On 20 September 2017, the Organization for Economic Co-operation and Development (“OECD”) released the CRS Status Message XML Schema User Guide for Tax Administrations (Link). In this way, the OECD is supporting the technical implementation of the automatic exchange of information under the Common Reporting Standard. This Guide contains the updated version of the OECD’s standardised IT-format of the CRS Status Message XML Schema (Link), as well as the related User Guide (Link).
On 25 September 2017, the Internal Revenue Service (“IRS”) in the United States issued Notice 2017-46 (Link) providing guidance for financial institutions required to collect taxpayer identification numbers (TINs) and dates of birth under either the temporary regulations under Chapter 3 of the Internal Revenue Code or a Model 1 intergovernmental agreement. The Notice provides that foreign financial institutions required under an applicable Model 1 IGA (Reporting Model 1 FFI) to report U.S. TINs associated with preexisting U.S. reportable accounts will not be in significant noncompliance with the Model 1 IGA solely because of their failure to report U.S. TINs, provided they comply with certain requirements set forth in the Notice. The Notice also provides relief for U.S. financial institutions (including U.S. branches of FFIs) required to collect foreign TINs and dates of birth from non-U.S. account holders.
For more information, please read PwC’s Tax Insights from Financial Markets.
On 21 September 2017, the U.S. Internal Revenue Service (“IRS”) released Publication 5216 (rev. Mar. 2017) International Compliance Management Model (ICMM) Notification XML Schema User Guide (Link). The purpose of this document is to provide a general description of the FATCA Notification Schema V2.3 that will be the basis for all electronic notifications from the Internal Revenue Service (IRS) to FATCA filers.
On 26 September 2017, the U.S. Internal Revenue Service (“IRS”) announced that due to a high volume of the files they have received, the sending out of the File Status Notifications by the IRS will take longer than usual in the following days (Link).
The new German Investment Tax Act will become effective on 1 January 2018, and significantly change the taxation of foreign investment funds in terms of their investments in German stocks. This is good news for the foreign fund industry as there will be one level playing field going forward. In particular, the option to apply for a reduced 15% withholding tax rate at source should be seen as a change for the better.
Registration for Relief at Source: German dividends paid to a foreign investment fund are at present subject to 26.375% Withholding Tax and Solidarity Surcharge (WHT). Under the new rules, if the foreign investment fund obtains and provides a “Fund Status Certificate” the German WHT will be reduced to 15% at source. This applies irrespective of the location of the fund. If the Fund Status Certificate is submitted late the overpaid WHT (11.375%) can be claimed back within a period of two years.
Tax Privileged Investors: Foreign investment funds with tax privileged German or comparable foreign investors (e.g. churches, non-profit organizations, foundations, corporations under public law) may even be able to obtain full relief of German WHT for this specific investor type if certain formal requirements are met.
New WHT on Manufactured Payments: Foreign investment funds will be subject to a new German tax liability in terms of stock lending and repo transactions on German stocks. Manufactured dividend payments and lending fees in particular will be subject to tax in Germany. The obligation to apply the German WHT on the above payments is generally with the German or foreign custodian of the lender/buyer. Subsequently, foreign custodians might also be obliged to apply German WHT. It is important to note that in cases where a (foreign) custodian does not apply the WHT on these payments the foreign investment fund would be obliged to file German tax returns.
Abolition of Capital Gains Tax: At present, capital gains regarding German stock realized by foreign investment funds may be subject to tax if the fund held at least 1% of the shares of the German company and is not entitled to treaty protection. In this case, the foreign fund is obliged to register for tax in Germany and to file a German tax return. From 1 January 2018, onwards the above capital gains will no longer be subject to German tax liability.
On 12 September 2017, Brunei Darussalam signed Multilateral Convention on Mutual Administrative Assistance in Tax Matters (“Convention”). The Convention is one of the most important and powerful instruments in the area of international tax cooperation and it provides for all forms of administrative assistance in tax matters, e.g. exchange of information on request, spontaneous exchange, automatic exchange, etc. Moreover, the Convention provides for the extensive safeguards concerning the protection of taxpayers’ rights. As the Convention is the premier instrument for the implementation of the CRS, the Convention should enable Brunei Darussalam to fulfil their commitment to begin the first exchange of the information by 2018 (Link).
On 13 September 2017, PwC’s CITT Compare Tool was updated to include the latest content from Hungary and Singapore. Please take this opportunity to re-run reports for those countries and use the latest information within your projects.
On 7 September 2017, Belgian Public Federal Service Finance (“SPF Finance”) announced that MyMinfinPro FATCA Portal will be temporarily closed to allow the SPF Finance to consolidate various information received and to further communicate such information to the U.S. Internal Revenue Service (Link-French).
The reopening of the MyMinfinPro FATCA Portal will be announced on the SPF Finance website.
The Switzerland tax authorities have considered the future possibility of applying the voluntary disclosure option (Link-German). The competent cantonal tax administration is responsible for assessing whether voluntary disclosure meets the legal requirements. This also applies to the question whether the tax administration was already aware of the tax factors which are being disclosed, and the disclosure is therefore not made voluntarily.
In the opinion of the tax authorities, this knowledge is assumed for the automatic exchange of information (“AEOI”) tax factors at the latest from 30 September 2018, so that their disclosure is no longer on its own initiative. Therefore, in the opinion of the tax authorities, a (non-criminal) self-declaration of such income factors is no longer possible from this date. For the AEOI taxing factors existing after 2017 and for tax factors from countries which later acceded to the AEOI, this applies analogously to 30 September of the year in which the data exchange takes place (for the first time).
The knowledge from other sources as well as the fulfilment of the other requirements of the disclosure are independent from this date.
On 30 August 2017, the Cayman Islands Department for International Tax Cooperation announced that the AEOI Portal will be closed for reporting at 4 PM on 13 September 2017 (Link). The AEOI Portal will reopen to allow Cayman Financial Institutions to complete any outstanding reporting only after the data submitted prior to the closing have been transmitted to the U.S. Internal Revenue Service and the CRS Common Transmission System.
The reopening of the AEOI Portal will be communicated through an Industry Advisory and on the AEOI Portal News and Updates page of the Department for International Cooperation website. The AEOI Portal is not anticipated to reopen until late October or early November at the earliest.