Six US tax compliance updates you NEED to know

in Tax, 18.11.2019

QI, FATCA, CRS, MDR…whatever you’re dealing with, you can be sure that the topic of compliance is never far behind. With the constantly changing needs of regulators, new technological capabilities and frequent legal updates, compliance is an ever-shifting challenge.

To stay ahead of the game, we attended a leading industry conference (the 31st International Tax Withholding & Information Reporting Conference) and just a few weeks ago, SIFMA’s Global Tax Reporting Symposium. These two events, both held in New York, brought together tax practitioners, industry experts and the IRS – all eager to explore the future of the industry.

So, what’s new? Read on as we reveal SIX key takeaways:

  1. FATCA burden reduction regulations are expected to be finalized with minimal changes.
  2. A new FAQ addresses the issue of “U.S. Reportable Accounts without U.S. TINs”. Read more in our newsletter on the topic.
  3. Concerning Section 1446 (f), the IRS has indicated that we should expect further regulations to be published. At the same time the QI Agreement will also be updated to clarify a QI’s obligation with respect to Section 1446 (f) withholding (if any).
  4. As revealed in our June blog, the repeal of Section 958(b)(4) could mean that non-US subsidiaries of foreign banks should be treated as controlled foreign corporations (CFCs) which are “US Payors” for the purposes of Form 1099 reporting (Chapter 61) and backup withholding (Section 3406) purposes. Luckily, newly proposed §1.6049-5(c)(5)(i)(C) provides that a US payor includes only a CFC that is a CFC without regard to downward attribution from a foreign person, and thus the unintended consequences from repeal of Section 958(b)(4) are eliminated.
  5. As for Section 871(m) which treats “dividend equivalent” payments made under derivative contracts as US-source dividends, the IRS indicated that it intends to further extend the transition period, under which only delta 1 contracts are in scope. It also plans to issue guidance on “burden reduction”. The exact length and scope of the extension is still unclear.
  6. The EU’s DAC6 / MDR imposes the obligation to disclose reportable cross-border arrangements on EU intermediaries. This new regime will likely show great variations on local implementations and will potentially affect US transactions (i.e. movement of assets from the EU to the US) in terms of reporting obligations. Organizations with an EU nexus are now performing impact assessments and preparing for implementation.

Watch this space for more updates!

Questions? Get in touch with our team of tax experts.

 


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