Presenting a live 110-minute teleconference with interactive Q&A Forms W-8BEN and W-9 Compliance in Foreign and U.S. Business Transactions Meeting the Demands of the Substantially Overhauled W-8BEN Under New FATCA Rules TUESDAY, JULY 25, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Marianne Couch, Principal, COKALA Tax Information Reporting Solutions , Ann Arbor, Mich. Harold Adrion, Director, EisnerAmper , New York Armin Gray, Ruchelaw Law Firm , New York For this program, attendees must listen to the audio over the telephone. Please refer to the instructions emailed to the registrant for the dial-in information. Attendees can still view the presentation slides online. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Forms W-8BEN and W-9 Compliance in Foreign and U.S. Business Transactions June 25, 2013 Marianne Couch, Cokala Tax Information Harold Adrion, EisnerAmper mcouch@cokala.com harold.adrion@eisneramper.com Armin Gray, The Ruchelman Law Firm gray@ruchelaw.com
Today’s Program FATCA Overview Slide 8 – Slide 32 [ Harold Adrion ] FFIs And NFIs Slide 33 – Slide 44 [ Harold Adrion and Armin Gray ] FATCA Funds And Trusts Slide 45 - Slide 56 [ Harold Adrion and Armin Gray ] Significant Ongoing Compliance Challenges With W-8BEN Slide 57 - Slide 66 And W-9 [ Marianne Couch]
Notice ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
Harold Adrion, EisnerAmper FATCA OVERVIEW
Overview FATCA is the law Signed by President Obama on March 18, 2010 Proposed regulations issued on Feb. 8, 2012 (published Feb. 15, 2012) Final regulations issued on Jan. 17, 2013 (officially published Jan. 28, 2013) Bilateral inter-governmental agreements can modify outcomes under the final regulations. New withholding tax and information reporting system for payments made to “foreign financial institutions” (FFIs) Similar system of withholding tax and information reporting for payments made to “non - financial foreign entities” (NFFEs) 9
Overview (Cont.) Designed to reduce the incidence of improper tax avoidance through the use of offshore accounts and non-US investments Targets financial institutions serving US investors rather than the US investor itself Goal: Increased information reporting and transparency Enforcement mechanism:30% withholding tax imposed on US payments to certain non-US persons 10
To Whom Does FATCA Apply? • Foreign financial intermediaries that have U.S. clients, directly or indirectly • U.S. client is determined using U.S. tax law definition of U.S. person: Resident of the United States (green card holder or person who satisfies the substantial presence test) or U.S. citizen (including a dual citizen), U.S. corporation or U.S. partnership, trust or estate • Virtually every foreign financial institution that holds, trades or invest in U.S. investment property for itself of on behalf of an account holder (whether or not the client is a U.S. person) 11
To Whom Does FATCA Apply? (Cont.) • Includes: Banks, trust companies, custodians, investment entities (i.e., collective investment vehicles), insurance companies that issue policies that have “cash value” • Final regulations treat managers of investment entities as financial institutions. (1.1471-5)e)(4)(i)(A) • Excludes: Non-financial holding companies, start-up companies, entities in the process of liquidation or reorganization, hedging or financing centers of non-financial groups with respect to transaction with non-FFI affiliates, and certain charitable organizations 12
To Whom Does FATCA Apply? (Cont.) • U.S. payors and foreign institutions that make withholdable payments to FFIs and NFFEs • Withholdable payment means any payment of U.S.-source, FDAP income (i.e., interest, dividends, rents, premiums, annuities, etc.) and any gross proceeds from the sale of other disposition (occurring after 12/31/16) of any property of a type that can produce interest of dividends that are U.S.-source FDAP income 13
30% Withholding On A Withholdable Payment • FATCA’s lever to achieve this goal is a NEW 30% withholding tax levied on “withholdable payments” or any foreign pass -through payment made to non- participating “foreign financial institutions” (FFIs) and “non - financial foreign entities” (NFFESes) by “withholding agents.” • “Withholdable payments” include all U.S. -source income (FDAP) and gross proceeds from the sale of disposition of any property of a type that can produce interest or dividends from U.S. sources. 14
FATCA Mechanics And Applications • FATCA introduces a new “Chapter 4” of the Internal Revenue Code, with two key sections: • Sect. 1471 – payments to “foreign financial institutions” (FFIs) • Sect. 1472 – payments to “non - financial foreign entities” (NFFEs) • U.S. payers accordingly have the statutory obligation (unless modified by regulation) to determine whether payees are “good” or “bad” FFIs and NFFEs. • NOTE: FATCA withholding is a “filter” that applies before applying the standard NRA withholding rules (Chapter 3 withholding). 15
FATCA Mechanics And Applications (Cont.) • All Chapter 3 rules (1441, 1446, 1442), systems and procedures remain fully applicable, if Chapter 4 requirements are satisfied. • Difference in application of treaties 16
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Two Regimes • Final regulations • Intergovernmental agreements (IGAs) • FFI considered to be deemed compliant FFI • Model I IGA (e.g. Cayman Islands and UK) does not enter into an agreement with the U.S. but rather with the IGA jurisdiction. • Model II IGA S (e.g. Switzerland and Japan) enters into an agreement with the U.S. and applies regulations. 18
IGAs Will Be Primary Way FATCA Is Enforced • IGA now appeard to be the predominate way FATCA will be enforced. • More than 75 countries have either entered an IGA or are in the process of negotiating them. • IRS is expected to publish a list of countries that will be considered to either have an IGA or be on the way to obtaining them. 19
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IGAs • In February 2012, the U.S., France, Germany, Italy, Spain and the UK issued a joint statement in support of the underlying goals of FATCA but recognized legal impediments to compliance. • In June 2012, Switzerland and Japan, with the U.S., issued a joint statement describing an approach different from that of the G5 countries. • U.S. is open to an inter-governmental approach to implementing FATCA and reportedly is in discussions with over 75 countries regarding such inter-governmental approach. 21
IGAs (Cont.) • To date, 3 different approaches: • Model I with reciprocity • Model I without reciprocity • Model II 22
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