QI & FATCA News

Proposed Regulations Provide QI and FATCA Relief – New Form W-9 – 2019 QI Deadlines

The IRS Publishes Proposed Regulations Impacting QI and FATCA Obligations

On December 13, 2018, the IRS released proposed regulations (REG-132881-17) extending the time required for QIs to obtain updated treaty statements and limitation of benefits (“LOB”) certification and removed FATCA withholding on gross proceeds.

Deadline to obtain LOB certification from legacy clients extended to January 1, 2020

Starting from January 1, 2017, Rev. Proc. 2017-15 (“QI Agreement”) required QIs to obtain LOB certification from entity account holders, either by completing Form W-8BEN-E or, in the case the QI utilizes the know-your-customer (“KYC”) documentation procedure, a treaty statement that includes LOB certification.  QIs were provided a two-year transition period, until January 1, 2019, to obtain a new treaty statement with LOB certification from legacy entity account holders documented according to the KYC rules while the deadline for existing entity clients that had provided Form W-8BEN-E remains the natural three-year expiration of the form. In addition, a treaty statement and LOB certification obtained under the KYC rules now has the same expiry period as Form W-8BEN-E (e.g., three full calendar years).

The proposed regulations extend the transition period to January 1, 2020 for QIs to obtain a new treaty statement and LOB certification from legacy entity account holders documented according to the KYC rules.

FATCA withholding on gross proceeds eliminated

Starting from January 1, 2019, withholding agents, including QIs, were required to begin withholding on withholdable payments consisting of gross proceeds paid to Non-Participating FFIs and recalcitrant account holders.  The proposed regulations removed gross proceeds from the definition of “withholdable payments,” thereby withholding agents no longer are required to withholding on these types of payments.

New Form W-9 Published

In October 2018 the IRS published a revised Form W-9. This revision reflects the change in the backup withholding rate, which now stands at 24%.

2019 QI Deadlines

  • January 31: Form 1099 (client copy)
  • February 15: Form 1099-B (client copy)
  • March 15: Form 1042-S (client/counterparty copy)
  • March 15: Form 1042-S (IRS, electronically) – deadline extension to April 15 by timely filing Form 8809
  • March 15: Form 1042 (IRS, paper) – deadline extension to September 16 by timely filing Form 7004
  • April 1: Form 1099 (IRS, electronically) – deadline extension to May 1 by timely filing Form 8809
  • July 1: Periodic Certification, including a Periodic Review or waiver, for QIs that have a certification period ending on December 31, 2018 (e.g., 2016 to 2018)

Our Services

The QI Solutions group assists financial institutions with FATCA, QI and CRS compliance. Our services include:

  • External QI reviewer, assistance for internal QI reviewers, assistance with QI Review sample plan and requesting a waiver of the QI Review;
  • Assistance with compiling and submitting RO certifications for QI and FATCA;
  • Assistance with QI Reporting and electronic filing of Forms 1042-S and 1099 to the IRS via the IRS FIRE platform; and
  • Bespoke FATCA, QI and CRS training programs.

2017 QI Reporting – 2018 Deadlines – QI Review and RO Certification

2017 QI Reporting (for income paid in 2017)

As in past years, all of the IRS forms for QI reporting, including requesting an extension, are available on our web site. Remember that Form 1042-S and Form 1099 must be filed electronically.

New Form 8809 (09-2017) and IRS Address for Submission

Form 8809 is used to request an automatic 30 day extension of time to file Form 1042-S (and Form 1099). The new address for paper submission of Form 8809 is:

  • Ogden - IRS Submission Processing Center
  • 1973 Rulon White Blvd.
  • Ogden, UT 84201
  • U.S.A.

Changes to Form 1042-S: Unique Form Identifier and Amended Forms

Form 1042-S now includes a box for a Unique Form Identifier ("UFI"), which must be a unique 10 digit number. Each time a Form 1042-S is amended it will retain its UFI and the amended box will be used to indicate a sequential amendment number, beginning with "1".

