Source: https://profwilliambyrnes.com/tag/international-tax/
Timestamp: 2019-04-19 06:40:30+00:00

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The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters of the analysis of 50 FATCA experts grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance requirements (Chapters 17–34), including information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA. Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, and insights as to the application of FATCA and the IGAs for BRIC and European country chapters.
How does a Financial Institution that is not currently a Qualified Intermediary (“QI”), a Withholding Foreign Partnership (“WP”), or a Withholding Foreign Trust (“WT”) register to become one?
The process to become a QI, WP or WT has not been modified by the provisions of FATCA.
How do FIs that are currently QIs, WPs and WTs renew their agreements?
Existing QIs, WPs and WTs are required to renew their QI agreements through the FATCA registration website as part of their FATCA registration process.
All QI, WP, or WT agreements that would otherwise expire on December 31, 2013 will be automatically extended until June 30, 2014. (Notice 2013-43; 2013-31 IRB 113).
I am not currently a QI/WP/WT. Can I use the LB&I registration portal to register for FATCA and become a new QI/WP/WT?
QI/WP /WT status can only obtained by completing and submitting a Form 14345 (“QI Intermediary Application”) and Form SS-4 (“Application for Employer Identification Number”) directly to the QI Program. Interested QIs/WPs/WT should submit the required paperwork to the QI program and separately use the FATCA registration portal to obtain a GIIN for FATCA purposes. FFIs can not become a new QI/WP/WT through the FATCA portal.
Note: Form 14345 (“QI Intermediary Application”) should be used for WPs and WTs in addition to QIs.
Must an FI become a QI/WP/WT in order to register under FATCA?
An FI is not required to obtain QI/WP or WT status to register under FATCA. If at the time of FATCA registration, the FI does not have in effect a withholding agreement with the IRS to be treated as a QI, WP or WT, the FI will indicate “Not applicable” in box 6 and will continue with the registration process.
Please provide a link that lists the jurisdictions treated as having in effect a Model 1 or Model 2 IGA.
How do Foreign Financial Institutions in Model 1 jurisdictions register on the FATCA registration website?
Financial Institutions that are treated as Reporting Financial Institutions under a Model 1 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Registered Deemed-Compliant Foreign Financial Institutions.
How do Foreign Financial Institutions in Model 2 jurisdictions register on the FATCA registration website?
Financial Institutions that are treated as Reporting Financial Institutions under a Model 2 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Participating Foreign Financial Institutions.
We are an FFI in a country that has not signed an IGA, and the local laws of our country do not allow us to report U.S. accounts or withhold tax. What is our FATCA classification?
Unless the Treasury website provides that your country is treated as having an IGA in effect, then, because of its local law restrictions, this FFI should register as a Limited FFI provided it meets the definition shown directly below. See FATCA – Archive for a list of countries treated as having an IGA in effect.
A Limited FFI means an FFI that, due to local law restrictions, cannot comply with the terms of an FFI Agreement, or otherwise be treated as a PFFI or RDCFFI, and that is agreeing to satisfy certain obligations for its treatment as a Limited FFI.
For registration purposes, can an EAG with a Lead FI and 2 Member FIs be divided into: (1) a group with a Lead FI and a member FI, and (2) a member FI that will register as a Single FI?
Yes. An EAG may organize itself into subgroups, so long as all entities with a registration requirement are registered. An FI that acts as a Compliance FI for any members of the EAG is, however, required to register each such member as would a Lead FI for such members.
What is required for an entity to be a Lead FI?
A Lead FI means a USFI, FFI, or a Compliance FI that will initiate the FATCA Registration process for each of its Member FIs that is a PFFI, RDCFFI, or Limited FFI and that is authorized to carry out most aspects of its Members’ FATCA Registrations. A Lead FI is not required to act as a Lead FI for all Member FIs within an EAG. Thus, an EAG may include more than one Lead FI that will carry out FATCA Registration for a group of its Member FIs. A Lead FI will be provided the rights to manage the online account for its Member FIs. However, an FFI seeking to act as a Lead FI cannot have Limited FFI status in its country of residence. See Rev. Proc. 2014-13 to review the FFI agreement for other requirements of a Lead FI that is also a participating FFI.
