#Providenciales, June 18, 2019 – Turks and Caicos – On September 25, 2017, the IRS issued Notice 2017-46 which provided for the following:

• Addressed Financial Institutions’ (“FIs”) obligations to obtain and report taxpayer identification numbers (“TINs”) and dates of birth (“DOB”) under chapters 3 and 4 of the Internal Revenue Code;
• Extension of the deadlines imposed on FIs under Model 1 Intergovernmental Agreements (“IGAs”); and
• Chapter 3 and 4 final and temporary regulations released January 6, 2017.

U.S. TIN and DOB Reporting

• Under the Model 1 IGAs, Foreign FIs (“FFIs”) are required to obtain and report U.S. TINs for all reportable account holders and controlling persons.
• For tax year 2017, an FFI failing to include a reportable person’s U.S. TIN would be considered significant non-compliance, triggering a notice from the IRS to the FFI’s tax authority.
• Where an FFI is non-compliant for 18 months after the issuance of a notification, that FFI would be classified as a nonparticipating FFI and would be subject to FATCA withholding.
• An extension is provided to FFIs that have been unable to obtain TINs, allowing them to not be deemed as non-compliant solely because they file tax year 2017, 2018, and 2019 FATCA reports without TINs.
• Where an FFI is unable to obtain TINs, they will be required to undertake the following:
  • Obtain and report the DOB of each reportable account holder and controlling person missing a TIN;
  • Request annually any missing TIN from such persons; and
  • Undertake a search of electronically searchable data maintained by the FFI for the missing TINs prior to the submission of tax year 2017 reports.

Withholding Certificate Validity: Foreign TIN and DOB Requirements

The following amendments will be made by the IRS and Treasury Department: the temporary chapter 3 regulations:

• The circumstances in which Foreign TINs and DOBs are required for Global Financial Services Industry will be narrowed;
• Clarification of the definition of “account holder,” “account,” and “financial institution” under the temporary regulations to align with their meaning under the chapter 4 regulations;
• A Foreign TIN or DOB will not be required where a withholding certificate is obtained solely to avoid Form 1099 reporting and backup withholding;
• The requirement that any account held by a resident in a jurisdiction that does not have an information exchange agreement with the U.S will be excluded from the Foreign TIN;
• There will also be an exception for accounts held by residents in jurisdictions that do not issue Foreign TINs. The current list is limited to Bermuda, the British Virgin Islands, and the Cayman Islands;
• A phase-in period has been provided through December 31, 2019, to provide withholding agents additional time to obtain Foreign TINs. Withholding certificates signed on or after January 1, 2018, the Foreign TIN— or a reasonable explanation for its absence—must be present on the form. Such Foreign TINs are not required to be validated against any jurisdiction’s format or TIN system provided the withholding agent does not have a reason to know it is invalid;

• A withholding certificate signed before January 1, 2018, will not be treated as invalid under the amended temporary regulations solely because of a missing Foreign TIN;
• Payments made before January 1, 2018, a Foreign TIN is not required, and the withholding certificates will be valid until the earlier of “(1) December 31, 2019; (2) the expiration date of the validity period of the withholding certificate [if applicable]; or (3) if applicable, the date when a change in circumstances requiring a revised withholding certificate occurs.”;
• A withholding certificate will remain valid beyond December 31, 2019, if the withholding agent obtains a written record of the Foreign TIN or if the Foreign TIN is otherwise within the withholding agent’s files. 

Form 1042-S Reporting

• Form 1042-S will be amended to provid instructions to require Foreign TINs to be reported for tax year 2018 and beyond where they are available, either from withholding certificates or the alternative procedures outlined above for obtaining Foreign TINs;
• For tax year 2017, the instructions will be amended to require DOB reporting in instances where the individual account holder’s DOB is available on the withholding certificate or within the withholding agent’s electronically searchable information;
• For tax year 2018 and beyond, the DOB will be required if it is identified in any of the withholding agent’s files, whether electronically stored or otherwise.

This Notice in its entirety can be viewed on the Internal Revenue Service website at https://www.irs.gov/pub/irs-drop/n-17-46.pdf.