Five Big Updates On QI, FATCA, CRS, And MDR

Compliance is an ever-shifting challenge, given the changing needs of regulators, new technological capabilities, and frequent legal updates. To help you stay on top of everything, our team has compiled the most important insights from the field of operational taxes. We were inspired by discussions at a recent industry-leading conference[1] we attended, where tax practitioners, industry experts, and the IRS gathered to explore the future of the industry.

Read on for five key takeaways:

1. Documentation and due diligence

   Obtaining valid documentation is the key starting point for QI, FATCA, or CRS compliance. Some notes on the recently proposed "burden reduction" regulations under FATCA and Chapter 3:

   Treaty statements provided with documentary evidence now need to be renewed every three years. This is a significant change for Qualified Intermediaries (QIs), who normally receive documentary evidence plus a treaty statement (as opposed to using IRS forms). Luckily, the deadline to obtain treaty statements with specific limitation on benefits (LOB) clauses for entity accounts has been extended to 1 January 2020. The above regulations now provide that, where the payee does not claim treaty benefits, hold-mail instructions may be "cured" by providing documentary evidence of non-US status (in other words: passports are now acceptable). Previously, another address that qualified as a permanent residence address had to be provided. Regarding FATCA, the regulations confirm that an entity with discretionary mandate generally qualifies as FFI. In the area of documentation, issues and common misconceptions do remain, but guidance exists to address questions about QI, FATCA, and CRS self-certifications, particularly on date and address requirements, FATCA and CRS status mismatches, the use of affidavits, missing GIIN, and content of withholding statements. Contact us for more information.

2. 1042-S reporting

   Although the QI regime has been around since 2001, reporting requirements for US-source payments made to non-US persons on form 1042-S continue to change every year. Some of the changes to QI, FATCA, and CRS reporting are, inter alia, that (1) the reimbursement procedure now allows a withholding agent to use the extended due date for filing Forms 1042 and 1042-S to make a repayment and claim a credit; and (2) an NQI that is a PFFI or RDCFFI can now report the withholding on Form 1042-S as Chapter 3 withholding, to the extent that the underlying payee...