We are a Sponsoring Entity, and we would like to register our Sponsored Entities. How do we register our Sponsored Entities?
The Sponsoring Entity that agrees to perform the due diligence, withholding, and reporting obligations of one or more Sponsored Entities pursuant to Treas. Reg. §1.1471-5(f)(1)(i)(F) should register with the IRS via the FATCA registration website to be treated as a Sponsoring Entity. To allow a Sponsoring Entity to register its Sponsored Entities with the IRS, and, as previewed in Notice 2013-69, the IRS is developing a streamlined process for Sponsoring Entities to register Sponsored Entities on the FATCA registration website. Additional information about this process will be provided by the IRS at a later date.
While a Sponsoring Entity is required to register its Sponsored Entities for those entities to obtain GIINs, the temporary and proposed regulations provide a transitional rule that, for payments prior to January 1, 2016, permit a Sponsored Entity to provide the GIIN of its Sponsoring Entity on withholding certificates if it has not yet obtained a GIIN. Thus, a Sponsored Entity does not need to provide its own GIIN until January 1, 2016 and is not required to register before that date.
What is a Point Of Contact (POC)?
The Responsible Officer listed on line 10 of Form 8957 (or the online registration system) can authorize a POC to receive FATCA-related information regarding the FI, and to take other FATCA-related actions on behalf of the FI. While the POC must be an individual, the POC does not need to be an employee of the FI. For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete and submit the FATCA Registration on behalf of an FI. John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.
Is the Responsible Officer required to be the same person for all lines on Form 8957 or the online registration (“FATCA Registration”)?
No, it is not required that the Responsible Officer (“RO”) be the same person for all lines on Form 8957 or the online registration. It is possible, however, that the same person will have the required capacity to serve as the RO for all FATCA Registration purposes.
The term “RO” is used in several places in the FATCA Registration process. In determining an appropriate RO for each circumstance, the Financial Institution (“FI”) or direct reporting NFFE should review the capacity requirements and select an individual who meets those requirements. This will be a facts and circumstances determination.
The RO identified in question 11b must be an individual who is authorized under local law to consent on behalf of the FI or direct reporting NFFE (“an authorizing individual”) to the disclosure of FATCA-related tax information to third parties. By listing one or more Points of Contact (each, a “POC”) in question 11b and selecting “Yes” in question 11a, the authorizing individual identified at the end of question 11b (to the right of the checkbox) is providing the IRS with written authorization to release the entity’s FATCA-related tax information to the POC. This authorization specifically includes authorization for the POC to complete the FATCA Registration (except for Part 4), to take other FATCA-related actions, and to obtain access to the FI’s (or direct reporting NFFE’s) tax information. Once the authorization is granted, it is effective until revoked by either the POC or by an authorizing individual of the FI or direct reporting NFFE.
The authority required for an individual to be an RO for purposes of Part 4 is substantially similar to the authority required for RO status under Treas. Reg. § 1.1471-1(b)(116).
The RO designated in Part 4 must be an individual with authority under local law to submit the information provided on behalf of the FI or direct reporting NFFE. In the case of FIs or FI branches not governed by a Model 1 IGA, this individual must also have authority under local law to certify that the FI meets the requirements applicable to the FI status or statuses identified on the registration form. This individual must be able to certify, to the best of his or her knowledge, that the information provided in the FI’s or direct reporting NFFE’s registration is accurate and complete. In the case of an FI, the individual must be able to certify that the FI meets the requirements applicable to the status(es) identified in the FI’s registration. In the case of a direct reporting NFFE, the individual must be able to certify that the direct reporting NFFE meets the requirements of a direct reporting NFFE under Treas. Reg. § 1.1472-1(c)(3).
An RO (as defined for purposes of Part 4) can delegate authorization to complete Part 4 by signing a Form 2848 “Power of Attorney Form and Declaration of Representative” or other similar form or document (including an applicable form or document under local law giving the agent the authorization to provide the information required for the FATCA Registration).
