 extends the effective phase-in period for certain 871(m) transactions. As it relates to relevant provisions of the 2017 Qualified Intermediary Agreement, the notice extends the period through 2022 in which the IRS will take into account the extent to which a Qualified Derivatives Dealer made a good faith effort to comply. Please refer to the IRS bulletin for details regarding the guidance.
  • October 30, 2019As calendar year 2019 is quickly coming to an end, we wanted to remind US offices and branches of financial institutions, like US banks and US investment entities, that Forms W-8 (except for a Form W-8IMY), without a valid FTIN will generally be considered invalid after December 31, 2019. This applies irrespective of the form’s expiration date. For example, a Form W-8BEN-E signed in 2017 provided without an FTIN will be considered invalid on January 1, 2020, even though it does not expire until December 31, 2020. Consequently, US source income (reportable on Form 1042-S) paid on or after January 1, 2020, will be considered made to an undocumented person subject to US income tax withholding at a rate of 24 percent (backup withholding) or 30 percent (NRA withholding). The above is generally applicable to Forms W-8 signed before January 1, 2018. Forms signed on or after January 1, 2018, were required to contain an FTIN. Please download the PDF to see more details.
  • October 15, 2019: The IRS updated the FATCA FAQ (FATCA—FAQs General, Reporting, Q3) stating that a “reporting Model 1 FFI is not required to immediately close or withhold on accounts that do not contain a TIN beginning January 1, 2020.” (emphasis added). In the event a TIN is not provided, an error notice to correct the issue within a 120-day period will be generated. If a TIN is not provided within such period, the IRS will consider the facts and circumstances to determine whether there is significant non-compliance. Significant non-compliance may result in a notification being sent the exchange partner and/or revocation of Global Intermediary Identification Number.
  • September 23, 2019: The IRS issued a bulletin announcing a new file naming convention required for FATCA data packets due to recent upgrades to the International Data Exchange System (IDES). The file name must now follow the below convention, utilizing a Coordinated Universal Time (UTC) timestamp and the GIIN of the sender (FATCAEntitySenderId):
    UTC_FATCAEntitySenderId.zip

    Further, the UTC must follow a specific timestamp format—YYYYMMDDTHHMMSSmsZ—corresponding to:

    YYYY = 4-digit year
    MM = 2-digit month
    DD = 2-digit day
    T = letter T for separating date and time
    HH = 24-hour
    MM = 2-digit minutes
    SS = 2-digit seconds
    ms = 3-digit milliseconds
    Z = Letter Z – the UTC designator

    The IRS has updated its IDES resources to incorporate this change: IDES User GuideIDES Data PreparationIDES Data Preparation User Tips

    In the same bulletin, the IRS also announced that it has updated the list of approved certificate authorities to revise the names of some of the types of certificates. Note that there have been no changes to the actual certificate authorities. The current list can be viewed here: Link
  • August 9, 2019: The IRS circulated FATCA News & Information Bulletin (issue number 2019-7) announcing updates to FATCA Metadata XML Schema v1.2 User Guide (Publication 5188), IDES User Guide (Publication 5190), and Sender File Metadata XML. The updated FATCA Metadata XML Schema v1.2 User Guide now includes one new exchange file type. IDES User Guide updates (among others) provide: an explanation on how to add, change and update user contact information and FI GIIN composition, information about clearing browser cache before resetting password, IDES testing window information, and three enumeration values (TEI, ETR, and ETR Status) to Create Sender Metadata File section. Updated Sender File Metadata XML may be accessed here: Link

    Full text of the FATCA News & Information Bulletin (issue number 2019-7) may be consulted here: Link
  • May 6, 2019: The IRS circulated a bulletin (Issue Number: 2019-5) about commencement of a FATCA International Data Exchange Services (IDES) testing session. According to the bulletin, the IDES will be open for testing from June 17, 2019 at 8:00 a.m. EDT to Friday, July 26, 2019 at 5:00 p.m. EDT. The testing session will be available to those users that have completed IDES enrollment by June 13, 2019 at 5:00 p.m. EDT. For participation in the testing, the users will need an active password. All passwords and profile information should be updated before the enrollment cutoff date.

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