Update on Automatic
Exchange of Information
FiTAX Seminar
KPMG Luxembourg Société
coopérative
November 2015
Content
Page
Background
3
Key CRS Definitions
11
CRS Reporting
18
Updated QI Agreement and 1042-S
22
FATCA - Additional Transition Relief
33
Background
Background
Overview
Towards a common standard on
automatic exchange of information
Modified
EUDAC*
FATCA*
CRS*
Luxembourg: Tax Information related
to fiscal years as from 1st of January
2016 exchanged in 2017
•
Switzerland: On 27 May 2015,
Switzerland signed an agreement with
the EU. The agreement should come
into force on 1 January 2017 and the
first exchange of financial account data
between Switzerland and the EU
member states should occur in 2018.
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a Swiss entity. All rights reserved
4
Background
Purpose
An effective model for automatic exchange of information requires a common standard on the information
to be reported by financial institutions and exchanged with residence jurisdictions
The scope of financial
information to be reported
covers different types of
investment income:
•
•
•
•
interests
Dividends
Similar type of income
Requires information on
account balances
The scope of account
holders to be reported:
Reporting is required not
only with resppect to
individuals but with respect
to interposed legal entities
or arrangements
Financial Institutions are
required to look trough shell
companies, trusts or similar
arrangements
The scope of financial
institutions required to
report:
A comprehensive reporting
regime covers not only
banks but also other
financial institutions such
as brokers, certain
collective investment
vehicles and certain
insurance companies
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a Swiss entity. All rights reserved
5
Background
FATCA Versus CRS
•
•
•
Definition of Financial
Institutions is similar but less
deemed-compliant statuses
Due
diligence
Definition of Passive Non
financial entity is extended to
Investment entities established
in non-participating jurisdictions
No concept of “Responsible
officer»
•
Increase of the number of clients
to review under CRS
•
CRS based on the identification
of Tax Residency
•
No thresholds for individuals,
other than that of 1 million of
USD for account with high value
•
Procedure of self-certification to
be clarified
•
Reporting to the local authorities
•
XML Schema
•
Local specificities to be taken
into account
CRS
Governance
and Scope
Modified
EUDAC
In the context of CRS/modified
EUDAC:
•
No withholding tax
•
No notion of nonparticipating
Financial Institutions
Reporting
Withholding
Tax
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a Swiss entity. All rights reserved
6
Background
Examples
Financial Institution
Active
NFE
Passive
NFE
BO
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a Swiss entity. All rights reserved
7
Key CRS
Definitions
Key CRS Definitions
Participating Jurisdiction Financial Institution
A Participating Jurisdiction Financial Institution
means:
i.
Any Financial Institution that is resident in a Participating
Jurisdiction, but excludes any branch of that Financial
Institution that is located outside such Participating
Jurisdiction
ii.
Any branch of a Financial Institution that is not resident in
a Participating Jurisdiction, if the branch is located in the
Participating Jurisdiction
• “resident”: means subject to the jurisdiction of such
Participating Jurisdiction (i.e. the Participating Jurisdiction is
able to enforce reporting by the Financial Institution)
• A Financial Institution that does not have a residence for
tax purposes (i.e. treated as fiscally transparent) is
considered to be subject to the jurisdiction of a Participating
Jurisdiction if:
− It is incorporated under the laws of the Participating
Jurisdiction
− It has its place of effective management there, or
− It is subject to the financial supervision in the participating
Jurisdiction
A Trust qualifying as Financial Institution is considered
subject to the jurisdiction if one or more trustees are
considered resident in such Participating Jurisdiction.