Note: While the certification in Part 4 of the online registration does not include the term “responsible officer,” the FATCA Online Registration User Guide provides that the individual designated in Part 4 must have substantially the same authority as the RO as defined for purposes of Form 8957, Part 4.
While the ROs for purposes of Question 10, Question 11b, and Part 4 of the FATCA Registration may be different individuals, in practice it will generally be the same individual (or his/her delegate)). The regulatory RO is responsible for establishing and overseeing the FFI’s compliance program. The regulatory RO may, but does not necessarily have to, be the registration RO for purposes of 1) ascertaining and completing the chapter 4 statuses in the registration process; 2) receiving the GIIN and otherwise interacting with the IRS in the registration process; and 3) making the Part 4 undertakings. Alternatively, the regulatory RO, or the FFI (through another individual with sufficient authority), may delegate each of these registration roles to one or more persons pursuant to a delegation of authority (such as a Power of Attorney) that confers the particular registration responsibility or responsibilities to such delegate(s). The scope of the delegation, and the delegate’s exercise of its delegated authority within such scope, will limit the scope of the potential liability of the delegate under the rules of agency law , to the extent applicable. The ultimate principal, whether that is the regulatory RO or the FFI, remains fully responsible in accordance with the terms and conditions reflected in the regulations, and other administrative guidance to the extent applicable under FATCA, the regulations.
The Instructions for Form 8957 state that for purposes of Part 1, question 10, “. . . RO means the person authorized under applicable local law to establish the statuses of the FI’s home office and branches as indicated on the registration form.” What does it mean for an RO to have the authority to “establish the statuses of the FI’s home office and branches as indicated on the registration form”?
To have the authority to “establish the statuses” for purposes of question 10, an RO must have the authority to act on behalf of the FI to represent the FATCA status(es) of the FI to the IRS as part of the registration process. This RO must also have the authority under local law to designate additional POCs.
My FI plans on employing an outside organization (or individual) solely for the purpose of assisting with the registration process. Once registration is complete, or shortly thereafter, my FI intends to discontinue its relationship with this organization. Is this permissible under the FATCA registration system? How should my FI use the registration system to identify this relationship?
Once the services of a POC are no longer needed, the RO may log into the online FATCA account and delete the POC. This process revokes the POC’s authorization. At this point, the Responsible Officer can input a new POC, or leave this field blank if they no longer wish to have any POC other than the RO listed on Line 10.
If a third-party adviser that is an entity is retained to help the FI or direct reporting NFFE complete its FATCA registration process, the name of the third-party individual adviser that will help complete the FATCA registration process should be entered as a POC in Part 1, question 11b, and the “Business Title” field for that individual POC should be completed by inserting the name of the entity and the POC’s affiliation with the entity. For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete the FATCA Registration on behalf of FI Y. John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.
Are U.S. Financial Institutions (USFIs) required to register under FATCA? If so, under what circumstances would a USFI register?
A USFI is generally not required to register under FATCA. However, a USFI will need to register if the USFI chooses to become a Lead FI and/or a Sponsoring Entity or seeks to maintain and renew the QI status of a foreign branch that is a QI. Furthermore, a USFI with a foreign branch that is a reporting Model 1 FFI is required to register on behalf of its foreign branches (and should identify each such branch when registering). A USFI with non-QI branch operations in a Model 2 jurisdiction or in a non-IGA jurisdiction is not required to register with the IRS.
Is a Foreign Financial Institution (“FFI”) required to obtain an EIN?
If the FFI has a withholding obligation and will be filing Forms 1042 and Forms 1042-S with the Internal Revenue Service, it will be required to have an EIN. Please see publication 515 (“Withholding of Tax on Nonresident Aliens and Foreign Entities”) for further information about U.S. Withholding requirements. SeePub. 515. An FFI is also required to obtain an EIN when it is a QI, WP, or WT (through the application process to obtain any such status) or when the FFI is a participating FFI that elects to report its U.S. accounts on Forms 1099 under Treas. Reg. §1.1471-4(d)(5).
