The US Department of the Treasury and Internal Revenue Service (IRS) released on 6 March 2014 temporary and final regulations for FATCA as well as changes to coordinate the FATCA regulations with Chapters 3 and 61 and Section 3406 of the Internal Revenue Code (IRC). Additional updates were issued on 1 July 2014.
PwC has updated a formatted version of the FATCA regulations and published a new volume of the formatted regulations for withholding of tax on nonresident aliens and foreign corporations. The new edition is available for download by following this link.
The PwC formatted regulations
Click here to download the latest versions of the PwC formatted regulations.
On June 25, 2014, the Internal Revenue Service (IRS) released the instructions for Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities). Form W-8BEN-E, which was issued without instructions in March 2014 (with a February 2014 revision date), is used by non-US entities to document their status as a payee under Chapter 4 and as a beneficial owner under Chapter 3 of the US Internal Revenue Code (Code).
An entity that does not document its Chapter 4 status (commonly referred to as its FATCA status) may be treated as a recalcitrant account holder or nonparticipating foreign financial institution, and subject to a 30% withholding when receiving certain withholdable payments.
The instructions to Form W-8BEN-E provide clarification and relevant definitions in regard to the requirements for documenting and certifying a non-US entity’s status, which is essential for compliance with FATCA and other information reporting and withholding requirements.
On 2 May2014, the US Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) announced in Notice 2014-33 (the Notice) that calendar years 2014 and 2015 will be regarded as a transition period for purposes of IRS enforcement and administration with respect to the implementation of the Foreign Account Tax Compliance Act (FATCA or Chapter 4).
In addition, the Notice provides that this transition period will apply with respect to certain related due diligence and withholding provisions under Chapters 3 and 61 and Section 3406 of the Internal Revenue Code (Code) that were revised in coordinating regulations issued on February 20, 2014. This relief means that the IRS will take into account the extent to which withholding agents, foreign financial institutions (FFIs), and other entities are making a good faith effort to comply with FATCA and the modifications to existing information reporting and withholding obligations until calendar year 2016.
The PwC Insight attached below provides an overview of the notice and observations regarding:
Although the US tax regime is based on self-assessed tax, the Internal Revenue Service continues to expand third-party information reporting requirements with the aim of ensuring that taxpayers file complete and accurate income tax returns by matching independent information with what is being reported on their returns. This Tax Insight serves as a high-level primer to facilitate discussions as businesses consider their compliance requirements for the current year.
The withholding provisions of FATCA are scheduled to begin in January 2014. Multinational businesses that have not already begun to assess the FATCA requirements, determine their specific impact, and create a customized plan to comply may be falling behind.
Now is the right time to learn more and take action.
While strict global Anti-Money Laundering (AML)/Know Your Customer (KYC) requirements have been with us for a long time, strict rules aimed at ending global tax evasion are a more recent phenomenon. The provisions of the Foreign Account Tax Compliance Act (FATCA) were enacted in 2010 with a primary goal of providing the United States' Internal Revenue Service (IRS) with an increased ability to detect US tax evaders concealing their assets in foreign accounts and investments.
This document highlights four key challenges that AML/KYC professionals should understand as their financial institutions begin to implement FATCA alongside existing account opening and AML/KYC capabilities.