28 July 2014
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International Tax Alert
IRS issues instructions for
requester of Forms W-8BEN,
W-8BEN-E, W-8ECI, W-8EXP,
and W-8IMY
The IRS has issued the long-awaited “Instructions for the Requester of Forms W-8BEN,
W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY.” These instructions are critical to the
withholding agents that must obtain Forms W-8 from foreign payees for information
reporting and withholding purposes, including FATCA. The instructions contain some
due diligence standards for Form W-8 validation, clarify provisions in the regulations
and other guidance issued by the government on FATCA implementation and the
conforming regulations under chapter 3 (NRA withholding and reporting) and chapter
61 (Form 1099 reporting and backup withholding), and document some of the
statements made by public officials over the past few months about the forms.
Implications: While the instructions do not answer all of the questions foreign persons
and withholding agents have about the 2014 revisions to the Forms W-8, at least
we now know which questions are answered in the instructions and which questions
withholding agents and their advisors will need to resolve on their own.
Specific items to note in the “Instructions for the Requester of Forms W-8BEN,
W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY” include the following.
Collection of new forms
As anticipated, withholding agents may continue to collect the February 2006 version
of the Form W-8BEN from foreign ENTITY payees through the end of 2014. Under
the applicable regulations, a withholding agent can only collect a prior version of a
withholding certificate for six months after a new version is released. Notwithstanding
the regulations, however, for purposes of both chapter 3 and chapter 4 (FATCA),
a withholding agent making or
documenting a payment to an
entity payee or account holder can
request the prior version of a Form
W-8 until 1 January 2015, and rely
on it for chapter 3 purposes for its
entire validity period; for chapter
4 purposes, the withholding agent
may rely on the prior version to the
extent permitted by the regulations
for “pre-FATCA Forms W-8,” so
long as the form is provided to the
withholding agent before 1 January
2015.
Implications: Since the exception
provided in the instructions applies
only to Forms W-8 received from
entities, withholding agents can
only accept the prior version of
the Form W-8BEN from individuals
until 1 September 2014. The
significant differences between the
old Form W-8BEN as it applied to
individuals and the new form are the
requirements around obtaining an
individual’s foreign TIN and his date
of birth.
Foreign TIN/Date of birth
The specific instructions to
requesters of a Form W-8BEN
provide that a withholding agent
“should” request an individual’s
foreign TIN if the account is held
in the US office of a financial
institution. If a foreign TIN is not
provided, the form must be treated
as invalid if the withholding agent
knows the payee has a foreign TIN
that he has not provided, unless the
withholding agent has a record of
the TIN in its account files that it can
report on a Form 1042-S. A similar
instruction is given to requesters of
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a Form W-8BEN-E. Absent a foreign
TIN, a withholding agent must obtain
an individual payee’s date of birth to
treat the form as valid, unless the
withholding agent has a record of the
payee’s date of birth in its account
files that it can report on a Form
1042-S.
Implications: It is difficult to imagine
when a withholding agent would
“know” a payee has a foreign TIN if
it is neither on the form nor in the
withholding agent’s files, such that
it can be reported on a Form 1042S. There is, however, no obligation
on the part of a withholding agent
to determine whether the foreign
TIN provided is correct in terms of
format and length. The instructions
are silent as to the obligation of a
payor that is not a US office of a
financial institution to collect either a
foreign TIN or a date of birth from a
foreign individual.
IGA classifications
The instructions provide that
withholding agents may rely on an
alternative certification under an IGA
unless they “know or have reason to
know the certification is incorrect.”
Additionally, the instructions
provide the requester can ask the
account holder to provide the form
in accordance with the requirements
and definitions applicable to the IGA
of the requester.
Implications: It is possible that the
same account holder could have
multiple FATCA statuses based on the
entity to which she presents the form if
the applicable IGAs’ definitions do not
align.
International Tax Alert
Chapter 4 status not required
Consistent with the payee
instructions to the Form W-8BEN-E,
the requester instructions provide
that payees are only required to
provide their chapter 4 status if they
receive withholdable payments for
FATCA purposes. Therefore, payees
receiving interest on a grandfathered
obligation or a non-financial payment
do not need to provide their chapter
4 status. Likewise, for a “preexisting” entity’s obligation, chapter
4 status is not required until the
end of the applicable due diligence
period.
Implications: This creates operational
and system challenges for many
withholding agents. While a form
received without a chapter 4 status
during a preexisting account’s due
diligence period is valid, chapter 4
withholding is required as soon as
the due diligence period expires.
For those preexisting accounts
whose due diligence period expires
30 June 2016, that are receiving
withholdable payments, this rule
creates, in effect, a mid-year 2016
form expiration and an early 2016
tax form solicitation requirement.
For withholding agents that are not
making withholdable payments,
however, the instructions also allow
the withholding agent to develop a
substitute form that omits chapter
4 certifications. Therefore, for
example, an accounts payable group
may want to develop a simplified
form for vendors to whom they will
pay US-source FDAP income that
is not subject to potential FATCA
withholding or reporting.