How does a FFI apply for a EIN if it does not already have one?
If a FFI does not have an EIN, it may apply for one using Form SS-4 (“Application for Employer Identification Number”) or the online registration system. See Apply-for-an-Employer-Identification-Number-(EIN)-Onlinefor more information.
We are a foreign central bank of issue. Will we be subject to FATCA withholding if we do not register?
You will generally be exempt from FATCA Registration and withholding if you meet the requirements to be treated as an exempt beneficial owner (e.g. as a foreign central bank of issue described in Treas. Reg. § 1.1471-6(d), as a controlled entity of a foreign government under Treas. Reg. §1.1471-6(b)(2), or as an entity treated as either of the foregoing under an applicable IGA). A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner in accordance with the regulations. However, an exempt beneficial owner may be subject to withholding on payments derived from the type of commercial activity described in Treas. Reg. § 1.1471-6(h).
We are a foreign pension plan. Will we be subject to FATCA withholding if we do not register?
You will be exempt from FATCA Registration and withholding if you meet the requirements to be treated as a retirement fund described in Treas. Reg. § 1.1471-6(f), or under an applicable IGA. A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner (in this case, a retirement fund) in accordance with the regulations.
How should an entity seeking the FATCA status of “direct reporting NFFE” (other than a sponsored direct reporting NFFE) register for this status to obtain a GIIN in order to avoid FATCA withholding?
A direct reporting NFFE is eligible to register for this status and when registering should complete an online registration (or, alternatively, submit a paper Form 8957) based on the instructions provided in this FAQ. For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information.
In general, for purposes of completing the registration of a direct reporting NFFE, substitute the words “direct reporting NFFE” for the words “financial institution” wherever they appear in the online registration user guide (or in the Instructions for Form 8957). Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).
Question 1 – – Select “Single”.
Question 4 – – Select “None of the above”.
Question 6 – – Select “Not applicable”.
Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).
Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and will act as a point of contact with the IRS in connection with its status as a direct reporting NFFE.
Part 4 – – The individual who completes this part must have the authority to provide the certification.
How should a sponsor of a sponsored direct reporting NFFE register itself for this status and obtain a GIIN?
A sponsor of a sponsored direct reporting NFFE is a sponsoring entity (see Treas. Reg. § 1.1471-1T(b)(124)) and should complete an online registration (or, alternatively, submit a paper Form 8957) as a sponsoring entity, based on the instructions provided in this FAQ. A sponsoring entity need only complete one registration to act as the sponsor for both sponsored FFIs and sponsored direct reporting NFFEs. For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information, including by incorporating the definition of sponsoring entity provided in Treas. Reg. § 1.1471-1T(b)(124).
In general, for purposes of having a sponsor register a sponsored direct reporting NFFE, substitute the words “sponsor of a direct reporting NFFE” for the words “sponsoring entity” wherever they appear in the online registration user guide (or in the Instructions for Form 8957). Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).
Question 1 – – Select “Sponsoring Entity”.
Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and who will act as a point of contact with the IRS in connection with its obligations as a sponsoring entity.
Why has my registration been put into “Registration Incomplete”? What can I do?
The RO has been identified with initials only and no specific name has been provided.
The RO does not appear to be a natural person.
Notice 2013-43 stated that any registrations submitted prior to January 1, 2014 would be taken out of submit and put into Registration Incomplete status. Thus, if your registration was submitted prior to January 1, 2014, you must re-submit your registration assuming that none of the other abovementioned reasons (1-3) are an issue with the FFI’s registration.
After you have updated your registration, you must resubmit in order for your registration to be processed.
Additional FAQs are available for the FATCA Registration System and the FATCA FFI List.
The February 20, 2014 release of 565 total pages of commentary and amendments to the FATCA Regulations (these final regs issued January 17, 2013) included 336 pages of changes to the withholding and documentation rules of Chapters 3 and 61 – over 50 discrete amendments and clarifications in total. Treasury stated that it has taken “into account certain stakeholder suggestions regarding ways to further reduce burdens consistent with the compliance objectives of the statute”.
