Second Edition of the OECD Standard for AEOI Released
On 27 March, 2017, the OECD published the second edition of the standard for Automatic Exchange of Financial Account Information in Tax Matters (“AEOI”). This newly released edition replaces the first edition of the standard for AEOI from July 2014.
The vast majority of the standard for AEOI remains unchanged relative to the first edition. In the second edition, Annex 3 “Common Reporting User Guide” is updated, as it now contains additional technical guidance on the handling of corrections and cancellations within the CRS XML Schema, including a revised set of correction samples.
Please refer to the following link for access to the second edition of the standard for AEOI: http://www.oecd.org/ctp/exchange-of-tax-information/standard-for-automatic-exchange-of-financial-account-information-in-tax-matters-second-edition-9789264267992-en.htm
Facility to Disclose CRS Avoidance Schemes Launched by OECD
On 5 May, 2017, the OECD launched a disclosure facility on the Automatic Exchange Portal allowing parties to share information on potential schemes, products, and/or structures that may be used to circumvent the Common Reporting Standard (“CRS”).
Parties are able to fill out a form through the Automatic Exchange Portal to describe any identified loopholes or schemes that may be used for avoiding the CRS. The form asks for a description of the scheme, information on how actively it is used, and a list of the countries or regions where the scheme is used . The OECD then systematically analyzes the received information on the reported schemes to assess the risk they present to the overall integrity and effectiveness of the CRS. If required, the OECD uses the acquired information to take appropriate courses of action. Parties may fill out the forms on an anonymous basis.
OECD Automatic Exchange Portal’s form
+41 58 792 4282
QI Renewal Deadline
Qualified Intermediaries (QIs) that wish to renew their QI Agreements with an effective date of 1 January 2017 are reminded that the application for their renewal is due by 31 March 2017. Renewing by 31 March 2017 will ensure that there is a seamless transition from the old QI agreement to the new 2017 QI Agreement.
The application must be submitted online through the new IRS QI Portal.
For more information about the application process and the use of the portal, please see our PwC Tax Insights publication.
New FAQs regarding QDD application
On 17 March 2017, the IRS published new Frequently Asked Questions (“FAQs”) that provide additional details regarding the completion of the application questions for QIs that wish to apply to be Qualified Derivative Dealers (“QDDs”) for 2017. These FAQs are published on the FATCA FAQ website under the Qualified Intermediary heading. There are a total of eleven FAQs (beginning with #10) posted by the IRS that answer a variety of questions regarding the completion of the application for QDD status.
QI’s that wish to be QDDs with an effective date of 1 January 2017 must submit their applications on or before 31 March 2017 through the online QI Portal.
As of this week, ESTV SuisseTax, the Swiss Federal Tax Administration’s online portal, has opened its AEOI registration function for reporting Swiss Financial Institutions (“FIs”). Reporting Swiss FIs must register by the end of 2017 for an initial AEOI data exchange in 2018.
Please note that a registration for AEOI purposes is only possible via the online portal. Swiss FIs can enter the ESTV SuisseTax portal by referring to the following link: https://www.estv.admin.ch/estv/de/home/estv-suissetax/estv-suissetax.html.
The Swiss Federal Tax Administration is expecting to provide a data exchange test phase for reporting Swiss FIs in the summer of 2017.
Please refer to the link below for the official media release: https://www.admin.ch/gov/de/start/dokumentation/medienmitteilungen.msg-id-65920.html
The Internal Revenue Service (IRS) on December 30, 2016 released Rev. Proc. 2017-15, which sets forth the final 2017 qualified intermediary (QI) agreement (2017 QI Agreement). The 2017 QI Agreement provides procedures for QIs (including qualified derivatives dealers (QDDs)) and qualified securities lenders (QSLs)) to comply with their US information reporting and withholding obligations.
