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Peru enacts Supreme Decree on the automatic exchange of information

On 10 November 2018, Peru enacted “Supreme Decree No. 256-2018-EF” (“Decree”) (Link-Spanish). Financial institutions must submit financial information of the reportable accounts to the Peruvian Tax Administration (“PTA”). In this respect, the Decree regulates the type of the information to be submitted to the PTA in order to comply with the requirements established in the international agreements signed by Peru and by the Decisions of the Commission of the Andean Community. Furthermore, the Decree contains Annex II, which provides due diligence procedures that financial institutions must follow to identify financial information that have to be submitted to the PTA.

Canada publishes updates to Declaration of Tax Residence for Individuals

On 5 December 2018, after the statement regarding Canada’s commitment to combating offshore tax evasion and aggressive tax avoidance (Link-Blog), the Canada Revenue Agency (“CRA”) released an updated version of the “Form RC520”, which is the Declaration of Tax Residence for Individuals (Link). For purposes of the Foreign Account Tax Compliance Act (“FATCA”) and the Common Reporting Standard (“CRS”), individuals may populate this form to identify the account holder (Section 1) and to declare tax residence (Section 2).

Slovenia publishes second edition of the International Exchange of Information in the Area of Customs and Taxes Manual

On 2 December 2018, the Ministry of Finance in Slovenia published the second edition of the Slovenian “International Exchange of Information in the Area of Customs and Taxes Manual” (Link-Slovenian). In connection with the exchange of information in the tax area, this manual provides basic information on the different information exchange mechanisms, as well as information on the legal basis for such exchange of information.

Switzerland initiates consultation on introduction of AEOI with 18 additional countries

On 7 December 2018, the Swiss Federal Council initiated consultation on the introduction of the Automatic Exchange of Information (“AEOI”) with 18 additional countries (Link).

The implementation of the AEOI is planned for 1 January 2020, and the first exchange of data should take place in 2021. The expansion of Switzerland’s AEOI network takes current international developments into account.

In June 2018, the Organisation for Economic Co-operation and Development (“OECD”) adapted the conditions used to determine whether the international standards on tax transparency are being implemented satisfactorily. One of the conditions requires that individual states and territories complement their AEOI network with all partner states that have an interest in the AEOI and meet the requirements of the OECD standard. This extended scope of application of the AEOI will create a level playing field worldwide, which will benefit the Swiss financial centre.

Against this backdrop, after consulting the relevant parliamentary commissions, the Federal Council is proposing to expand Switzerland’s AEOI network with additional states and territories. These are the 18 partner states that are still missing from the 107 states and territories that are currently committed to implementing the AEOI. By expanding its AEOI network accordingly, Switzerland is underlining that it is implementing its international obligations.

In accordance with the Federal Council’s proposal, the Swiss AEOI network is to be expanded to include the following 18 states and territories: Albania, Azerbaijan, Brunei, Dominica, Ghana, Kazakhstan, Lebanon, Macao (China), the Maldives, Nigeria, Niue, Pakistan, Peru, Samoa, Sint Maarten, Trinidad and Tobago, Turkey and Vanuatu. Before an initial exchange of data with these partner states, the Federal Council will once again review whether they meet the requirements of the AEOI standard on the basis of the federal decree of 6 December 2017. The focus will be on data security and confidentiality.

The consultation will last until 20 March 2019. The Federal Council plans to submit the dispatch on the introduction of the AEOI with these partner states to Parliament in spring 2019.

The relevant news are also available in German (Link-German), French (Link-French), and Italian (Link-Italian).

IRS publishes new FAQs on FATCA Certification

On 7 December 2018, the U.S. Internal Revenue Service (“IRS”) updated its Frequently Asked Questions (“FAQs”) on the Foreign Account Tax Compliance Act (“FATCA”) Registration System (Link). The FATCA Registration System is a secure, web-based system that users may use to register, renew their agreement, and certify, for themselves and associated entities (if any) online.

