Last-minute guidance on FATCA form-filling

Monday, 30 June 2014
On the eve of the coming into force of the US Foreign Account Tax Compliance Act, the US Internal Revenue Service has issued several long-awaited documents to help foreign financial institutions and US clients complete the associated forms.

The most important is the guidance for Form 8966, used by foreign financial institutions (FFIs) to report information about their US accounts to the IRS.

Also available are the instructions for Form W-8BEN-E 'Certificate of Status of Beneficial Owner for US Tax Withholding and Reporting (Entities)'.

Further instruction leaflets have been issued for Form 1042-S, used by withholding agents (such as banks) to report any US-source payments or withholding under FATCA; and for Form W-8IMY, which certifies the right of foreign intermediaries or other entities, as well as certain US branches to apply FATCA withholding and reporting.

Draft revised instructions have also been issued for Form 8938, which must be filed by individual taxpayers who have certain foreign assets.

The IRS has further revised the FFI Agreement originally released as Revenue Procedure 2014-13, and the Qualified Intermediary Agreement originally released as Revenue Procedure 2000-12.

FATCA requires foreign institutions to identify their US clients and report their financial transactions to the IRS. Any institution that does not comply may have a 30 per cent withholding tax imposed on all investment income derived from US sources. This tax is collected by other institutions that do comply with FATCA.

Even with the newly released guidance, it appears likely that many financial institutions will take several months to approach compliance with FATCA. Because of this, the US government has previously announced it will delay enforcing the withholding tax against non-compliant banks that have shown good faith in attempting to meet the aims of FATCA.

Toine Knipping, the chief executive of international trust company Amicorp, told the South China Morning Post that a large percentage of smaller financial institutions in Hong Kong will not be FATCA-ready. Many small FFIs worldwide still do not realise that FATCA applies to them at all – not surprisingly, as the US government's literature did not make clear what types of institutions would be exempted or deemed compliant, and the details have had to be thrashed out in complex inter-governmental negotiations.

  • FATCA-like agreements between the UK and its crown dependencies, as well as Gibraltar, also come into force tomorrow, requiring banks and other institutions in the dependencies to report client income to HM Revenue & Customs.


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