Historically, the process for applying for QI status has been a paper process that included the completion of Form 14345, Application for Qualified Intermediary, Withholding Foreign Partnership, or Withholding Foreign Trust, and IRS approval. The IRS currently is implementing an electronic QI application (QI Portal) process. In addition to the actual application, the QI portal has a link to a user guide and a frequently asked questions (FAQ) section as well as links to other resources for portal users.
Similar to systems used to manage foreign financial institution (FFI) agreements, the QI Portal provides users a secure system, a convenient method to upload certain supportive documents, the ability to receive electronic notifications regarding changes to status, renewal reminders, and other updates, and reduces the need to contact the IRS directly in many cases.
For more information about the application process and the use of the portal, please see our PwC Tax Insights publication.
The Internal Revenue Service (IRS) and the US Department of the Treasury (Treasury) on January 19, 2017 issued final, temporary, and proposed regulations (the 2017 Section 871(m) Regulations) under Section 871(m) of the Internal Revenue Code (Code). The 2017 Section 871(m) Regulations provide much anticipated guidance in response to comments provided with respect to the existing Section 871(m) regulations as well as additional guidance provided by the IRS in Notice 2016-76 and the new qualified intermediary agreement (2016 QI Agreement) provided in Revenue Procedure 2017-15. The 2017 Section 871(m) Regulations:
- consistently with Notice 2016-76, provide that Section 871(m) will apply to delta-one transactions only for 2017,
- consistently with the 2016 QI Agreement, provide for changes to the treatment of payments made to qualified derivatives dealers (QDDs) and calculation of their tax liability, and
- address a multitude of comments made with respect to the existing Section 871(m) regulations, including providing clarification with respect to the timing of the determination of delta, the ability for withholding agents to choose to withhold on the underlying dividend payment date, and the treatment of parties to Section 871(m) transactions.
Observation: These 2017 Section 871(m) Regulations were issued immediately prior to the memorandum issued by the White House Chief of Staff freezing the publication of new regulations. However, the 2017 Section 871(m) Regulations were subsequently published in the Federal Register on January 24, 2017 and therefore appear to be currently effective. However, future action may change the current status.
For more information, please refer to our PwC Tax Insights publication.
The Internal Revenue Service (IRS) on December 30, 2016 issued Rev. Proc. 2017-15 setting forth the final qualified intermediary (QI) withholding agreement (2017 QI Agreement). Non-US entities and certain foreign branches of US entities may enter into the 2017 QI Agreement with the IRS to simplify their obligations as withholding agents under Chapters 3 and 4 (Foreign Account Tax Compliance Act or FATCA) of the Internal Revenue Code (Code) and as payers under Chapter 61 and Section 3406 of the Code for amounts paid to their account holders. The 2017 QI Agreement has an effective date of January 1, 2017.
The 2017 QI Agreement allows certain non-US derivatives dealers and securities lenders that are QIs to enter into an agreement with the IRS to act as qualified derivative dealers (QDDs) with respect to transactions that give rise to payments with respect to Code Section 871(m) transactions and substitute interest. The QDD regime addresses the problem of cascading or over-withholding on certain derivatives and securities lending transactions by providing that no withholding tax is required on certain payments made to a QDD when it is acting as a principal.
Rev. Proc. 2017-15 follows Notice 2016-42, which was issued in July 2016 and set forth a proposed QI agreement (2016 Proposed QI Agreement) that contained provisions setting out terms and requirements for QDDs. The IRS requested and received many stakeholder comments on the 2016 Proposed QI Agreement. The 2017 QI Agreement (including the QDD provisions) responds to certain of those comments, and implements the guidance set forth in Notice 2016-76 which delayed many of the provisions related to Code Section 871(m).
For more information about the changes and provisions relevant for QDDs, please see our PwC Tax Insights publication.
Revenue Procedure 2017-15 – Final QI Agreement
The Internal Revenue Service (IRS) on December 30, 2016 released Rev. Proc. 2017-15, which sets forth the final 2017 qualified intermediary (QI) agreement (2017 QI Agreement). The QI regime permits certain foreign persons acting as intermediaries to simplify their federal tax withholding and information reporting responsibilities (1) under Chapter 3 and Chapter 4 of the Internal Revenue Code (Code) and (2) as a payor under Chapter 61 and Section 3406 of the Code (i.e., Form 1099 reporting and backup withholding).
