Customer and Investor Tax Transparency – Updates on Tax Transparency and Exchange of Information


Updates highlighted in this issue

  1. IRS Releases Revised Publication on FATCA Data Exchange Service with Testing Sessions now available
  2. FATCA IDES Sample Test Packet
  3. Form 1042-S instructions have been released
  4. Bulgaria approves IGA (signed 5 December 2014)
  5. Jersey draft guidance
  6. Jersey’s statement on tax transparency
  7. Poland will participate in the implementation of FATCA
  8. Luxembourg draft circular on FATCA
  9. Latvia publishes draft notes on FATCA reporting
  10. Links to current US information reporting forms and instructions

To discuss FATCA, the Common Reporting Standard or other tax information reporting issues, please contact a member of PwC’s Global Information Reporting network.

1.  IRS Releases Revised Publication on FATCA Data Exchange Service with Testing Sessions now available

The IRS has released a revised Publication on the International Data Exchange Services (IDES) on 17 February. In addition, the FATCA International Data Exchange Service (IDES) will hold an open testing session from Wednesday, February 18 at 2:00 AM EST to Friday, February 20 at 5:00 PM EST. This testing session will be open to financial institutions and tax administrations who are enrolled as IDES users prior to Tuesday, February 17, 2015 at 2:00 AM EST. Note that users must fully complete the enrollment process to be eligible to participate in this testing session. Enrolled users will receive an email with a link to the IDES test web application on February 17, 2015. For more information, please use this (Link)

2.  FATCA IDES Sample Test Packet

The IRS has provided an IDES sample test file to the IDES Data File preparation page. For more information, please use this (Link).

3.  Form 1042-S instructions have been released

The IRS has released Instructions to the 2015 Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding).

Form 1042-S is used to report amounts paid to foreign persons, and to report amounts withheld under Chapter 3 of the Internal Revenue Code or to report distributions of effectively connected income by a publicly traded partnership or nominee.

The instructions for 2015 now point out that it will be compulsory for withholding agents that report amounts withheld by another withholding agent, to provide the name and EIN of the withholding agent that withheld the tax. This information was optional for 2014.

Furthermore, withholding agents that furnish a substitute Form 1042-S to the recipient must furnish a separate substitute Form 1042-S for each type of income or payment. Any substitute forms must comply with the rules set out in Pub. 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, W-2G, and 1042-S. A substitute of Form 1042-S, Copy A, must be an exact copy of Form 1042-S, Copy A. If it is not, the form may be rejected as incorrect and the IRS may impose penalties.

The list of foreign country codes has been removed from these instructions. Filers must now use the list of country codes at (Link). A list of foreign countries with which the United States has an income tax treaty is also available at (Link).

For more information download the 2015 instructions for Form 1042-S.

A number of US information reporting forms and instructions can be accessed in the attachment to this note.

 4.  Bulgaria approves IGA

The Bulgarian cabinet approves the FATCA Model 1 (reciprocal) IGA with the US on 5th of December 2014.

See the Bulgarian IGA Model I.

5.  Jersey draft guidance

On the 3 February 2015, Jersey released updated draft guidance notes which provide practical assistance to business and tax staff who deal with entities affected by the FATCA agreements and other bilateral automatic exchange of information agreements based on FATCA. The guidance notes and the Jersey Regulations have been prepared to deliver these overarching principles, abiding by the spirit of the FATCA IGA and the CRS and developing international standards. As such in delivering the reporting obligations, the guidance also recognizes the burden of reporting for affected businesses

See the fulldraft Jersey guidance notes.

6.  Jersey’s statement on tax transparency

Jersey is an Early Adopter for implementing the global Common Reporting Standard on Automatic Exchange of Information. Jersey was one of the 51 countries who signed a Multilateral Competent Authority Agreement in Berlin last October. Jersey is fully supportive of automatic exchange of information, based on the US FATCA model being applied globally as a new international standard. Jersey is actively participating with the OECD in pursuing this goal.

Engagement with UK Jersey’s government has, in the past, invited the Labour leadership to visit the island to discover the facts. This invitation will be re-issued.

To read the full statement, please use this (Link).

 7.  Poland will participate in the Implementation of FATCA

On 6 February 2015, the draft bill amending Polish Tax Ordinance to implement IGA was published (Polish language). These proposed regulations are focused on the procedural aspects of the implementation.

According to the draft bill, Polish financial institutions (FIs) will be obliged to: (i) identify US reportable accounts and accounts owned by Non-participating financial institutions; as well as (ii) report to the Polish Minister of Finance the relevant information about such accounts. To this end, Polish FIs shall perform identification by relying on the definitions and due diligence procedures as presented in the IGA. The deadline for reporting for the prior reporting period is 30 June.

Failure to report the relevant information or the delivery of incorrect information to the Minister of Finance will be penalized under the Polish Fiscal Penal Code – accordingly up to PLN 5.6m. (approx. EUR 1,34m)

The Polish Tax Ordinance will define the terms of control and transfer of the relevant data. In case the US tax authorities are provided with incorrect data, further actions will depend on the nature of the failure. A minor failure or error will need to be clarified by the Polish financial institution upon the written request of the Polish Minister of Finance. Subsequently, the corrected data will be provided to the US authorities.

In case of a major failure, a tax audit of the Polish financial institution will be performed by the Polish Tax Authorities. Polish financial institution will be entitled to rectify data provided prior to the initiation of the audit as well as during the audit. The maximum duration of the tax audit will be 7 months. During the audit Polish tax authorities will be entitled to demand access to all information and documents related to the scope of FATCA. Subsequently, the Polish Minister of Finance will provide the US tax authorities with the outcome of the audit within 18 months of obtaining the notification concerning the identification of the major failure by the US authorities. The outcome of the audit may constitute a basis for initiation of the proceedings under the Fiscal Penal Code with the potential penalties specified above.

The controversial part of the draft is associated with the implementation of the alternative procedures for new accounts opened prior to entry into force of the IGA. According to the draft regulation, the FI must close any new account within this period for which it was unable to collect the required self-certification or other documentation pursuant to the relevant procedures. This requirement is heavily discussed in the market because it is very difficult to apply such a solution in view of other Polish laws.

See the full text of the polish bill to implement the FATCA IGA.

8.  Luxembourg draft circular on FATCA

On 6 January 2015, the Luxembourg tax authorities (administration des contributions directes) released a draft version of the first administrative circular (ECHA – n°2 – French text) on the Foreign Account Tax Compliance Act. The Circular addresses the automatic exchange of information between Luxembourg and the United States of America.The Circular highlights the legal requirements imposed on Luxembourg under the IGA and states expressly that an additional circular defining the technical aspects of the exchange of information will be provided in the future.

For more information see the Circulaire du directeur des contributions ECHA – n° 2 du (FATCA Circular)

 9.  Latvia published draft notes on FATCA reporting

Latvia published draft notes on FATCA reporting (Latvian language). This draft contains the reporting due date of 31 July. The rather short document explains the procedure related to how FIs are required to perform the reporting. The note is still a draft and has not been approved yet.

See the Latvian draft notes on FATCA reporting.

10.  Links to current US information reporting forms and instructions

The attached document lists the status of FATCA-related forms and instructions. Links are included where available.

FATCA related IRS Forms and Instructions 2.2

Should you have any further questions, please contact Stéphane Martin (+32 2 710 4192), Olivier Hermand (+32 2 710 4416) or Patrice Delacroix (+32 2 710 7401).