China amends Individual Income Tax Law

On 31 August 2018, The People’s Republic of China passed amendments to the Individual Income Tax Law. One of the amendments is the new tax residency rule (Link-Chinese). In general, individuals working in China are taxable only on their Chinese sourced income. However, individuals who have been tax residents in China for at least five consecutive “full years” are taxable on their worldwide income. For this purpose, the term “full year” requires a person not to be absent from China for more than 30 days on a single trip or more than 90 days over several trips within the tax year. This rule can be easily circumvented and, thus, the residence status avoided.

The amendments introduce a new threshold of “183 days”, instead of  a “full year”. According to the new rule, an individual who has residence in China or has no residence but has lived in China for at least 183 days in total within a tax year is considered a Chinese resident. This amendment will go into effect as of 1 January 2019.

In connection with the automatic exchange of information, the revised tax residency rule will result in an increased volume of the information being exchanged with the Chinese tax authority, given the new rule will make the threshold lower for individuals to be considered Chinese residents. As previously reported, China has signed the Multilateral Competent Authority Agreement (“MCAA”) to automatically exchange financial account information under the Common Reporting Standard (“CRS”) starting from September 2018 (PwC’s CITT News Blog).

Russia issues draft list of activated CRS information exchange relationships

On 10 September 2018, the Russian Government issued the list of countries with activated automatic exchange of information (“AEOI”) relationships under the Common Reporting Standard (“CRS”) (Link-Russian). This list is in draft form and it has not yet entered into force. It is anticipated that Russia will begin to automatically exchange information with respective countries as of 1 January 2019. Therefore, it is expected that the finalized list of countries will be issued prior to this date.

Cayman Islands releases AEOI News & Updates

On 14 September 2018, the Cayman Islands Department for International Tax Cooperation (“DITC”) released an updated version of the Automatic Exchange of Information (“AEOI”) News & Updates circular: “AEOI News & Updates” to reflect the recent changes regarding the AEOI (Link).

The DITC announced that the Cayman Islands AEOI Online Portal is open for notifications and reporting for all respective years, and users are advised to submit any outstanding reporting as soon as possible. Principal Points of Contact (“PPoCs”) must ensure that reporting obligations have been met for all Financial Institutions (“FIs”) that they are responsible for. Cayman FIs with Common Reporting Standard (“CRS”) reporting obligations are reminded that these obligations will not be regarded as complete, even if they have no reportable accounts, until they have successfully submitted a CRS Filing Declaration for the relevant reporting period.

In addition, the chapters F&G “FATCA IRS Error Notifications” and “CRS Error Notifications” have been updated. If a user received a notification for any Foreign Account Tax Compliance Act (“FATCA”) or CRS return via email, the information provided in the guide should be read before attempting a correction, or contacting the AEOI Portal Team.

Further information on the latest AEOI developments can be found on the Cayman Islands AEOI website (Link).

IRS collects comments on FATCA Forms

On 18 September 2018, the U.S. Internal Revenue Service (“IRS”) issued a request for comments within Notice 47241 as part of the Federal Register Vol.83, no.181 (Link). Comments are requested for the following forms:

  • Form 8966 FATCA Report (Link);
  • Form 8957 Foreign Account Tax Compliance Act (FATCA) Registration (Link);
  • Form 8966-C Cover Sheet for Form 8966 Paper Submissions (Link);
  • Form 8809-I Application for Extension of Time to File FATCA Form 8966 (Link); and,
  • Form 8508-I Request for Waiver From Filing Information Returns Electronically (For Form 8966) (Link).

The IRS, as part of its effort to reduce paperwork and respondent burden, has invited the general public and other Federal agencies to take this opportunity to comment on continuing information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning Foreign Account Tax Compliance Act (“FATCA”) registration. Written comments should be received on or before 19 November 2018 to be assured of consideration.

IRS releases updated FAQs on QI/WP/WT

On 19 and 20 September 2018, the U.S. Internal Revenue Service (“IRS”) updated its Frequently Asked Questions (“FAQs”) on Qualified Intermediary (“QI”), Withholding Foreign Partnership (“WP”) and Withholding Foreign Trusts (“WT”) (Link). Questions 13 in each section “Registration Update” and “FATCA Certifications” has been updated to support users in understanding the respective requirements.

The new FAQs include the following:

Section: FATCA Certifications

  • Question 13: When are the FATCA certifications due?

