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.