The 2017 QI Agreement is based on the 2016 Proposed QI Agreement released by the IRS in July 2016, but contains certain changes and points of clarification made in response to stakeholder comments regarding certain provisions of the QI agreement. See our Insight: IRS proposes updated qualified intermediary agreement for more information on the 2016 Proposed QI Agreement. The more notable changes and points of clarification among others include information on:
- QI compliance program including the periodic review and certification of compliance;
- Partnerships or trusts applying the joint account or agency options;
- Entities eligible for QI agreements;
- Documentation requirements relating to account holders;
- Application for QI status, term of the agreement, effective date; and
- Qualified Derivatives Dealers (QDDs)
The 2017 QI Agreement has an effective date of January 1, 2017. QIs with expired agreements must renew before March 31, 2017 to have a new QI agreement with a retroactive effective date of January 1, 2017.
For additional information on these new provisions and clarifications, please see PwC’s Tax Insight on the 2017 QI Agreement.
Revenue Procedure 2017-16 – Final FFI Agreement
The Internal Revenue Service (IRS) on December 30, 2016 released Rev. Proc. 2017-16 which provides guidance to foreign financial institutions (FFIs) that are treated as participating FFIs (PFFIs) and as reporting financial institutions under an applicable Model 2 intergovernmental agreement (IGA) (Reporting Model 2 FFIs). Rev. Proc. 2017-16 updates the 2014 FFI agreement, which was set forth in Rev. Proc. 2014-38 and expired on December 31, 2016, to provide guidance on new and renewed FFI agreements.
The 2017 FFI agreement, which expires on December 31, 2018, has been revised to provide clarification with respect to certain compliance requirements and to be consistent with various provisions of concurrently released final and temporary Chapter 4 regulations implementing the Foreign Account Tax Compliance Act (FATCA). Modifications contained in the 2017 FFI agreement address:
- the expiration of transitional periods;
- clarification of the requirements for Reporting Model 2 FFIs and branches; and
- new procedures for final certifications of compliance and other obligations upon termination of an FFI agreement.
For additional information on these modifications, please see PwC’s Tax Insight on the 2017 FFI Agreement.
New IRS QI System
On 15 December 2016, the IRS announced the upcoming launch of a new Qualified Intermediary (QI), Withholding Foreign Partnership (WP) and Withholding Foreign Trust (WT) system which will allow these entities to manage their information online.
The QI, WP and WT frequently asked questions will be removed from the FATCA online registration system and will be available in the new system.
For additional information on the updates to the FATCA Online Registration System. please see the FATCA Online Registration user guide.
Further Insights on IRS Notice 2016-76
On 2 December 2016, the Internal Revenue Service (“IRS”) and the U.S. Department of the Treasury issued Notice 2016-76 (Link) providing highly anticipated guidance addressing specific challenges with implementing regulations under Section 871(m) of the Internal Revenue Code. The Notice introduces transitional relief in anticipation of expected amendments to the Section 871(m) regulations and the proposed qualified intermediary (QI) agreement. Portions of the Notice have been discussed in recent public comments by IRS and Treasury officials, but certain provisions may come as a surprise to stakeholders.
For more information, please see PwC’s Tax Insights from Global Information Reporting.
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.
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 – https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-64612.html
Argentina – https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-64554.html
Mexico – https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-64585.html
Brazil – https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-64584.html
Uruguay – https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-64583.html
A complete list of Switzerland’s partner states can be found under the following link: https://www.sif.admin.ch/sif/en/home/themen/internationale-steuerpolitik/automatischer-informationsaustausch.html
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: https://www.estv.admin.ch/estv/de/home/internationales-steuerrecht/fachinformationen/aia/publikationen/wegleitung.html