Mastering FATCA Compliance and Implementation for NFFEs: Navigating Who, What, When and How Much

Understanding the Complexities of the Withholding Requirements

Recording of a 110-minute CPE/CLE webinar with Q&A


Conducted on Wednesday, July 8, 2015

Recorded event now available

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Program Materials

This webinar will provide tax executives, tax counsel and tax advisors with a drill down into the intricacies of Foreign Account Tax Compliance Act (FATCA) compliance relevant to non-financial foreign entities, including Chapter 4 withholding, non-financial foreign entities (NFFE) status and potential exemption, new requirements for the W-8 series of forms, how Chapter 4 withholding interacts with FDAP withholding, and steps to implement an effective Chapter 4 compliance program.

Description

Beginning July 1, 2014, U.S. taxpayers that make payments to foreign persons are required to analyze and report information regarding payments both to foreign financial institutions and NFFEs under FATCA. To date, the impact of these rules on foreign financial institutions has been widely discussed, but the rule’s broad impact on NFFEs has received less attention.

The FATCA provisions—Chapter 4 of the Code (§§ 1471 et. seq.)—may require 30% withholding on “withholdable payments” to foreign entities that have not provided an appropriate withholding certificate (such as Form W-8 or W-9) or other acceptable documentation. Withholdable payments include payments of U.S. source FDAP income (basically, all gross income other than income from the sale of goods), and in 2017, gross proceeds from the sale or disposition of assets that produce or can produce U.S. source interest or dividend income.

However, there are broad carveouts that apply to many payments made by NFFEs, including interest and OID on short-term obligations and payments for the following: the use of property, office and equipment leases, services (including wages and other forms of employee compensation), software licenses, freight, transportation, and interest on outstanding accounts payable arising from the acquisition of goods and services.

The withholding tax may apply whether the foreign entity receives the payments as beneficial owner or as agent for a client and whether the beneficial owner is a U.S. or foreign person. The withholding tax applies to many items not otherwise subject to FDAP withholding (e.g., portfolio interest and capital gains of foreign investors) and cannot be reduced or eliminated by treaty.

Listen as our panel of tax specialists explains the impact of the FATCA rules on NFFEs and drills down into the details that tax advisors to NFFEs need to know.

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Outline

  1. NFFEs
    1. NFFEs—identification and classification
    2. Qualifying as an exempted NFFE
    3. IRS required disclosures for certain NFFEs
    4. W-8 implications
  2. Chapter 4 withholding
    1. Determining withholding agents
    2. Withholdable payments
    3. Interaction with Chapter 3 and Chapter 61 withholding
    4. Noncompliance penalties
    5. Best practices for compliance implementation

Benefits

This discussion will focus on the rules applicable to NFFEs and withholding agents, including:

  • Who is a Chapter 4 withholding agent?
  • What types of payments are subject to Chapter 4 withholding? What payments are not “withholdable” items?
  • Which NFFEs qualify for exemption from FATCA?
  • What information needs to be provided to a Chapter 4 withholding agent to avoid withholding, and who should provide the documentation?
  • What are the new requirements applicable to the W-8 series of forms?
  • How does Chapter 4 withholding interact with FDAP withholding, amounts taxed as effectively connected income, and income tax treaties?
  • How does recovery of and crediting of Chapter 4 withholding by foreign payees work?
  • What are the penalties for failure to withhold?
  • What steps should withholding agents take to implement an effective Chapter 4 compliance program?

Faculty

Comisky, Ian M.
Ian M. Comisky

Partner
Blank Rome

Mr. Comisky has more than 30 years of experience concentrating his practice in the areas of civil and criminal tax...  |  Read More

Leary, Bill
Bill Leary

Director, International Tax
Doeren Mayhew

Mr. Leary brings more than 25 years’ experience to his role as a Director in the firm’s International Tax...  |  Read More

Matthew D. Lee
Matthew D. Lee

Partner
Blank Rome

Mr. Lee is a former U.S. Department of Justice trial attorney who concentrates his practice on all aspects of white...  |  Read More

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