IRS Announces 871(m) Phase-In Rules

On Friday, 2 December 2016, the IRS published Notice 2016-76 which provides for the phase-in application of the section 871(m) dividend equivalent regulations.

Some quick key highlights:

  • Withholding during 2017 will apply to 871(m) transactions that have a delta of one (including combined transactions).  All other 871(m) transactions will be subject to withholding beginning in 2018.
  • For enforcement purposes during 2017 and 2018, the IRS will consider the extent to which a withholding agent makes a good faith effort to comply
  • Taxes withheld for 871(m) during 2017 can be deposited quarterly
  • If a withholding agent underwithholds 871(m) tax, the withholding agent is permitted to adjust the underwithholding without penalty as long as such underwithholding is corrected before the following March 15 (i.e., the deadline for Form 1042)
  • The combination rule is simplified for 2017 to apply only to over-the-counter transactions that are priced, marketed or sold in connection with each other (listed securities transactions are not required to be combined for 2017)

We will continue to analyze the notice and follow up with you when we have more information.

Recent AEOI Updates in Switzerland

Switzerland Signs New Joint Declarations on Introduction of AEOI

Switzerland signed new joint declarations on the introduction of the automatic exchange of information (AEOI) with India, Argentina, Mexico, Brazil, and Uruguay. Switzerland and the five new partner states will begin collecting data in 2018 for a first exchange in 2019.

Please note that this timeline differs from Switzerland’s previous AEOI agreements; up until these five new joint declarations, Switzerland has had agreements to collect data in 2017 for first exchanges in 2018.

It is assumed that we will see further agreements in the future with the new information exchange timeline.

Please refer to the links below for the official media releases:

India –

Argentina –

Mexico –

Brazil –

Uruguay –

A complete list of Switzerland’s partner states can be found under the following link:

Swiss FTA Publishes New Draft of AEOI Guidance Notes

The Swiss Federal Tax Administration (FTA) has published an updated draft of the Swiss AEOI guidance notes. All changes to the August 2016 version have been highlighted in yellow. Currently, the Swiss AEOI guidance notes are only available in German. According to the Swiss FTA, a final version of the guidance notes will be published on 1 January 2017.

Please refer to the link below to access the updated guidance notes draft:

IRS announces 871(m) transition and upcoming guidance

On Friday, 21 October 2016, the IRS announced several §871(m) related updates while presenting at the SIFMA Global Tax Reporting Symposium in NYC.  We understand from our colleagues that attended the conference that the IRS made the following interesting remarks:

  • The effectiveness of §871(m) will be phased in.  The regulations will be effective from 1 January 2017 for all delta one contracts and from 1 January 2018 for all other 871(m) transactions.  The IRS did not provide any details regarding what qualifies as a delta one contract.
  • The IRS commented that the combination rule will be relaxed although they did not provide any details around how much the rule will be relaxed or whether the rule will be relaxed only for certain parties (e.g., brokers, long parties, etc.).
  • The IRS did indicate that they have not provided specific rules for the combination rule on purpose as they understand that there may be more than one way to reasonably apply the combination rules.
  • The IRS also commented that they are considering changing the timing of withholding from the date of payment to the date of the underlying dividend.

While the phase-in announcement is certainly a welcome relief, there are still a number of open questions remaining regarding the implementation of §871(m).

We can hopefully expect some answers in November when the IRS plans to release a package of regulations and a transition relief notice.

We will continue to keep you updated as we learn more.

Liechtenstein plans to extend its CRS network with 32 further juristictions

The Liechtenstein government plans to extend its CRS network with 32 further countries based on the MCAA. Please find below the link to the document “Bericht und Antrag” (in German) published by the Liechtenstein Government on 13 October 2016. The Liechtenstein parliament has to decide at its next session.

There is a list of the 32 countries included in the report. Besides several financial centres and offshore jurisdictions (e.g. Jersey, Guernsey, Bermuda, Monaco etc.), also large countries (e.g., Argentina, Australia, Chile, China, India, Japan, Canada, Korea, Malaysia, Mexico, New Zealand or South Africa) and the two other EEA countries (Norway and Island) are on the list.

The first automatic exchange of information should already start in 2018 for the fiscal year 2017.

The European Commission has launched a “European TIN Portal”

The European Commission has recently launched the so called European TIN Portal, a website which provides information concerning the structure and specificities of TINs of European Member states, if the Member State in question has chosen to publish this information.

Interestingly, one can also find examples of official documents, showing where the TIN is located on the respective document. There is further a search/check tool which enables stakeholders to check the TIN syntax and/or structure.

SwissBanking information on termination of Final Withholding Tax Agreements and EU Savings Directive

On September 9, 2016, SwissBanking has published a new circular (circular No. 7902) which provides new information concerning the termination of the withholding tax agreements with the UK and Austria and the change from the EU Savings Directive towards the AEOI.

In our opinion, it is important to deal with the questions discussed in the circular and particularly with respect to the UK tax year and the RnD confirmation as soon as possible.

