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)
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