QI/FATCA Agenda July 2010

QI - quo (probably) vadis?

Last month, officials of the IRS discussed some important issues around the QI system during a public conference. Whilst these are no official guidelines or notices, the discussions shed some light on the areas of focus for the U.S. administration going forward. In the sense of a "QI - quo (probably) vadis?", let us summarize some of the noteworthy points:

• The Announcement 2008-98, albeit not in the public focus for the time being, is still being discussed. Hence, Qualified Intermediaries should take into consideration that some of the announcements made back in 2008 - in particular as regards the QI audit procedures - could be re-discussed in the near future;
   
• The QI renewal process for those agreements which are up for renewal in 2012 will probably be altered and amended;
   
• QI audits, which follow a strict time pattern, are - to some extent - considered too predictable and too routine. It could be discussed whether to render the QI audits less foreseeable and less "planable", i.e. QI audits could be required in a more random pattern;
   
• More scrutiny could be put on the treatment of non-disclosed U.S. account holders;
   
• The co-ordination of the IRS withholding and QI teams should be improved;
   
• The IRS could likely apply a more focused view towards backup withholding issues and the enforcement of a proper form 1042 / 1042-S reporting;
   
• Instead of focusing on the payments that are subject to withholding under the QI regime, future audits could pay more attention to the payments that are not subject to the QI regime. In other words: the IRS might be prone to ask more explanation on and justification for the fact that a withholding had not been effected on certain payments (e.g. certain derivative payments, dividend equivalent payments as well as custody and brokerage payments);
   
• More attention might need to be given to proper co-ordination of the NRA withholding tax and the backup withholding, i.e. to the question how well the systems are integrated;
   
• Emphasis should be placed on explaining U.S. addresses within client files as well as hold-mail instructions;
   
• The IRS is contemplating a more systems- and risk-based approach, moving somewhat away from the purely agreed-upon procedures approach;
   

Let us reiterate that the above bullet points recapture a discussion and should only be viewed as an indication of where discussions are heading. Hence, no action should be taken merely based on this information.

Lessons learned

Who may sign a Form W-8BEN?

Form W-8 BEN must be signed and dated by the beneficial owner of the income, or if the beneficial owner is not an individual, by an authorized individual or officer of the beneficial owner. Generally, an authorized individual must be authorized to sign on behalf of the beneficial owner.

If the Form W-BEN is completed by an agent acting under a duly authorized power of attorney, the form must be accompanied by the power of attorney in proper form or a copy thereof specifically authorizing the agent to represent the principal in making, executing, and presenting the form. IRS Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. The agent, as well as the beneficial owner, may incur liability for the penalties provided for an erroneous, false, or fraudulent form.

Disclaimer
Any U.S. tax advice contained in the body of this article was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax laws