Tax Reporting & Withholding 2022 Conference Takeaways
Tax Reporting Group – 2022 Tax Reporting & Withholding Conference
The week of May 2, I had the pleasure of attending and speaking at the Tax Reporting and Withholding Conference. In addition to speaking on a great panel about client onboarding there were some key takeaways from the noteworthy topics that interested the audience of tax professionals and experts from across the industry.
Conference Key Takeaways
- TIN requirements related to 1446
- Release of the new QI Agreement and 1446(f) withholding related to NQI’s with US owners.
- 36 month proposed limited life of CRS Self Certifications
Further IRS updates included some reminders that 2021 W-8 forms need to be used for forms signed after May 1, 2022. The expiration of the transition rules for 871(m) and a heads up on the release of the Instructions for Requester of Forms W-8 and revisions to Form W-8EXP.
TIN Requirements related to 1446
The IRS panel with John Sweeney was very informative. John reminded the audience that where the new W-8 forms are being collected for certification of income related to income under section 1446(f), the form must include a US Tax Identification Number. In accordance with the requirements under section 6031 a nominee must provide a TIN, name and address to the partnership for each partner that they hold interest as nominee. This is an important note that the 2021 W-8BEN and W-8BEN-E are only valid for Chapter 3 and Chapter 4 without the US TIN. The process for getting a US TIN may be a time-consuming one which customers may need to start soon to properly document for 1446.
Keeping with 1446 the panel also highlighted that although a NQI under current rules for Chapter 3 and 4 can supply all or the owner documents for purposes of calculating withholding and information reporting at a beneficial owner level. Under 1446(f) any transfer of ownership or trade by a NQI can only use the ownership statement for support of information reporting. This would require a full 10% withholding rate applicable to all owners including the US owners within a NQI. This would mean that a US owner will have NRA withheld and reported to them. The industry expects that the IRS will provide guidance for reporting and instruction for US owners claiming the federal tax withheld as NRA withholding.
QI Agreement & 1446(f) withholding for NQI’s with US owners
Moving on the IRS release the updated QI agreement and proposed changes to the QI agreement that applies to a QI affecting a transfer of an interest in a publicly-traded partnership (PTP) or receiving a distribution made by a PTP on behalf of an account holder of the QI. The proposed modifications to section 3 of the QI agreement provide general requirements, QIs are permitted to assume primary withholding responsibility under sections 1446(a) and (f) on a payment-by-payment basis.
The modifications to section 6 of the QI agreement, QI does not assume primary withholding under section 1446(a) or (f) for a payment, a QI is permitted to provide to its withholding agent the withholding statements and other information described in the modifications to section 6 of the QI agreement. Additionally, when a QI does not assume primary withholding responsibility under section 1446(a) or (f), the QI must also provide to its withholding agent a withholding statement that includes either withholding rate pools or specific payee information (and associated payee documentation) in lieu of withholding rate pool information when acting as a disclosing QI.
CARF Proposal & 36 Month CRS Self Certifications
Finally, under Crypto Asset Reporting Framework (CARF) the proposal suggest that self-certifications obtained for purposes of reporting Crypto Assets then the certificates would need to be renewed every 36 months. This differs from the US renewal requirements in that the 36 calendar months would mean that the certificates would expire and need to be solicited all year long. The US renewals are always based upon a fixed expiration of 31st of December allowing for a single point for solicitation. This would require a modification of policies and procedures for the period of validity for self-certification and eliminate the evergreen state for certain investments.
How Can TAINA Help?
In summary, many of the changes will drive a change in policies and procedures plus create new documentation requirements. Now more than ever it is important to think of an automated solution in the IRW space because there are limits to how much we can stretch our people. Let's focus on automating repetitive processes. The TAINA Platform takes care of your FATCA and CRS compliance in a seamless end-to-end process whilst maintaining an up to date, robust and detailed ruleset.
TAINA’s fully-automated FATCA and CRS Validation Platform can help financial institutions lighten their compliance burden and prove their FATCA and CRS compliance whilst improving efficiency, reducing cost, mitigating risk and improving their overall customer and investor experience. Using our flexible and lightweight platform you can automate and streamline your FATCA and CRS validation process whilst ensuring you have good year-end data that will result in clean FATCA and CRS reporting to tax authorities all year round.
We would love to talk to you more about your current documentation validation process and how our award-winning FATCA and CRS Validation platform may add value to your organisation.