Jurisdictions undertaking first exchanges by 2017
(Early adopters – Jurisdictions having signed the Multilateral CAA)
Other jurisdictions undertaking first exchanges by 2017
Jurisdictions undertaking first exchanges by 2018
Specific cases (United States of America, Austria)
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a Swiss entity. All rights reserved
9
Key CRS Definitions
Reporting FI vs Non-Reporting FI
The CRS Standard defines the following
categories of Non-Reporting FIs:
a) A Governmental Entity, International Organisation or
Central Bank
b) A Broad Participation Retirement Fund, a narrow
Participation Retirement Fund, a Pension Fund of a
Governmental Entity, International Organisation or
Central Bank; or a Qualified Credit Card Issuer
c) Any other Entity that presents a low risk of being used to
evade tax, has substantially similar characteristics to
any of the Entities described under a) and b) and is
defined under domestic law as a Non-Reporting FI,
provided the status of such entity does not frustrate the
purposes of the Common Reporting Standard
d) An exempt Collective Investment Vehicle; or,
e) A trust to the extent the trustee is a Reporting FI and
reports the Reportable accounts of the trust
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a Swiss entity. All rights reserved
10
Key CRS Definitions
Financial Accounts
!
-
the term “Financial Account” does not include
any account that is an excluded account
-
Any equity or debt interest in an Investment
Entity is considered a Financial Account.
However equity or debts interests in an Entity
that is an Investment Entity solely because it is
an investment advisor or an investment manager
are not Financial Accounts
-
The CRS Standard does not exclude interests
that are regularly traded on an established
securities market from the definition of financial
account as an equity or debt interest in an
Investment Entity
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a Swiss entity. All rights reserved
11
Key CRS Definitions
Reportable Account – Reportable Juridiction Person
Reportable account
Any account held by one or more Reportable Persons or by a
Passive NFFE with one or more Controlling Persons that are
Reportable Persons
Reportable Jurisdiction Person
In general, are in scope any individual or entity that is resident
in the Reportable Jurisdiction under the tax laws.
A tax transparent entity, which has no residence for tax
purposes is considered resident in the jurisdiction in which the
place of effective management is situated
The “place of effective management” is the place where key
management and commercial decisions that are necessary
fore the conduct of the Entity’s business as a whole are in
substance made.
Please note that an Entity may have more than one place of
management, but it can only have one place of effective
management at any one time.
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a Swiss entity. All rights reserved
12
Key CRS Definitions
Reportable Person
Reportable Person
Is any Reportable Jurisdiction Person other than:
- A corporation the stock of which is regularly traded on one or
more established securities markets;
- Any corporation that is a related entity of a corporation the
stock of which is regularly traded on one or more established
securities markets;
- A Governmental Entity;
- An International Organisation;
- A Central Bank; or
- A Financial Institution
Please note that:
As the CRS Standard excludes Financial Institutions from
the definition of Reportable Person, an equity or debt interest in
an Investment Entity held by a Custodial Institution is not
subject to reporting by the Investment Entity
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a Swiss entity. All rights reserved
13
Key CRS Definitions
Active NFE – Passive NFE
1
Do less than 50% of gross income qualify
as passive income and do less than 50% of
assets held produce passive income?
Yes
Active NFE
No
2
Is the NFFE regularly traded on
an established securities market
or a related entity of such entity?
No
3
Yes
Yes
Is the NFFE a government, an
International Organisation, Central Bank, or
An Entity wholly owned therof
4
No
Do the activities of the NFFE consist in
holding the outstanding stock or providing
financing to one or more subsidiaries ,
which are not financial institutions?
5
6
7
No
Is the NFFE a start-up company with a
Business other than that of a Financial
Institution?
No
Is the NFFE in liquidation?
Yes
Is the entity an Investment Entity
that is not a Participating
Jurisdiction Financial Institution?
Yes
Yes
Yes
No
Is the NFFE primarily engaged in financing
and hedging transactions for related entities?
Yes
Passive NFE
No
8
Does the NFFE qualify as a non-profit
organisation?
