All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Non-US entities get first sight of beneficial ownership form for FATCA

fatca4.jpg

The Internal Revenue Service has published a draft Form W-8BEN-E, which overseas entities must use to certify beneficial ownership status for US withholding tax purposes under the Foreign Account Tax Compliance Act (FATCA).

Depending on which of the 22 different descriptions that they correspond to in part 1, which deals with the identification of the beneficial owner, entities are directed to different sections of the 25-part document.

Categories include foreign financial institution (FFI), non-financial foreign entity (NFFE) or variations of either, exempt retirement fund, certified deemed-compliant nonregistering local bank and excepted nonfinancial holding company.

Part II of the form allows entities to claim the benefits of the tax treaty between the US and their home jurisdiction. Part III refers to notional principal contracts “from which the income is not effectively connected with the conduct of a trade or business in the United States”.

FATCA, which was passed in 2010 as part of the HIRE (Hiring Incentives to Restore Employment) Act, will require foreign financial institutions (FFIs) to report to the IRS about their US taxpayer-held accounts. Otherwise, the institutions and accountholders deemed non-compliant face a 30% withholding tax on certain payments such as US source interest and dividends. Proposed regulations came out in February. The Treasury’s timetable calls for final regulations to be released before the end of the summer.

Affected financial institutions called on the US government to postpone the introduction of the legislation to give them time to put the processes in place to enable to identify their US accountholders and comply with the law. Some service providers believe the institutions could end up spending hundreds of millions of dollars.

The law was originally due to come into force in full on January 1 next year, but that will now be the start of a phased introduction of the rules.

The withholding tax of 30% will be imposed beginning January 1 2014 on US-source dividends and interest paid to non-participating foreign banks and financial institutions. Withholding on all applicable payments, including US-source gross proceeds of sale and pass-thru payments, will be applied from January 1 2015.

More from across our site

Japan reports a windfall from all types of taxes after the government revised its stimulus package. This could lead to greater corporate tax incentives for businesses.
Sources at Netflix, the European Commission and elsewhere consider the impact of incoming legislation to regulate tax advice in the EU – if it ever comes to pass.
This week European Commission officials consider legal loopholes to secure minimum corporate taxation, while Cisco and Microsoft shareholders call for tax transparency.
The fast-food company’s tax settlement with French authorities strengthens the need for businesses to review their TP arrangements and documentation.
The full ALP model will be adopted through a new TP regime, which is set to boost the country’s investments and tax certainty.
Tax professionals have called on the UK government to reconsider its online sales tax as it would affect the economy at the worst time.
Tax professionals have called on companies to act urgently to meet e-invoicing compliance targets as the EU plans to ramp up digitisation.
In the wake of India’s ambitious 25-year plan for economic growth, ITR has partnered with leading tax commentators to discuss what the future will look like for India and for the rest of the world.
But experts cast doubt on HMRC's data and believe COVID-19 would have increased the revenue shortfall.
EY’s plan to separate its auditing and consulting businesses might lessen scrutiny from global regulators, but the brand identity could suffer, say sources.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree