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

IRS Releases “Corrections” to FATCA Regulations

fotoflexer-photofatca.jpg

The IRS has published "technical corrections" to the final FATCA regulations, reports Burt Staples & Maner

Although there is a reference in the preamble to "coordination," we still expect around the end of the year a substantial package of "coordination regulations" to reconcile chapters 3, 4, and 61.

While many of the changes this time around are quite minor, there are a few items that are worth noting:


Old provision

New provision

Citation

On a change in circumstances for an entity other than a passive NFFE [non-financial foreign entity], a participating FFI [foreign financial institutinon] must refresh documentation by the earlier of 90 days or the first withholdable payment or foreign passthru payment. The same deadlines apply to accounts that become recalcitrant due to a change in circumstances (other than newly high value individual accounts).

Only the 90-day rule applies. Withholdable payments within the 90 days are not subject to withholding. Caution: Change in circumstances provisions that apply to other situations (for example, withholding agents other than participating FFIs) have not been changed to drop the withholdable payment trigger.

Treasury Regulations Section 1.1471-4(c)(2)(iii)(C), -5(g)(3)(iii)

A sponsoring entity had to be able to “manage” the sponsored entity and enter into contracts on its behalf, but it was unclear to what extent.

A sponsoring entity merely must be authorised to perform FATCA compliance on the sponsored entity's behalf. Wide-ranging management or contracting authority is unnecessary.

Treasury Regulations Section 1.1471-5(f)(1)(i)(F)(3)(i), (f)(2)(iii)(B)

An example in the regulations stated that an “Investment Advisor” is a “financial institution,” but failed to explain why merely providing advice would trigger that treatment.

The facts of the example are changed to add that the Investment Advisor is managing a portion of the portfolio, an activity that clearly makes the Investment Advisor a financial institution.

Treasury Regulations Section 1.1471-5(e)(4)(v) Example 1

US branches of participating FFIs treated as US persons apply the same documentation standards as US withholding agents, and if they follow the backup withholding and reporting rules that apply to other US withholding agents, they are deemed to comply with FATCA. Nothing specific about US branches of Reporting Model 1 FFIs.

Same treatment extended to US branches of Reporting Model 1 FFIs.

Treasury Regulations Section 1.1471-4(b)(7), -4(c)(2)(v), -4(d)(2)(iii)(B)

A “branch” was defined as anything treated as a branch or as separately regulated under local law that also maintains separate books and records.

The definition is simplified by eliminating the need for separate books and records.

Treasury Regulations Section 1.1471-4(e)(2)(ii)

To qualify as a “limited branch,” the branch was required to face a barrier to FATCA compliance under local laws in place as of February 15, 2012.

The date is eliminated. The local law restriction could be passed at any time and the branch would still qualify as a limited branch prior to the end of 2015.

Treasury Regulations Section 1.1471-4(e)(2)(iii)

Limited branches had to retain required records of account documentation for at least six years.

Limited branches must retain required records of account documentation for the life of the account or obligation, but not less than six years.

Treasury Regulations Section 1.1471-4(e)(2)(iv)(B)

Certain Forms W-8 are valid indefinitely rather than expiring after three years if accompanied by documentary evidence. Unclear whether the documentary evidence needed to be refreshed.

No need to refresh the documentary evidence, so long as the Form W-8 and documentary evidence were provided together.

Treasury Regulations Section 1.1471-3(c)(6)(ii)(B)(2), (3)


Source: Burt Staples & Maner (www.bsmlegal.com)

more across site & bottom lb ros

More from across our site

Peter Boerhof, the VAT director of Vertex, will take part in a fireside chat with ITR at 10am GMT on November 10 to discuss how to manage the tax complexities of cross-border sales.
Tax leaders are concerned that the EU digitalisation drive could mean more audits as tax authorities collect ever greater amounts of data from businesses.
Speakers at ITR’s Global TP Forum Europe said TP analyses are often tied to the value created from a company’s ESG commitments.
Discussions around recharacterisation are better to avoid, as tax authorities could dismiss an entire TP transaction, said panellists at ITR’s Global TP Forum.
Several tax chiefs shared their administrations’ latest digital identity tracking systems and other tax technologies at the OECD’s annual meeting of authorities.
Businesses welcome the UK’s decision to scrap the IR35 reforms but are not happy about the time and money they have wasted to date.
Energy ministers agreed on regulations including a windfall tax on fossil fuel companies to address high gas prices at an extraordinary Council meeting on September 30.
The European Parliament raises concerns over unanimity in voting on pillar two, while protests break out over tax reform in Colombia.
Ramesh Khaitan speaks to reporter Siqalane Taho about tax morality, transfer pricing regulations, Indian tax developments, and the OECD’s two-pillar solution.
Join ITR and KPMG China at 10am BST on October 19 as they discuss the personal, employment, and corporate tax-related implications of employees working from overseas.
We use cookies to provide a personalized site experience.

By continuing to use & browse the site you agree to our Privacy Policy.
I agree