Monthly Archives: December 2016

Soon, the IRS will launch a new

1. Qualified Intermediary (QI),
2. Withholding Foreign Partnership (WP) and
3. Withholding Foreign Trust (WT) system

allowing these entities to manage their information online. The QI, WP and WT related questions will be available in the new system.

Additional information on the updates to the FATCA Online Registration System is available via the FATCA Online Registration user guide.

On April 15, 2016 we posted US Pressured For Beneficial Ownership Rules where we discussed that in a speech by Treasury deputy assistant secretary Jennifer Fowler to a financial crime conference earlier in April noted that the Treasury is in the process of introducing a new rule forcing financial institutions to perform customer due diligence checks on new clients.

This rule, first published in August 2014, is still under consultation, though close to being finalized. We also discussed that the regulations are likely in response to the growing view of the United States as a tax haven for foreigners seeking to evade their foreign tax obligations or otherwise conceal their holdings.
The Treasury Department noted in its March 30th statement that one purpose of the new regulations will be to assist foreign countries in obtaining information regarding their own taxpayers under the United States' tax treaties and tax information exchange agreements. 

The new regulations where to be issued under section 6038A of the Internal Revenue Code, which requires certain foreign owned U.S. corporations to file a Form 5472 disclosing the identity of their foreign owners and reporting certain related-party transactions. The filing requirement generally applies where more than 25% of the voting power or value of all classes of stock are owned by a single foreign owner. 

The IRS has now issued these regulations as final on 12/12/2016a nd they treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner, but only for the reporting, record maintenance and associated compliance requirements that apply to 25% foreign-owned domestic corporations under Code Sec. 6038A.
 
These changes are intended to provide IRS with improved access to information that it needs to satisfy its obligations under U.S. tax treaties, tax information exchange agreements and similar international agreements, as well as to strengthen the enforcement of U.S. tax laws. TD 9796, 12/12/2016; Reg. § 1.6038A-1, Reg. § 1.6038A-2, Reg. § 301.7701-2. These regulations are effective December 13, 2016.

All of which may not be good for tax advisors.

Now according to Bloomberg BNA, IRS employees could be in for a rocky ride if President-elect Donald Trump and Congress move forward with sweeping pledges to rein in federal employee benefits and cripple unions.

Trump has vowed to place a hiring freeze on federal jobs and shrink the workforce, as one of his first efforts once in office, and ease firing restrictions. Other ideas Republican lawmakers have floated could also come to fruition now that no veto threat looms, such as ending automatic pay raises and changing benefits plans.

Those moves would be jarring for employees across federal agencies, but would particularly sting at the Internal Revenue Service, an agency that has lost millions of dollars through budget cuts and thousands of employees through attrition and retirement.

 

In a Rev Proc 2016-56,2016-51 IRB, the IRS has updated two lists of countries with which the U.S. has in effect an agreement that requires payors to report certain deposit interest paid to nonresident alien individuals who are residents of the other country under Reg. § 1.6049-8(a) and Reg. § 1.6049-4(b)(5).
 
One list is of countries with which the U.S. has in effect an income tax or other treaty or a bilateral agreement and the other is of countries with which IRS has determined that an automatic exchange of information is appropriate. 

The following are the countries with which the United States has in effect an income tax or other convention or bilateral agreement relating to the exchange of tax information within the meaning of section 6103(k)(4) pursuant to which the United States agrees to provide, as well as receive, information and under which the competent authority is the Secretary of the Treasury or his delegate:

1. Antigua & Barbuda
2. Aruba
3. Australia
4. Austria
5. Azerbaijan
6. Bangladesh
7. Barbados
8. Belgium
9. Bermuda
10. Brazil
11. British Virgin Islands
12. Bulgaria
13. Canada
14. Cayman Islands
15. China
16. Colombia
17. Costa Rica
18. Croatia
19. Curacao
20. Cyprus
21. Czech Republic
22. Denmark
23. Dominica
24. Dominican Republic
25. Egypt
26. Estonia
27. Finland
28. France
29. Germany
30. Gibraltar
31. Greece
32. Grenada
33. Guernsey
34. Guyana
35. Honduras
36. Hong Kong
37. Hungary
38. Iceland
39. India
40. Indonesia
41. Ireland
42. Isle of Man
43. Israel
44. Jamaica
45. Jersey
46. Korea, Republic of
47. Latvia
48. Liechtenstein
49. Lithuania
50. Luxembourg
51. Malta
52. Mauritius
53. Mexico
54. Netherlands
55. New Zealand
56. Norway
57. Poland
58. Saint Lucia 
59. Slovak Republic
60. Slovenia
61. South Africa
62. Spain
63. Sweden
64. United Kingdom