Questions under the “Certification” section have been updated to support users in understanding the certification of pre-existing accounts (“COPA”) and periodic certification processes. The new FAQs include the following question:

  • Question 3: How do I find out if I am required to complete a COPA or periodic certification?

Answer 3: You will receive a message board message notifying you that a certification is available.  However, whether you are required to submit a certification will generally depend on the classification you select at the start of the certification.  Once you select your classification, the system will display a screen indicating whether you are required or not required to submit a certification and you will also receive a message board message.

IRS releases updated FAQs on QI/WP/WT

On 12 December 2018, the U.S. Internal Revenue Service (“IRS”) updated its Frequently Asked Questions (“FAQs”) on Qualified Intermediaries (“QI”), Withholding Foreign Partnerships (“WP”) and Withholding Foreign Trusts (“WT”) (Link).

Questions 16, 17 and 18 in the section “Foreign Account Tax Compliance Act (“FATCA”) Certifications” have been updated to support users in understanding the respective requirements:

  • Question 16: I terminated my Foreign Financial Institution (“FFI”) agreement by canceling my account in the FATCA registration system and no longer Have a GIIN, how do I submit a certification?

Answer 16: Section 12.10 of the FFI agreement (Revenue Procedure 2017-16, 2017-3 IRB 501) requires final certifications of compliance upon termination of the FFI agreement.  The certification, described in section 8.03(B) of the FFI agreement, must cover the period from the end of the most recent certification period (or, if the first certification period has not ended, the effective date of the FFI agreement) to the date of termination (the “short certification period”).  This final certification for the short certification period must be submitted within six months of the date of termination.  Therefore, if you entered into or renewed your FFI agreement in 2017, you are required to submit a final certification of compliance.

Since the ability to submit a certification was deployed on July 22, 2018, if you terminated your FFI agreement prior to July 22, 2018, you are not required to submit a final certification. However, if you choose to do so, you must contact the IRS to have your account unlocked.

However, if you terminated your FFI agreement on or after July 22, 2018, you are required to submit a certification if you have a certification obligation. Upon cancelling your account in the FATCA registration system, you will see a message reminding you of your certification obligation which must be completed within 6 months of the cancellation. Your FATCA ID and Access Code will remain active during this time.

  • Question 17: I have registered branches in multiple jurisdictions, how do I submit a certification only on behalf of those that have a certification requirement?

Answer 17: When submitting a certification for the entity, all approved branches at the time of submission are automatically included in your certification.  You are not able to certify only for selected branches.  The IRS, however, recognizes that the certification submission is only intended for branches with a certification requirement, specifically, approved branches maintained by the entity which are not located in a Model 1 Intergovernmental Agreement (“IGA”) jurisdiction.

  • Question 18: I am submitting a certification for an entity that has multiple approved branches. However, some but not all the branches have a material failure or event of default (“EOD”). How can I make my certification reflect only the affected branch(es)?

Answer 18: If there is a material failure or event of default that is applicable only to a specific branch (or branches), you should note that in the applicable text box by listing the jurisdiction, legal name and the Global Intermediary Identification Number (“GIIN”) of the branch (branches) to which the material failure and/or event of default relates.   If the entity itself has a material failure or event of default, that fact also should be noted in the applicable text box.

IRS and Treasury issue Proposed Regulations Reducing Burden under FATCA and Chapter 3

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”). The proposed regulations provide rules that aim to reduce taxpayer burden with respect to certain requirements under Chapter 3 and Chapter 4 of the Code.

Written or electronic comments and requests for a public hearing on this proposed regulation must be received within 60 days of publication in the Federal Register, which is forthcoming.

Specifically, the proposed regulations eliminate withholding on payments of gross proceeds, defer withholding on foreign pass-through payments, eliminate withholding on certain insurance premiums, and clarify the definition of investment entities. The proposed regulations also include guidance on certain due diligence requirements of withholding agents and clarify procedures for refunds and credits of amounts withheld.