Yes
No
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a Swiss entity. All rights reserved
14
Key CRS Definitions
Controlling Person
Controlling Person
Means the natural person who exercises control over the entity
In case of a trust, the Controlling Persons are:
- The settlor(s);
- The trustee(s);
- The protector(s), if any;
- The beneficiary(ies) or class(es) of beneficiaries;and
- Any other person(s) exercising ultimate effective control over
the trust
This term corresponds to the term of “beneficial owner” as
described in Recommendation 10 of the Financial Action Task
Force (“FATF”) Recommendations
Control over an Entity is generally exercised
1) by the natural person who ultimately owns the controlling
ownership interest in the Entity (e.g. owning more than
25% of the legal person); or
2) If no controlling ownership interest has been identified, by
the person who exercises control over the Entity through
other means;or
3) Natural person who holds a position of senior managing
official
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a Swiss entity. All rights reserved
15
Key CRS Definitions
Account Holder
Account holder
Means the person listed or identified as the holder of a Financial
Account (regardless of whether the person is a flow-through entity or
not)
- in case a trust or estate is listed as the owner or holder of the
Financial account, the trust or estate is the Account Holder rather
than the owners or beneficiaries
A person, other than the Financial Institution acting for the benefit or
account of another person as agent, custodian, nominee, signatory,
investment advisor, intermediary or legal guardian is not treated as
holding the account.
- the Reporting Financial Institution may rely on information in its
possession (including information collected pursuant to AML/KYC
Procedures) based on which it can reasonably determine whether
the person is acting for the benefit or account of another person
Each joint account holder is treated as an Account Holder for
purposes of determining whether the account is a Reportable Account
In case of a Cash Value or Annuity Contract, the Account Holder is the
person:
- Entitled to access the cash value or change the beneficiary; or
- Any person named as the owner of the contract and any person
with a vested entitlement to payment under the terms of the
contract
- Upon maturity of the contract, each person entitled to receive a
payment
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16
Key CRS Definitions
Documentary Evidence
Documentary evidence:
Includes any of the following:
!
a) A certificate of residence issued by an authorised government body
of the jurisdiction in which the payee claims to be resident
b) With respect to an individual, any valid identification issued by an
authorised government body that includes the individual’s name
and is typically used for identification purposes
c) With respect to an Entity, any official documentation issued by an
autorised government that includes the name of the Entity, and
either the address of its principal office in the jurisdiction in which it
claims to be a resident or the jurisdiction in which the entity was
incorporated or organised
d) Any audited financial statement, third-party credit report,
bankruptcy filing or securities regulator’s report.
The Reporting FI should give preference to a piece of Documentary
evidence that is more recent and more specific than another piece of
Documentary Evidence
Validity of Documentary evidence
- General rule: last day of the 5th year
following the year the Documentary
Evidence was collected
- Documentary evidence that contains an
expiration date should be valid until the
later of:
-
-
Shall remain indefinitely valid
documentary evidence:
-
The Reporting FI is not required to retain a paper copy of the
Documentary Evidence.
A Reporting FI may retain
 an original, certified copy, or photocopy of the Documentary
evidence or
The expiration date; or
The last day of the 5th calendar year
following the year in which the
documentary evidence was provided
-
Furnished by an authorised government
body (e.g. passport)
That is generally not renewed or
amended (e.g. certificate of
incorporation)
Provided by a Non-Reporting FI or a
Reportable Jurisdiction Person that is not
a Reportable Person
 instead a notation of the type of documentation reviewed, the date
the documentation was reviewed and the documents identification
number (e.g. passport number)
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a Swiss entity. All rights reserved
17
CRS Reporting
CRS Reporting
General Reporting Requirements
General information
Payment Information
- In the case of an individual: name, address, jurisdiction(s) of
residence, TIN(s), and date and place of birth
-
In the case of any custodial Account:
-
the total gross amount of interest, the total gross amount
of dividends and the total gross amount of other income
grenerated with respect to the assets held in the
account, in each case paid or credited to the account (or
with respect to the account) during the calendar year or
other appropriate reporting period; and
-
the total gross proceeds from sale or redemption of
Financial Assets paid or credited to the account during
the calendar year
- In the case of an Entity qualifying as Passive NFE: Name,
address, jurisdiction(s) of residence and TIN(s) of the Entity
and the name, address, jurisdiction(s) of residence, TIN(S)
and date and place of birth of each Reportable Person
- The account number (or functional equivalent in the absence
of the account number)
- The name and identifying number (if any) of the Reporting
Financial Institution
- The account balance or value as at the end of the relevant
calendar year ort other apprpriate reporting period, or if the
account was closed during such year or period, the closure
of the account
-
In the case of any Depository Account:
- the total gross amount of interest paid or credited to the
account during the calendar year or other appropriate
reporting period; and
-
In the case of any other account:
-
The total gross amount paid or credited to the Account
Holder during the calendar year, including the aggregate
amount of any redemption payments made to the
Account Holder during the calendar year
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a Swiss entity. All rights reserved
19
CRS Reporting
General Reporting Requirements
Some practical Guidance towards
reporting the correct information
- The information reported must identify the
information in which each amount is denominated
- The TIN or date of birth is not required to be
reported if such TIN(s) or date of birth is not in the
records of the Reporting Financial Institution and is
not otherwise required to be collected by such
Reporting Financial Institution under domestic law.
