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IRS issues instructions to Form W-8BEN-E - EY - …

International Tax Alert 30 June 2014. IRS issues instructions to EY Global Tax Alert Library form W-8 BEN-E. In anticipation of the 1 July 2014, initial effective date of FATCA, the IRS has issued a Access both online and pdf flurry of new information, including the instructions to the form W-8 BEN-E, Certificate versions of all EY Global Tax of Status of Beneficial Owner for United States Tax Withholding and Reporting Alerts. (Entities). The IRS also has released: Copy into your web instructions to the form W-8 IMY, Certificate of Foreign Intermediary, Foreign Flow- browser: Through Entity, or Certain US Branches for United States Tax Withholding and Reporting Services/Tax/International- 2014 instructions for form 1042-S, Foreign Person's US source Income Subject to Tax/Tax-alert-library#date Withholding 2014 instructions for form 8966, FATCA Report Revenue Procedure 2014-38, FFI Agreement for Participating FFI and Reporting Model 2 FFI.

30 June 2014 International Tax Alert IRS issues instructions to Form W-8BEN-E In anticipation of the 1 July 2014, initial effective date of FATCA, the IRS has issued a

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Transcription of IRS issues instructions to Form W-8BEN-E - EY - …

1 International Tax Alert 30 June 2014. IRS issues instructions to EY Global Tax Alert Library form W-8 BEN-E. In anticipation of the 1 July 2014, initial effective date of FATCA, the IRS has issued a Access both online and pdf flurry of new information, including the instructions to the form W-8 BEN-E, Certificate versions of all EY Global Tax of Status of Beneficial Owner for United States Tax Withholding and Reporting Alerts. (Entities). The IRS also has released: Copy into your web instructions to the form W-8 IMY, Certificate of Foreign Intermediary, Foreign Flow- browser: Through Entity, or Certain US Branches for United States Tax Withholding and Reporting Services/Tax/International- 2014 instructions for form 1042-S, Foreign Person's US source Income Subject to Tax/Tax-alert-library#date Withholding 2014 instructions for form 8966, FATCA Report Revenue Procedure 2014-38, FFI Agreement for Participating FFI and Reporting Model 2 FFI.

2 Revenue Procedure 2014-39, Application Procedures and Overview of Requirements for Qualified Intermediary Status Under Chapters 3, 4 and 61 and Section 3406;. Final Qualified Intermediary Agreement New Frequently Asked Questions (and answers) with respect to withholding foreign partnerships and withholding foreign trusts Technical corrections to the FATCA and chapter 3 and 61 temporary and proposed regulations published in February 2014. While each of these documents merits review and analysis by the many foreign persons and withholding agents to which they apply, the instructions to the form W-8 BEN-E will have the broadest impact. Implications: Unfortunately, we are Specific items to note in the form income that is not subject to FATCA.

3 Still waiting for the instructions for W-8 BEN-E instructions : withholding, such as interest on a the Requester of Forms W-8, which grandfathered obligation or a non- The IRS included several pages of will be critical to the withholding financial payment, the payee does definitions in the form W-8 BEN-E. agents who have already begun to not need to provide the Chapter 4. instructions that will be very useful receive Forms W-8 BEN-E (which status. to anyone who has not read the was finalized by the IRS in April voluminous FATCA and Section Implications: These instructions 2014). Therefore, while a foreign 1441 regulations. create operational and system person now has the instructions it challenges for withholding agents.

4 Needs to complete any of the Forms Disregarded entities must pay While a form received without a W-8 revised for FATCA purposes, particular attention to the form 's Chapter 4 status during a preexisting withholding agents do not have the directions as the form must be account's due diligence period is instructions they need to validate completed differently depending valid, Chapter 4 withholding is and rely on those forms. Because on the facts and circumstances. required as soon as the due diligence the IRS has indicated that there will For instance, a disregarded entity period expires. For those preexisting be numerous tips and cautions should generally not complete the accounts whose due diligence period in those instructions , their release form W-8 BEN-E in its own name expires 30 June 2016 and that are as soon as possible is critical to the unless they are hybrid entities receiving withholdable payments, implementation of FATCA.

