IRS updates FAQs on QI/WP/WT

On 11 February 2020, the U.S. Internal Revenue Service (“IRS”) released issue number 2020 – 02 updating its Frequently Asked Questions (“FAQs”) on Qualified Intermediaries (“QI”), Withholding Foreign Partnerships (“WP”) and Withholding Foreign Trusts (“WT”) (Link).

Question 9 and 10 in the section “Certifications and Periodic Reviews” have been updated to support users in understanding the respective requirements.

Please note that the initial issue number 2020 – 02 from 11 February 2020 included FAQ 18. The IRS corrected this issue and released a second issue number 2020 – 02 on 12 February 2020 stating, that FAQ 18 has been removed. The accidentally released FAQ 18 contained the same information as issue number 2020 – 01 (see News X), but with a wrong deadline.

Question 9: When is the deadline for QI/WP/WT entities to select the periodic review year of their certification?

Answer 9: All QI/WP/WT entities must select the periodic review year of their certification period before July 1, 2020. This includes those entities selecting 2019 as their periodic review year.

If a QI/WP/WT entity is applying for a waiver of the periodic review when making its periodic certification, it must select 2017 for its periodic review year, complete Parts I, II, and III of the certification, and submit its waiver application before July 1, 2020. However, the entity will not be required to perform a periodic review if its waiver application is approved.

The IRS will notify the entity when a request for a waiver of the periodic review is approved or denied. If such request is denied with less than 6 months remaining before the certification due date, including any extensions, the entity will be granted a six-month extension from the date of denial of the waiver to complete the periodic review and resubmit the certification. At that time, the entity may select a year other than 2017 as its periodic review year. If the entity encounters difficulty selecting a year other than 2017, the entity should contact the FI Team at lbi.fi.qiwpissues@irs.gov. The resubmitted certification should include a completed Part IV and Part VI (if applicable).

Question 10: When are the due dates for submissions of QI/WP/WT Certifications covering a 3 full calendar year certification period ending 31 December 2019?

Answer 10: The certification due date depends on which year the QI/WP/WT selected for its periodic review, and whether the QI/WP/WT is applying for a waiver of the periodic review requirement with its periodic certification (waiver application). According to section 10.03 of the QI Agreement (QI Agreement) and section 8.03 of the WP Agreement and WT Agreement, the certification due date for a QI/WP/WT that selected 2017 or 2018 for its periodic review and that has a certification period ending December 31, 2019 is July 1, 2020.

According to those same sections noted above, the certification due date for a QI/WP/WT that selected 2019 for its periodic review is December 31, 2020.

If a QI/WP/WT entity is applying for a waiver of the periodic review when making its periodic certification, it must select 2017 for its periodic review year, complete Parts I, II, and III of the certification and submit its waiver application by July 1, 2020. However, the entity will not be required to perform a periodic review if its waiver application is approved.

The IRS will notify the entity when a request for a waiver of the periodic review is approved or denied. If such request is denied with less than six months remaining before the certification due date, including any extensions, the entity will be granted a six-month extension from the date of denial of the waiver to complete the periodic review and resubmit the certification. At that time, the entity may select a year other than 2017 as its periodic review year. If the entity encounters difficulty selecting a year other than 2017, the entity should contact the FI Team at lbi.fi.qiwpissues@irs.gov.  Following completion of the periodic review, the QI/WP/WT’s resubmitted certification should include a completed Part IV and Part VI (if applicable).

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