- However the Reporting FI is required to use
reasonable efforts to obtain the TIN(s) and date of
birth with respect to Preexisting Accounts by the
end of the second calendar year following the
year in which such accounts were identified as
Reportable Accounts
- A TIN is not required to be reported if
a) The TIN is not issued by the relevant Reportable
Jurisdiction, or
b) The domestic law of the relevant Reportable
Jurisdiction does not require the collection of the
TIN issued by the Reportable Jurisdiction
!
Sponsoring: The concept of “Sponsored Investment Entity and Controlled Foreign Corporation” and
“Sponsored Closely Held Investment Vehicle” do not exist under CRS. However, the FiTAX procedure
described in the data dictionary will still be used for “Trustee-documented trust”.
Jurisdiction indicia / connection: For Preexisting Accounts, this should be based on the residency
test or the indicia search and for New Accounts this should be based on a self-certification.
Date and place of birth: Under CRS, if on FI’s records and required to be collected under domestic
law of the FI, the date and place of birth of each Reportable Person should be reported.
The Model 1 FATCA IGA should only require the reporting of date of birth for Preexisting Accounts
where the TIN is not available and requires that FATCA Partner establish, by January 1, 2017, for
reporting with respect to 2017 and subsequent years, rules requiring Reporting Financial Institutions to
obtain TIN. TIN should be required for all New Accounts. The Model 1 FATCA IGA should however
not require the reporting of the place of birth.
Negative account balance: under CRS, negative account balance should be reported as “nil”.
Account balance currency: Under CRS, the information must be reported in the currency in which
the account is denominated and the currency must be identified in the information reported.
However, in the case of an account denominated in more than one currency, the Reporting Financial
Institution may elect to report the information in a currency in which the account is denominated and is
required to identify the currency in which the account is reported.
Account status: Where accounts are closed in the reporting period, under the Model 1 FATCA IGA
Financial Institutions should report the account balance immediately before closure (see Article 2,a),4
of the Model 1 FATCA IGA). Under CRS, however, only the fact that the account has been closed
should be reported (see Section I, A,4 of the Standard). Where an account is closed during the year,
the fact of closure is reported.
Please also note that a debt or Equity Interest in a trust (that is an FI) could be considered to be
closed, for example, where the debt is retired, or where a beneficiary is removed.
FATCA Passive NFFE vs CRS Passive NFE: under FATCA, assuming we have a French Passive
NFFE with a US investor, we should report both the Passive NFFE and its US controlling person to
the US. For CRS, however, we should – for instance – also report the French Passive NFE to France
(to the extent that the entity falls into the definition of a Reportable person).
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a Swiss entity. All rights reserved
20
CRS Reporting
FATCA versus CRS
FATCA
CRS
Account Holder Type
Mandatory
Validation(choice)
Account Number
Validation
Validation
Resident Country Code
Optional
Optional(Mandatory)
TIN
Mandatory
(Optional) Mandatory
Birth Date
Optional
(Optional) Mandatory
Sponsorship/Intermediary
Reporting/Pool Report
Optional
Optional (Non-CRS)
Nationality
Null
Optional (Non-CRS)
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a Swiss entity. All rights reserved
21
Updated QI
Agreement and
1042-S
High-level changes to the QI Agreement
Term of revised QI Agreement
• The revised Agreement will be in effect through 2016, as opposed to the previous 6-year term.