(v) transitional rules for collateral arrangements prior to 2017.
See the previous Friday article covering amendments to the FATCA Final regulations: https://profwilliambyrnes.com/2014/02/21/irs-makes-substantial-amendments-to-fatca-regulations/ Below I cover the amendments for Coordination of FATCA with Pre-Existing Reporting and Withholding Rules.
The amendments also harmonize the requirements contained in pre-FATCA rules under chapters 3 and 61 and section 3406 of the Internal Revenue Code with those under FATCA.
Chapter 3 contains reporting and withholding rules relating to payments of certain U.S. source income (e.g., dividends on stock of U.S. companies) to non-US persons.
Chapter 61 and section 3406 address the reporting and withholding requirements for various types of payments made to certain U.S. persons (U.S. non-exempt recipients).
I. Rules for Identification of Payees.
Documentation requirements are central to identification of payees under the chapter 3 and FATCA reporting and withholding regimes.
The documentation requirements for withholding agents and foreign financial institutions (FFIs) under FATCA differ in certain respects from the corresponding documentation requirements for withholding agents under chapter 3. The amendments to the regulations remove inconsistencies in the chapter 3 and FATCA documentation requirements (including inconsistencies regarding presumption rules in the absence of valid documentation) based, in part, on stakeholder comments.
II. Coordination of the Withholding Requirements under Chapter 3, Section 3406, and FATCA.
Chapter 3, section 3406, and FATCA require a payor to withhold under certain, potentially overlapping, circumstances. These temporary regulations provide rules to ensure that payments are not subject to withholding under both chapters 3 and FATCA, or under both section 3406 and FATCA.
III. Coordination of Chapter 61 and FATCA Regarding Information Reporting with Respect to U.S. Persons.
FATCA generally requires FFIs to report certain information with respect to their U.S. accounts. In some cases, this reporting may be duplicative of the information required to be reported on Form 1099 with respect to the same U.S. accounts when the holders of such accounts are U.S. non-exempt recipients or the benefits of Form 1099 reporting to increasing voluntary compliance is not outweighed by the burden of overlapping information reporting requirements with respect to the same accounts.
U.S. payor reports on the account in accordance with the FATCA regulations or an applicable IGA.
The amendments do not provide a similar exception to reporting under chapter 61 for U.S. payors. While some of the information reported by FFIs under FATCA on Form 8966 and under chapter 61 on Form 1099 may overlap, there are also significant differences. Most notably, the requirement under chapter 61 to furnish a copy of Form 1099 to the payee facilitates voluntary compliance, and there is no equivalent requirement for payee statements under FATCA. Moreover, U.S. payors generally have well-established systems for reporting and are subject to reporting on a broader range of payments under chapter 61 than non-U.S. payors. In light of these differences, the benefits of chapter 61 reporting by U.S. payors to the voluntary compliance system outweigh the reduction in burden that would be achieved by eliminating this reporting for U.S. payors that report on the same account under FATCA or an applicable IGA.
The amendments provide a new, limited exception to reporting under chapter 61 for both U.S. payors and non-U.S. payors that are FFIs required to report under chapter 4 or an applicable IGA with respect to payments that are not subject to withholding under chapter 3 or section 3406 and that are made to an account holder that is a presumed (but not known) U.S. non-exempt recipient.
FFIs that are required to report under chapter 4 or an applicable IGA will provide information regarding account holders who are presumed U.S. non-exempt recipients. Moreover, such presumed U.S. non-exempt recipients may not actually be U.S. persons for whom the recipient copy of Form 1099 would be relevant to facilitate voluntary compliance. As a result, the IRS and Treasury believe that reporting under chapter 61 should be eliminated on payments to account holders who are presumed U.S. non-exempt recipients and for whom there is FATCA reporting.