Answer 13: For the certification period ending December 31, 2017, FATCA certifications are generally due no later than December 15, 2018; however, for sponsoring entities and trustees of a trustee-documented trusts, they are due no later than March 31, 2019.

Section: Registration Update

  • Question 13: What are the most common errors made during the registration process?

Answer 13:  Address Line cannot be a website address.

1) Registration Part 1, Number 1: Financial Institution Type: If selecting Sponsoring Entity, a QI EIN should not be provided.  The QI EIN should only be used for QI purposes (section 2.66 of Revenue Procedure 2017-15).

2) Registration Part 1, Number 2: Legal Name of Financial Institution:  Cannot be left blank or abbreviated; use full legal name (for Lead, Member, Single, Sponsoring, Sponsored, etc.).  Also remember to check the spelling of the FI name.

3) Registration Part 1, Number 4: FI’s FATCA classification in its country/jurisdiction:  The FATCA classification selected should be consistent with the IGA in force.

4) Registration Part 1, Number 5: Mailing Address of Financial Institution: Required fields cannot be left blank or contain erroneous information.

5) Registration Part 1, Number 6: in reference to withholding agreement as QI/WT/WP EIN of the FI: If you have not registered with the IRS QI/WT/WP program and received a valid TIN for this purpose, do not insert a number or select any of the aforementioned statuses.

6) Registration Part 1, Number 10: FATCA RO for FI:

 Legal Last Name (Family) and Legal First Name (Given):  Fields cannot be left blank or contain erroneous information, initials, nicknames or the name of a company; must include full first and last names of a natural person.

Common mistakes:

◦ FI that is a trust inserts name of law firm as name of RO.

◦ RO first name is one or two initials, no middle name provided.

◦ RO name contains title or FI name.

◦ RO first, middle and last names are identical.

Business Address Lines 1 and 2 for RO:  Cannot be left blank or contain erroneous information. Cannot contain a website address.

Country/Jurisdiction for RO: Cannot be left blank. Must correspond with city location.

Business Telephone Number for RO: Cannot be left blank and cannot be fictitious (ex. 222-222-2222).

Business Email Address for RO: Cannot be left blank or contain a comma. Use period/dot, not comma (email will be returned on messages sent by IRS to RO/POC).

7) Registration Financial Institution Agreement, Signature and Certification: Certification (bottom of registration page) cannot be left blank or contain anything other than a natural person’s full name (first and last).  Cannot contain the FI Legal Name.

8) In-process or Test Accounts in FATCA registration system:  Do not ‘submit’ a test, fictitious or in-process account; rather leave the information in ‘initiated’ status. If “submitted”, your account will be placed into “Under Review” by IRS and therefore cannot be accessed without first contacting the IRS.

Trinidad and Tobago opens FATCA Information webpage

In August 2018, the Government of Trinidad and Tobago opened its Foreign Account Tax Compliance Act (“FATCA”) Information webpage (Link). This webpage includes information on the relevant deadlines, a FATCA Report Submission Guide (Link), FATCA Frequently Asked Questions (Link) and other valuable information on the exchange of information in Trinidad and Tobago.

Ireland issues Corporation Tax Roadmap

On 5 September 2018, the Government of Ireland, Department of Finance, published Ireland’s Corporation Tax Roadmap (Link).

The Roadmap takes stock of the changing international tax environment, outlines the actions Ireland has taken to date and the further actions that will be taken over the coming years. The Roadmap includes consideration of responses, inter alia, received from PwC (Link), to the Department’s consultation on the recommendations made in the Review of Ireland’s Corporation Tax Code, and the implementation of the Anti-Tax Avoidance Directives. The Foreign Account Tax Compliance Act (“FATCA”) and the Common Reporting Standard (“CRS”) are two key actions that have been taken by Ireland over the last five years.

AEOI Arrangement between China and Hong Kong enters into force

On 11 September 2018, AEOI arrangement between China and Hong Kong for conducting automatic exchange of financial account information in tax matters (“AEOI”) came into effect (Link). According to the government representative, with this AEOI arrangement Hong Kong will conduct AEOI with the Mainland for the first time later this month (September). Furthermore, Hong Kong will continue to deliver its obligations to implement AEOI in accordance with the Common Reporting Standard (“CRS”) promulgated by the Organisation for Economic Co-operation and Development (“OECD”).