• The limited validity period is intentional, to align the validity period of the new QI agreement with the FFI and IGAs.
Documentation and due diligence
• With FATCA’s new reporting requirements for US accounts, the revised QI Agreement eliminates the provisions relating to
undisclosed US persons.
• New definition for Reportable Payment for a non-US payer: for a non-US payer, a Reportable Payment includes any broker
proceeds (not just those relating to US securities) if the sale is effected inside the US.
• New requirements for partnership/trust joint account and PAI rules.
Presumption rules
• Implement withholding requirements for “withholdable payments” and the workflow associated with functionality.
Withholding
• Implement withholding requirements for “withholdable payments” and the workflow associated with functionality.
Reporting
• Implement FATCA reporting requirements as required under the IGAs and the workflow associated with functionality.
Audit
• New compliance procedures led by responsible officer.
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a Swiss entity. All rights reserved
23
Updated QI Agreement and 1042-S
Reportable payments
Old QI Agreement
If QI is a…
New QI Agreement
A reportable payment means
… US payor
(1) Any reportable payment
(2) Any broker proceeds from the sale of
assets beneficially owned by a US non-exempt
recipient account holder that produce, or
could produce, reportable payments if the
identity and account information of that account
holder is prohibited by law, including by contract,
from disclosure
(1) Any reportable amount;
(2) Any broker proceeds from a sale reportable under
§1.6045-1(c); and
(3) Any foreign source interest, dividends, rents,
royalties, or other fixed and determinable income.
… Non-US payor (« QI »)
(1) Any reportable amount
(2) Any broker proceeds from the sale of assets that
produce, or could produce, reportable amounts if
the sale is effected at an office inside the United
States,
(3) Any broker proceeds from the sale of an asset
that produces, or could produce,
reportable amounts that are beneficially owned
by a US non-exempt recipient whose identity and
account information is prohibited by law,
including by contract, from disclosure.
(4) Any foreign source interest, dividends, rents,
royalties, or other fixed and determinable income if
such income is paid in the US or to an account
maintained in the US or any other amount presumed
paid to a US non-exempt recipient
(1) Any reportable amount;
(2) Any broker proceeds from a sale effected at an
office inside the United States, as defined in §1.60451(g)(3)(iii); and
(3) Any foreign source interest, dividends, rents,
royalties, or other fixed and determinable income if
such income is not paid outside the United States as
described under section 5.13(C)(1) of this
Agreement.
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a Swiss entity. All rights reserved
24
Updated QI Agreement and 1042-S
Joint Account Provision
In the past, a bank acting as a QI had the option to enter in an agreement with a non-withholding foreign partnership or nonwithholding foreign trust to apply the simplified joint account documentation, reporting and withholding procedures.
Eligible entities
- Foreign partnership,
- Foreign simple trust or
- Foreign grantor trust,
After 30 June 2015 a QI should ensure that to apply the joint account provision the account is documented as follows:
• A valid Form W-8IMY provided by the partnership or trust;
• A withholding statement that provides information for all partners, beneficiaries, or owners;
• Valid Forms W-8 or, in the case of a partnership or trust that is a certified deemed-compliant FFI, documentary evidence
listed in the KYC attachment to the QIA from each partner, beneficiary, or owner, and
• For a withholdable payment, documentation to establish the partner’s, beneficiary’s, or owner’s FATCA status.
Pooled Reporting
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a Swiss entity. All rights reserved
25
Updated QI Agreement and 1042-S
Joint Account Provision
The requirements for the application of the joint account provision have been amended with the new QI Agreement.