The amendments provide a new, limited exception from reporting under chapter 61 for U.S. payors acting as stock transfer agents or paying agents of distributions from certain passive foreign investment companies (PFICs) made to U.S. persons. This exception is based, in part, on comments suggesting ways to reduce duplicative reporting with respect to PFIC shareholders. This exception would reduce burden while not significantly impacting taxpayer compliance.
IV. Conforming Changes to the Regulations Implementing the Various Regimes.
(iii) unifying definitions of terms used in chapters 3, 4 and 61.
Each year William Byrnes chooses fourteen international tax students from the graduate online program to assist within tax compendium published by LexisNexis, WoltersKluwer, National Underwriter Co. (the Tax Facts series), and Merten’s Federal Income Taxation. By the time these students have reached international alumni status, many have developed into authors with several chapter and article citations.
William Byrnes created this graduate program around the needs of tax and financial professionals looking for advancement and efficiency for their career, be that to attract new clientele with global issues, better manage the budgets of outside international counsel, or to enhance their CV for the next round of promotion. Explore an international tax & financial services career by listening to his interview responses, then interacting with him via Skype or Google Hangout.
The countries of the world, pushed by a U.S. Treasury promotional campaign, have inevitably capitulated to the U.S. unilateral demand for information although the per-country compliance cost may exceed one billion dollars and privacy protection laws must be amended. However, push back by important U.S. trading partners resulted in the U.S. Treasury entering into an expanding network of bi-lateral intergovernmental agreements that in most instances provide for automatic exchange between the competent authorities of the required financial information to fulfill FATCA compliance. These agreements may lead to an imposition of FATCA reporting compliance, though to a lesser extent, upon U.S. financial institutions, that the U.S. Treasury may in turn provide automatically to the foreign competent authority.
FATCA should not be observed in a historical vacuum but instead requires at least an understanding of the U.S. previous attempt to collect such information under the qualified intermediary (‘QI’) regime. Moreover, FATCA should not be observed in a unilateral vacuum but instead requires an overview of the EU and OECD information exchange initiatives and challenges thereto, tax collection and remission alternatives, as well as an overview of the spawn of FATCA (e.g. the UK’s son-of-FATCA approach).
This discussion will also explore the general nature, issues, and challenges of information collection and exchange. During this discussion we will digress into the topic of the information of a business’ financials and of its operations, the topic of domestic and cross border asymmetry of information, as well as the dialogue for global harmonization of information (such as standardization of accounts and of tax base determination), and for exchange of such information. Such conversation is necessary for a robust understanding of the topics of base erosion and the efforts of countries to control ‘transfer pricing’.
Fifty contributing authors from the professional and financial industry provide 600 pages of expert analysis within the LexisNexis® Guide to FATCA Compliance (2nd Edition): many perspectives crafted into one, coherent voice by primary author William Byrnes. The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of FATCA’s application for certain trading partners of the U.S. (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA. Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters.
Following his October presentation in Moscow at Moscow Finance University organized with University of Amsterdam, Professor William Byrnes was invited to lecture last week for the intersession international tax course of the University of Amsterdam’s Centre for Tax Law. While at the University of Amsterdam, he engaged with Dean Dr. Edgar du Perron on collaborative distance education opportunities, and attended the European Law Student Association’s (ELSA) annual Groot Juridisch Dictee of the Amsterdam chapter.
Income from selling products and providing services to U.S. customers is taxed annually at full U.S. rates.
Passive and highly-mobile income is taxed annually at full U.S. rates.
Examples provided of a minimum rate include 60% and 80% of applicable U.S. tax, with an allowance for tax credit maintained.
The proposal calls for a ‘deemed repatriation’ of all historical earnings of foreign subsidiaries that have not been previously subject to U.S. tax, imposing a one-off tax at an example rate of 20%, payable over eight years. Tax credits would also be allowed as offset against this one-off tax.
The proposal seeks to eliminate of the international aspects of the “check-the-box” rule. Finally, the proposal explores mitigating ‘base profits erosion’ (BEPS) arrangements used by foreign multinationals to avoid U.S. tax.