5 Claiming treaty benefits. Instead, this rule creates, in effect, a mid- their single owners should provide Implications: We anticipate (based year 2016 form expiration and an Forms W-8 BEN, W-8 BEN-E or on public comments from various early 2016 tax form solicitation W-9, as appropriate. However, the IRS officials) that while the form process. The instruction also creates name of a disregarded entity may W-8 BEN-E instructions are silent challenges from a customer service be appropriate in Part I, line 3 or on the issue, the instructions for perspective in that it will most line 10, or in Part II depending on the Requester of Forms W-8 will likely lead to unnecessary FATCA.

6 Whether the disregarded entity has state that withholding agents may withholding to the extent payees obtained a GIIN in its own name continue to collect the February follow the instruction and do not or is located in a jurisdiction other 2006 version of the form W-8 BEN provide their chapter 4 statuses on a than that of its single owner. from foreign payees through the timely basis. end of 2014. Under the applicable The instructions to line 5 state According to the instructions , if regulations, a withholding agent that a foreign entity is not required a payee's country of residence can only collect an old version of a to provide their Chapter 4 ( , for tax purposes has issued a withholding certificate for six months FATCA) status with respect to a tax identifying number (TIN) to after a new version is released.

7 Given pre-existing entity account before the payee, they should provide the February 2014 revision date on 1 July 2016 (or if they are a prima their TIN on line 9b. If the form the form W-8 BEN-E (and despite the facie FFI before 1 January 2015). is provided to a US office of a fact that the form was not actually The instructions also clarify that a financial institution, the payee released until April), that means that payee is only required to provide must provide a TIN unless they absent specific relief, withholding their Chapter 4 status if they receive have not been issued one or the agents would be required to collect withholdable payments for FATCA jurisdiction in which they are the new form W-8 BEN-E by 1 purposes or have been requested resident for tax purposes does not September 2014.

8 To provide their status by a FFI. issue them. Therefore, if a payee is receiving 2 International Tax Alert Implications: It is unclear the extent The instructions specify that a The instructions clearly provide to which a withholding agent will foreign branch of a US financial that qualified securities lenders be expected to determine whether institution that is not a qualified should not provide Forms a payee has a TIN, whether the intermediary under a Model 1 W-8 BEN-E, but rather must provide jurisdiction in which the foreign Intergovernmental Agreement Forms W-8 IMY to payors. person resides for tax purposes does (IGA) cannot use a form W-8 BEN-E. Implications: Brokers and custodians not issue TINs, or whether the TIN and instead the instructions will have to remediate any written that was provided is correct in terms direct that a form W-9 should be certifications that they have on file of format and length.

9 Furnished to withholding agents. for qualified security lenders and The instructions clarify that a non- Despite its fifteen pages, there is replace them with Forms W-8 IMY. financial foreign entity (NFFE) that no explanation in the instructions Implications: Thanks to the transition is a member of the same group that while a US person is generally relief granted by the IRS in Notice as a publicly traded US or foreign considered a substantial US. 2014-33, withholding agents have entity can qualify for the publicly- owner if they own more than time to wait for the Requester's traded NFFE exception. 10% of an entity, if the entity is an instructions to Forms W-8 to be investment entity, that ownership Whoever signs a form W-8 BEN-E issued to begin validating Forms threshold drops to anything greater must be authorized to do so, and W-8 BEN-E.

10 Than 0%. must check the box under their signature to certify they have the legal capacity to sign the form on behalf of the entity. International Tax Alert 3. For additional information with respect to this Alert, please contact the following: Ernst & Young LLP, International Tax Services Capital Markets Tax Practice Deborah Pflieger, Washington, DC +1 202 327 5791 Tim Morin, Denver +1 720 931 4488 Maria Murphy, Washington, DC +1 202 327 6059 Justin O'Brien, New York +1 212 773 4767 Terence Cardew, New York +1 212 773 3628 George Fox, Washington, DC +1 202 327 5621 Doug Sawyer, New York +1 212 773 8707 Ernst & Young LLP, International Tax Services Barbara Angus, Washington, DC +1 202 327 5824 Lilo Hester, Washington, DC +1 202 327 5764 John McMahon, Minneapolis +1 612 371 6771 International Tax Services Global ITS, Alex Postma, London ITS Director, Americas, Jeffrey Michalak.


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