New conditions (as from June 30, 2015) to qualify as an eligible partnership or trust for the joint account provision are:
• The partnership or trust is a certified deemed-compliant FFI (other than a registered deemed-compliant Model 1 IGA FFI),
an exempt beneficial owner, an owner-documented FFI or an NFFE (other than a WP or WT);
• The partnership or trust is a direct account holder of QI;
• None of the partnership’s or trust’s partners, beneficiaries, or owners is a flow-through entity or is acting as intermediary for
a payment made by QI to the partnership or trust;
• None of the partnership’s or trust’s partners, beneficiaries, or owners is a U.S. person and none of its foreign partners,
beneficiaries, or owners is subject to withholding or reporting under chapter 4 (which would include a nonparticipating FFI
and certain passive NFFEs); and
• The partnership or trust agrees to make available upon request to QI or QI’s auditor for purposes of QI’s compliance review
under section 10 of the QI Agreement (including to respond to IRS inquiries regarding its compliance review) records that
establish that the partnership or trust has provided QI with documentation for purposes of QI and FATCA for all of its
partners, beneficiaries, or owners. A partnership or trust to which a QI applies the joint account must waive any legal
prohibition against providing its records to the QI (rather than the IRS).
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a Swiss entity. All rights reserved
26
Updated QI Agreement and 1042-S
Avoidance of double reporting
1099 should not be filed only to the extent that all information was reported in the context
of FATCA (IGA or FFI agreement)
Documentation
Reporting
QI
QI
W8-IMY
Form 1042-S
NQI
NQI
8966 / IGA
Reporting
U.S. Clients
U.S. Clients
Exception:
• Election to apply backup withholding
• Election to file full 1099
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a Swiss entity. All rights reserved
27
Updated QI Agreement and 1042-S
1042-S Updates
Form structure and boxes: Changes relate to grouping and numbering
of boxes, i.e.
•
Income information (1 to 11),
•
WA info (12a to 12i),
•
Recipient info (13a through i, box 16 and 17 ),
•
Primary WA info (14a and b),
•
Intermediary information (slide 15a through 15i)
•
Payer info (18, 19 and 20), and
•
State info (21, 22 and 23)
Name and EIN of primary withholding agent.
•
This information was optional for 2014 but should be required for
amounts paid in 2015 and subsequent years.
Substitute Forms.
•
Withholding agents that furnish a substitute Form 1042-S to the recipient
should furnish a separate substitute Form 1042-S for each type of income
or payment.
•
Withholding agents should no longer be permitted to combine all income
and payments on a single substitute Form 1042-S and all fields on the
substitute form should match the copy filed with the IRS.
•
All of the fields on the substitute form should match the copy filed with
the IRS.
•
However, if you are reporting bank deposit interest paid to certain
nonresident aliens, you may truncate the recipient's TIN on a substitute
form.
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a Swiss entity. All rights reserved
28
Updated QI Agreement and 1042-S
1042-S Updates
New income codes:
•
13: Royalties paid on certain publicly offered securities,
•
51: Interest paid on certain actively traded or publicly offered securities,
•
52: Dividends paid on certain actively traded or publicly offered securities,
and
•
53: Substitute payments-dividends from certain actively traded or publicly
offered securities).
Account-by-account reporting for U.S. financial institutions.
•
For amounts paid on or after January 1, 2016, a U.S. financial institution
will be required to report payments of the same type of income (as
determined by the Income code in box 1) made to multiple financial
accounts held by the same beneficial owner on separate Forms 1042-S
for each account
•
No impact this year’s reporting.
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a Swiss entity. All rights reserved
29
Updated QI Agreement and 1042-S
1042-S Updates
Use of FATCA recipient codes:
•
Direct clients
• FATCA recipient code 15 (nonparticipating FFI) or 30 (recalcitrant
account holder): Only for direct clients.
• FATCA 4 reporting pools of recalcitrant account holders of a
participating FFI, registered deemed-compliant FFI or QI, use codes
42 through 49.
•
Indirect clients:
• FATCA reporting pool code 48 (U.S. payees pool) :Not for direct
clients
• FATCA reporting pool code 49 (QI-Recalcitrant Pool-General):
recalcitrant account holders of another QI.
•
Other FATCA codes:
• Use recipient code 37(undocumented preexisting obligation):
during the remediation period.
• Use recipient code 39 (accountholder of excluded financial
account) if you are reporting amounts paid with respect to an
obligation that is excluded from the definition of financial account for
FATCA purposes.
