PwC Tax Insights: IRS proposed Regulations Reducing Burden under FATCA and Chapter 3

As previously reported (Link-Blog), on 13 December 2018, the U.S. Internal Revenue Service (“IRS”) released “Issue 2018-17” to clarify the recent publication of proposed regulations reducing burden under the Foreign Account Tax Compliance Act (“FATCA”) and Chapter 3. The IRS and the Department of the Treasury are issuing proposed regulations (Link) under sections 1441, 1461, 1471, 1472, 1473, and 1474 of the Internal Revenue Code (“Code”).

Among numerous provisions in the Proposed Regulations, the modification of the so-called ‘lag method’ of withholding and reporting on a U.S. partnership’s undistributed income and adjustments to overwithholding under the reimbursement and set-off procedures would seem to have the most significant impact, especially on the asset management industry.

Other notable provisions in the Proposed Regulations include:

  • Elimination of FATCA withholding on both payments of gross proceeds and certain insurance payments;
  • Deferral of FATCA withholding on foreign passthru payments;
  • Guidance concerning certain due diligence requirements of withholding agents;
  • Clarification of the concept of ‘investment entity’ in the context of determining whether an entity is a ‘financial institution’ for FATCA purposes; and,
  • Modification of non-qualified intermediaries’ reporting of amounts withheld under FATCA.

To provide more detailed information on this topic, PwC in the U.S. released a Tax Insights on 7 January 2019 (Link).

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