IRS releases draft Form W-8IMY

The IRS released a draft version of Form W-8IMY ( Certificate of Foreign Intermediary, Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting ) with a September 2016 revision date recently, but has not issued draft instructions.

Part III (Qualified Intermediary) has been modified as anticipated to include certifications with respect to qualified derivative dealer (QDD) status and for situations where a qualified intermediary (QI) assumes primary withholding responsibility under Chapters 3 and 4 of the Internal Revenue Code and primary Form 1099 reporting and backup withholding responsibility for all payments of substitute interest. The draft form retains the qualified securities lender (QSL) certifications that are in the April 2014 version of the form as those certifications continue to be applicable until the new QDD provisions become effective. See our Insight: Proposed qualified intermediary agreement includes qualified derivatives dealer provisions for more information.

Other noted changes include:

  • A new Part XVI was added for a certification to be made by certified deemed-compliant investment advisors and investment managers.
  • References to sponsored entities that have not obtained a global intermediary identification number (GIIN) have been removed.
  • Part XIX (Nonreporting IGA FFI) has been modified by adding:
    • check boxes to identify whether the applicable intergovernmental agreement (IGA) is a Model 1 or Model 2,
    • a space for the name of a sponsor and for the trustee of a trustee documented trust, and
    • references US Department of the Treasury regulations as a basis for nonreporting IGA foreign financial institution (FFI) status.

Observation: Interestingly, there was no change to line 14e of Part III (Qualified Intermediary). Industry has been looking for clarification regarding when line 14e is required to be completed. Presumably, that issue will be addressed in the draft instructions. In addition to the line 14e issue, the draft instructions should offer more insight into the other form changes.

For more information, please contact a member of your PwC engagement team or one of the members of PwC’s Global Information Reporting Network. To view contacts for over 70 countries worldwide, click here.

IRS proposed updated Qualified Intermediary Agreement (including qualified derivatives dealer provisions)

The Internal Revenue Service (IRS) on July 1, 2016 issued Notice 2016-42 setting forth proposed changes that will apply to non-US entities that elect to enter into qualified intermediary (QI) agreements with the IRS. The QI agreement generally permits foreign persons to simplify their obligations as a withholding agent under both Chapter 3 (withholding at source) and Chapter 4 (the Foreign Account Tax Compliance Act or FATCA) of the Internal Revenue Code (IRC or Code) and as a payor under Chapter 61 and Section 3406 of the Code.

Some highlights from the proposed QI agreement include:

  • Information for QIs that act as qualified derivative dealers (QDDs) with respect to transactions subject to the treatment of dividend equivalents from US sources under Section 871(m) of the Code (871(m) transactions),
  • Procedures a QI must execute in order to satisfy its compliance review obligations,
  • Circumstances where a QI is eligible for a waiver of the requirement to conduct a periodic review and only provide some factual information, and
  • Requirement of QIs that use documentary evidence to document an entity account holder claiming reduced withholding under a tax treaty to collect an enhanced limitation on benefits (LOB) treaty statement from the holder.

The current QI agreement in Rev. Proc. 2014-39 expires on December 31, 2016. While the proposed effective date of the amended QI agreement is January 1, 2017, the IRS intends to issue a final QI agreement later this year that could modify some of the requirements included in the Notice. The final QI agreement will apply to any QI agreement in effect on or after January 1, 2017.

The IRS is requesting that comments to the proposed QI agreement be submitted by August 31, 2016.

For more information regarding the changes affecting Qualified Intermediaries, please see our Insight: IRS proposes updated qualified intermediary agreement.

For more detailed information regarding the qualified derivatives dealer (QDD) provisions, please see our Insight: Proposed qualified intermediary agreement includes qualified derivatives dealer provisions.

Updated QI Attachment for Switzerland

The IRS has recently published an updated Qualified Intermediary Attachment for Switzerland.  In addition to a list of acceptable documentary evidence, the QI Attachment also identifies the applicable laws, regulations, rules and administrative practices and procedures that QIs in Switzerland are required to follow when confirming the identity of the QI’s account holders.

The main updates to the QI Attachment include an up to date list of the laws and regulations that are applicable and a specific addition to permit Swiss QIs to open accounts for persons who have identified themselves with an electronic signature in accordance with the Federal Law on the Electronic Signature (“Bundesgesetz über die elektronische Signatur, ZertES”).

We will continue to keep you updated on further developments as they occur.

IRS releases updated Form W-8BEN-E and instructions

On 15 April 2016, the Internal Revenue Service (IRS) released updated final versions of Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities), and Instructions for Form W-8BEN-E.

Withholding agents may continue to accept the prior version of Form W-8BEN-E (dated February 2014) for six months after the April 2016 revision date on the updated version, but may not accept the prior version once use of the updated version becomes mandatory at the end of October 2016.

For more information regarding the changes included in the new Form W-8BEN-E, please see our recent PwC Tax Insight.