• Use recipient code 41 (NFFE subject chapter 3 withholding) if you
are reporting amounts paid to a specific recipient that is an NFFE that
you (or another WA) withheld upon under QI unless the NFFE is
treated as a recalcitrant account holder under FATCA, in which case,
use code 30 (recalcitrant account holder).
© 2015 KPMG Luxembourg, Société coopérative, a Luxembourg entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved
30
Updated QI Agreement and 1042-S
New reporting pools
2013
2015
2014
QI Pools:
QI Pools:
QI Pools:
13 Private Arrangement Intermediary
Withholding Rate Pool—General
14 Private Arrangement Intermediary
Withholding Rate Pool—Exempt
Organization
15 Qualified Intermediary Withholding Rate
Pool—General
16 Qualified Intermediary Withholding Rate
Pool—Exempt Organization
33 Withholding Rate Pool—General
34 Withholding Rate Pool—Exempt
Organization
35 PAI Withholding Rate Pool—General
36 PAI Withholding Rate Pool—Exempt
Organization
37 Agency Withholding Rate Pool—
General
38 Agency Withholding Rate Pool—
Exempt Organization
27 Withholding Rate Pool—General
28 Withholding Rate Pool—Exempt
Organization
29 PAI Withholding Rate Pool—General
30 PAI Withholding Rate Pool—Exempt
Organization
31 Agency Withholding Rate Pool—
General
32 Agency Withholding Rate Pool—Exempt
Organization
33 Joint account withholding rate pool
FATCA Pools:
FATCA Pools:
42 Recalcitrant Pool—No US Indicia
43 Recalcitrant Pool—US Indicia
44 Recalcitrant Pool—Dormant Account
45 Recalcitrant Pool—US Persons
46 Recalcitrant Pool—Passive NFFEs
47 Nonparticipating FFI Pool
48 US Payees Pool
42 Recalcitrant Pool—No US Indicia
43 Recalcitrant Pool—US Indicia
44 Recalcitrant Pool—Dormant Account
45 Recalcitrant Pool—US Persons
46 Recalcitrant Pool—Passive NFFEs
47 Nonparticipating FFI Pool
48 US Payees Pool
49 QI-Recalcitrant Pool—GeneraI
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a Swiss entity. All rights reserved
31
Updated QI Agreement and 1042-S
Compliance Program
The revised QI Agreement mandates a compliance program with 6 parts:
Written policies
and procedures
Periodic
certification
Training
Compliance
program
Periodic review
Systems
Monitoring of
business changes
© 2015 KPMG Luxembourg, Société coopérative, a Luxembourg entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved
32
FATCA - Additional
Transition Relief
FATCA - Additional Transition Relief
Notice 2015-66
On 18 September 2015, the U.S. Treasury and IRS released Notice 2015-66, announcing additional transition relief relating to
the FATCA.
Specifically, the Notice states an intent to amend the regulations to include the following additional relief:
• Withholding on gross proceeds will be delayed until 1 January 2019
• Withholding on foreign pass thru payments will be delayed until at least 1 January 2019.
• Limited Branch and Limited FFI statuses will be extended until 1 January 2017. (But Limited FFIs and Limited Branches will
be required to amend their registration to maintain this status during 2016).
• The deadline for registering sponsored entities (RDCFFI Sponsored Entities and sponsored direct reporting NFFEs) will be
extended until 1 January 2017.
• A sponsored entity that obtains a new GIIN will be permitted to provide its new GIIN orally or through written confirmation
(e.g., email) to an existing withholding agent.
• Updates to grandfathered rules regarding collateral.
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a Swiss entity. All rights reserved
34
FATCA - Additional Transition Relief
Notice 2015-66
Withholding on Gross Proceeds
Extension of Limited Branch and Limited FFI Statuses
• Withholdable payment:
• Pursuant to the FATCA rules, every FFI that is a member of
an expanded affiliated group (EAG) must be FATCA
compliant.
• Any payment of U.S. source FDAP income and,
• after 31 December 2016, gross proceeds from the sale or
other disposition of property that can generate U.S.
source interest or dividends.