Associate Dean William Byrnes recently returned from a week in Moscow (October 21 – 25) wherein he participated in two conferences, a presentation to the tax and transfer pricing partners at Pepeliaev (one of the largest Russian law firms), and meetings with government Ministry officials. Professor Byrnes, a renown international tax academic, was invited and sponsored by the Financial University of the Russian Federation and the University of Amsterdam’s Centre for Tax Law.
A conference organized by the Moscow branch of the International Financial Association, the world’s leading 20,000 member organization for the study of international fiscal policy matters, was held at Morgan Stanley’s Moscow office. William Byrnes joined presenters from the tax law faculty of the University of Amsterdam, including Dr. Dennis Weber, Dr. Stef van Weeghel, and Dr. Hein Vermeulen, as well as Bart Zoetmulder from the law firm Loyens and Loeff, Continental Europe’s largest. Byrnes participation included analyzing the impact of various aspects of the forthcoming United States and Russian intergovernmental agreement for automatic financial information exchange.
Financial University and the University of Amsterdam hosted a conference on emerging international tax issues in the context of the Russian Federation’s tax administration. William Byrnes joined high level presenters from the Ministry of Finance, from the Tax Administration, and tax professors from Financial University and from the University of Amsterdam.
At the firm of Pepeliaev, Professor William Byrnes and Dr. Dennis Weber presented about leveraging hybrid residential / online education to build and maintain firm knowledge-capacity to its founding partner Sergey Pepelieav, its Head of the Tax Practice Group Leonid Kravchinsky, its transfer pricing partner Valentina Akimova, and its Staff Training and Development Manager Larisa Gerasimova. Tax Partner Andrey Tereshchenko agreed to author the Russian chapter contribution in Professor Byrnes forthcoming Second edition of Lexis’ Guide to FATCA Compliance, and the firm will contribute to other of Professor Byrnes Lexis and Wolters Kluwer publications.
Editor’s Note: The following is an excerpt from Chapter 6 of LexisNexis® Guide to FATCA Compliance by William Byrnes and Robert Munro.
The Foreign Account Tax Compliance Act (“FATCA”) provides for withholding taxes to enforce reporting requirements on specified foreign accounts owned by specified U.S. persons or by U.S. owned foreign entities.
FATCA requires specified U.S. persons (U.S. citizen, residents and certain non-resident aliens) and specified domestic entities to report interests in specified foreign financial assets (SFFAs) if the aggregate value of those assets exceeds certain threshold. The regulations apply to domestic entities formed or availed of to hold, directly or indirectly, specified foreign financial assets. These specified entities include certain closely held corporations and partnerships that meet certain conditions and aggregation rules. Specified entities include domestic trusts if they meet certain criteria and exceed certain reporting threshold.
A U.S. owned foreign entity is an entity with one or more substantial U.S. owners. With certain exceptions, a substantial U.S. owner is any U.S. person with greater than 10% direct or indirect ownership interest in the foreign entity.
All foreign entities and foreign trusts are potentially subject to FATCA, in addition to the current Qualified Intermediary (QI) rules. Withholding rules and reporting requirements under FATCA depend upon the entity’s classification. FATCA classifies foreign entities as either financial entities or non-financial entities. Financial entities are classified as Foreign Financial Institutions (FFIs) [see infra. Chapter 7] while non-financial entities are classified as Non-Financial Foreign Entities (NFFEs) [see infra. Chapter 8].
Entities and trusts are very different under U.S. law. Entities include partnerships, limited liability companies (LLCs), international business companies (IBCs), foundations, usufructs, and corporations. In entities, the title to the property owned is not divided.
In a trust, however, U.S. law splits the ownership of the title into two parts, legal and equitable. The trustee of the trust owns the legal title for the benefit of the beneficiary, who owns the equitable title. A trust is a relationship, not an entity, and is treated differently under both the existing QI rules and FATCA.
1. IRS Notice 2013-10, “Information Reporting by Domestic Entities under Section 6038D with Respect to Specified Foreign Financial Assets”.