Form 1099 Reporting

A QI must perform Form 1099 reporting for US clients that have received US source income. In certain cases the QI’s Form 1099 reporting obligation can be satisfied if the client’s account is subject to FATCA reporting (including FATCA reporting to the local tax authorities in a Model 1 IGA country). Note, however, that Form 1099 reporting must be performed in case the client’s account is not a financial account for FATCA purposes (e.g., pensions or other Annex II products) or in case the payments to the US client have been subject to US withholding (which generally results when the client is in an omnibus account together with non-US clients).

Deadlines for 2018 QI Fulfillments

  • January 31: Form 8966 (only for Swiss FFIs with financial accounts held by non-consenting US account holders)
  • January 31: Form 1099 (client copy)
  • February 15: Form 1099-B (client copy)
  • March 15: Form 1042-S (client/counterparty copy)
  • March 15: Form 1042-S (IRS, electronically) – deadline extension to April 16 by timely filing Form 8809
  • March 15: Form 1042 (IRS, paper) – deadline extension to September 17 by timely filing Form 7004
  • April 2: Form 1099 (IRS, electronically) – deadline extension to April 30 by timely filing Form 8809
  • April 2: Form 8966 (IRS, electronically) – deadline extension to June 29 by timely filing Form 8809-I

QI Review and RO Certification

In 2018 most QIs will be required to perform the initial certification of sufficiency of internal controls ("Periodic Certification") and perform the Periodic Review by an internal or external reviewer. In certain circumstances QIs may request a waiver of the Periodic Review. The initial Certification Period covers the first three calendar years in which the QI had a QI agreement in effect since July 1, 2014, which in most cases will be the years 2015, 2016 and 2017. A QI may choose any year in the Certification Period for the RO certifications.

The deadline to submit the RO certification of compliance with the IRS is December 31, 2018 in case the third year of the Certification Period is chosen, and July 1, 2018 in case the first or second year is chosen or in case the QI requests a waiver of the Periodic Review. We expect further guidance from the IRS regarding the manner in which the certification will be submitted, however we anticipate that this will carried out on the IRS QI Management website.

Our Services

The QI Solutions group assists financial institutions with FATCA, QI and CRS compliance. Our services include:

  • External QI reviewer, assistance for internal QI reviewers, assistance with QI Review sample plan and requesting a waiver of the QI Review;
  • Assistance with compiling and submitting RO certifications for QI and FATCA;
  • Assistance with QI Reporting and electronic filing of Forms 1042-S and 1099 to the IRS via the IRS FIRE platform; and
  • Bespoke FATCA, QI and CRS training programs.

The IRS issues transitory relief for Model 1 IGA FFIs that do not have TINs for pre-existing US clients

On September 25, 2017 the IRS released Notice 2017-46 that provides transitory relief for Model 1 IGA FFIs that do not hold a US TIN in relation to FATCA reportable accounts of pre-existing clients, including US specified persons and controlling persons. The Model 1 IGA generally requires FFIs to obtain a US TIN from pre-existing US clients before January 1, 2017, and starting with the FATCA reporting for the 2017 tax year a US TIN must be reported.

Many FFIs are concerned that the inability to obtain US TINs from pre-existing US clients may result in a finding of significant non-compliance with the IGA requirement by the IRS. To address this issue, the transitory relief in Notice 2017-46 provides that FFIs will not be considered non-compliant in case: 1) the FFI reports the client’s date of birth in the FATCA report (for individuals), 2) the FFI requests a US TIN from affected clients annually, and 3) prior to performing FATCA reporting for the 2017 tax year the FFI searches its electronic records for the missing US TINs. This transitional relief applies to calendar years 2017, 2018 and 2019.

Model I IGA FFIs that do not have US TINs for FATCA reportable clients should implement policies and procedures in 2017 in order to meet the provisions of this transitory relief.

pdf NOTICE 2017-46 (63 KB)

The IRS has published Form W-8BEN-E, July 2017 version. The revised form modifies a few of the FATCA status options on line 5, the certifications for sponsored FFIs no longer require the GIIN of the sponsor (which reflects the requirement for sponsored FFIs to have their own GIIN), and the certification for nonreporting IGA FFIs. (Instructions are still in draft and should be released shortly).