• Notice 2015-66:
• 31 December 2016 is replace by 1 January 2019.
Foreign Passthru Payments
• A passthru payment:
• a withholdable payment as well as any foreign passthru
payment.
• The regulations reserve, however, on the definition of the
term “foreign passthru payment.”
• Notice 2015-66:
• A participating FFI will not be required to impose FATCA
withholding on a foreign passthru payment made to a
recalcitrant account holder or a NPFFI before the later of
• 1 January 2019, or
• Transition rules providing interim relief to FFIs with branches
or affiliates that are located in jurisdictions that have such
prohibitive laws.
• The regulations permitted branches and FFIs that satisfied
the “limited” requirements to operate under that status until
31 December 2015, without impacting the compliant status
of their EAG members.
• Notice 2015-66
• Treasury and the IRS recognize there may be jurisdictions
that have not been able (or willing) to enter into an IGA or
to modify their local law within the time originally allotted.
• To address this issue, the Notice announces the
government’s intent to provide an additional year to allow:
1. these jurisdictions to enter into an IGA; or
2. the limited branches and limited FFIs operating
within these jurisdictions to determine whether to
continue such operations.
• the date of publication in the Federal Register of final
regulations defining foreign passthru payment.
© 2015 KPMG Luxembourg, Société coopérative, a Luxembourg entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved
35
FATCA - Additional Transition Relief
Notice 2015-66
Extension of Time to Register Sponsored Entities
Updates to Grandfather Rules for Collateral
• Pooled Collateral:
• IRS permitted the sponsoring entity additional time (until 1
January 2016) to register and obtain GIINs for its sponsored
• Withholdable payment does not include a payment made
entities (See Notice 2013-69).
with respect to a “grandfathered obligation.”
• The regulations include a corresponding due diligence rule
that permits withholding agents to accept withholding
certificates provided by a sponsored entity with the GIIN of
its sponsoring entity for payments made prior to January 1,
2016. The IGAs contain similar provisions, though under the
IGA a sponsored entity is not required to obtain a GIIN if it is
not required to report (i.e., it does not have a U.S. account).
• Notice 2015-66:
•
Provides sponsoring entities an additional year, until 1
January 2017, to register their sponsored entities.
•
Provides flexibility in how the sponsoring entity is
to provide the new GIIN to withholding agents
currently holding a sponsored entity’s withholding
certificate. Specifically, the Notice provides that, in this
case, the GIIN may be provided orally or via written
confirmation (e.g., email).
• These provisions also include an agreement requiring a
secured party to make a payment with respect to
collateral posted to secure a grandfathered obligation. If
collateral secures both grandfathered and nongrandfathered obligations, the collateral posted to secure
the grandfathered obligations must be determined by
allocating, pro rata by value, the collateral to all
outstanding obligations secured by the collateral (the pro
rata rule).
• Notice 2015-66: provides that the pro rata rule will no
longer be mandatory. Instead, the withholding agent will
be permitted to apply the pro rata rule or withhold on all
withholdable payments relating to all the collateral.
• Substitute Payments Relating to Collateral:
• Notice 2015-66: provides that the definition of
grandfathered obligations will be modified to include any
obligation that gives rise to a substitute payment that was
created by way of the payee posting a grandfathered
obligation as collateral, which may have been
rehypothecated by the secured party.
© 2015 KPMG Luxembourg, Société coopérative, a Luxembourg entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved
36
Contact details
Gérard Laures
Partner
KPMG Luxembourg
T: +352 22 51 51 5549
M: [email protected]
© 2015 KPMG Luxembourg, Société coopérative, a
Luxembourg entity and a member firm of the KPMG network
of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved.
The information contained herein is of a general nature and
is not intended to address the circumstances of any
particular individual or entity. Although we endeavour to
provide accurate and timely information, there can be no
guarantee that such information is accurate as of the date it
is received or that it will continue to be accurate in the
future. No one should act on such information without
appropriate professional advice after a thorough
examination of the particular situation.
Jean Kizito
Manager
KPMG Luxembourg
T: +352 22 51 51 5492
M: [email protected]