2. IRC §1471(d)(2), Treas Reg §1.1471-5(b)(1)(i), (ii).
3. IRC §1471(d)(2), Treas Reg §1.1471-5(b)(1)(iii)(A). “Investment entity” is defined in Treas Reg §1.1471-5(e)(4)(i).
4. IRC §1471(d)(2), Treas Reg §1.1471-5(b)(1)(iii)(B)(1). “Treasury center” is defined in Treas Reg §1.1471-5(e)(1)(v).
5. See generally IRS Form 8938, Statement of Specified Foreign Financial Assets.
6. See generally IRS Form 8938, Statement of Specified Foreign Financial Assets.
7. Foreign social security or social insurance programs are not specified as FFA, so they are not subject to FATCA reporting. Instructions to IRS Form 8938, Statement of Specified Foreign Financial Assets, p. 4.
Lectures: 42 lecture hours using webcams / headsets with sharing of applications – also recorded for later on-demand viewing.
Lectures: 42 lecture hours using webcams / headsets (see www.wimba.com) with sharing of applications – also recorded for later on-demand viewing.
® CITA Certified International Tax Analyst Course – ITX 628 Corporation Tax (US) Expert Speaker – Hannah Bible J.D., LL.M.
® CTEP Chartered Trust and Estate Planner Certification – ITX 630 Estate & Gift (US) lead instructor Richard Duke, J.D., LL.M.
Collaboration each course is 42 lecture hours webcam-online for with showing and sharing of applications – recorded for on-demand viewing. Global network built amongst students, faculty, and returning alumni.
Knowledge & Efficiency Stand out from peers with full access and training on the industry tax and financial services databases, Westlaw and Lexis, CCH, Checkpoint, IBFD, Tax Analysts, BNA, Westlaw Business, Westlaw China, Complinet, and Butterworths, amongst the others.
Technology Confidence with planning and compliance software such as Orbitax, CCH compliance, Compliance Resource Network, and tax risk management enterprise systems e.g. Vertex.
This week we continue with our examination of Cross-Border Information Exchange deciphering the Legal Privilege Limitation requirements of exchange contemplated by the OECD Model Agreement for Tax Information Exchange. In the 15 week online International Tax courses starting September 14, we will be undertaking an in-depth analysis of the topics covered in this blog during the 10 online interactive webinars each week.
The Cayman TIEA does not contain the last emphasized sentence. The Bahamas TIEA states more broadly that “”criminal matter” means an examination, investigation or proceeding concerning conduct that constitutes a criminal tax offense under the laws of the United States. The IOM and Jersey TIEAs define criminal tax matters as those “involving intentional conduct which is liable to prosecution under the criminal laws of the applicant Party.” Barbados and Bermuda TIEAs do not contain a specific definition of criminal tax evasion, that is the USA may request information regarding civil tax matters.
From January 1, 2006, information regarding any civil tax matters may be requested by the USA from all of the jurisdictions. This date coincides with the date established by the OECD it demanding its commitment letters from targeted tax havens regarding the 1998 and 2000 Reports.
(ii) in connection with or in contemplation of legal proceedings and for the purposes of such proceedings, when the items are in the possession of a person who is entitled to possession of them.
(b) in connection with or in contemplation of legal proceedings and for the purposes of such proceedings, when they are in the possession of a person who is entitled to possession of them.
Items held with the intention of furthering a criminal purpose are not subject to legal privilege.
(h) a declaration that the request conforms to the law and administrative practice of the requesting party and would be obtainable by the requesting party under its laws in similar circumstances, both for its own tax purposes and in response to a valid request from the requested party under this Agreement.
The Cayman TIEA does not include clauses (a) or (e) above, but practically such information should be included in any valid request under any TIEA. Jersey and IOM’s TIEA is similar to the BVI TIEA in respect of this section, absent clause (a). NLA does not contain this section in its TIEA, but such information by the USA should be provided.
The BVI and Cayman TIEAs allow them 60 days to identify of any deficiencies in a request and provide the US notice. If BVI or Cayman will not provide requested information, or cannot, it must immediately notify the US.

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