Inconsequential errors
According to the instructions, if a
Form W-8 is otherwise valid but the
form was not dated, the withholding
agent may date the form from the
day it is received. (Note there is no
similar authority in the regulations
to date stamp a Form W-9 if the
form is not dated by the signer.) A
withholding agent may treat a Form
W-8 as valid if it contains an error or
omission that is “inconsequential” and
the withholding agent has sufficient
documentation on file to supplement
the missing information. A failure
to establish an entity type or make
a required certification, however, is
never inconsequential. If the person
signing the form does not also print
her name when required to do so on
the form, withholding agents may
still treat the form as valid if they
have documentation or information
supporting the identity of the person
signing the form. (Note: on page 6 of
the instructions, a typographical error
states that new documentation is
required for pre-existing obligations by
1 January 2016. This date should be
1 July 2016.)
Substitute forms
The instructions address the use of
substitute Forms W-8, but do not
clarify certain issues. For example, it is
not clear who must “agree” that a selfcertification under an applicable Model
1 IGA is appropriate. Likewise, the
information required to be included
on a substitute Form W-8BEN is not
clear. The instructions state that a
substitute form must contain all the
information required in Part 1, lines
1 – 7 and 8, but then appear to allow
a “non-IRS form” requiring additional
information, e.g., “all” countries in
which the individual is resident for
tax purposes and the individual’s city
of birth, but not date of birth, which
is inconsistent with both the actual
form and the requirements in the
regulations for a substitute form that
may be used by a FFI.
given the relatively small box on the
Form W-8BEN-E provided for a GIIN,
the instructions allow a withholding
agent to accept a GIIN that is
indicated and clearly identified on
the form as being furnished with
respect to the appropriate box, even
though it is not in the actual box
required.
Simplified forms
Written statements
The substitute Form W-8 instructions
allow withholding agents to choose
not to include all 33 chapter 4 statuses
provided on the official form on their
substitute form, but require the
substitute form to include any chapter
4 status for which withholding may
apply, such as the categories for a
nonparticipating FFI or a passive NFFE.
The instructions confirm that a
reasonable explanation supporting
an individual’s claim of foreign status
on a Form W-8 can be provided as
a “written statement prepared by
the individual or in the alternative, a
checklist provided by the withholding
agent and completed by the
individual stating that the individual
meets one of the requirements listed
in the [applicable] regulations.”
Implications: Presumably many
withholding agents will want to
simplify their substitute Forms
W-8BEN-E by eliminating those
categories of payees to which they
do not expect to make payments.
Qualified Securities Lenders
(QSLs)
GIINs
The instructions to the Forms
W-8BEN-E and W-8IMY state that a
QSL must furnish a Form W-8IMY to
withholding agents. The Requesters
Instructions, however, provide that a
withholding agent is only required to
get a Form W-8IMY from a QSL when
the withholding agent must determine
the QSL’s chapter 4 status. Therefore,
for pre-existing counterparties, a
withholding agent is not required to
collect a Form W-8IMY until the end of
the applicable due diligence period.
The instructions detail when foreign
entities must furnish their Global
Intermediary Identification Number,
and the responsibility of withholding
agents to verify the GIIN against
the published IRS list. Presumably,
Implications: A withholding agent
can continue to rely on valid
documentation currently on file from
QSLs, but will eventually need to
perform remediation for their QSL
accounts.
Fax/pdf forms
The instructions do not provide an
explanation of when a withholding
agent can rely on electronically
transmitted forms (e.g., sent via
fax or e-mail), even though the
regulations clearly allow for them,
effective for payments made as of 6
March 2014.
International Tax Alert
3
Payment card and third-party organizations
The instructions allow Payment Settlement Entities to
use a Form W-8BEN, W-8BEN-E or W-8ECI (as applicable)
to establish their foreign status and avoid Form 1099-K
reporting. Presumably, a foreign partnership can provide
a Form W-8BEN-E to a payment settlement entity as the
instructions do not refer to the Form W-8IMY.
Exempt recipient codes on Forms W-9
Quizzically, the instructions provide the following
reference to a Form W-9 requirement that the Form W-9
instructions do not contain:
“If you receive a Form W-9, you must generally
make an information return on a Form 1099
(unless the payee has provided a valid code on
the form to indicate it is an exempt recipient).”
4
International Tax Alert
Implications: While the current version of the Form W-9
released in August 2013 contains a request for “Exempt
payee code (if any) _____,” there is no suggestion in the
instructions to the Form W-9 that payors cannot treat
payees as exempt recipients if they do not furnish a code,
although that is the result that the Form W-8 Requester
Instructions suggest.
With the issuance of these instructions, withholding
agents can finally begin to validate the 2014 versions of
the Forms W-8.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP, Financial Services
• Debbie Pflieger, Washington, DC
• Tim Morin, Denver • Maria Murphy, Washington, DC
• Justin O’Brien, New York
• Terence Cardew, New York
• George Fox, Washington, DC
• Doug Sawyer, New York
• Todd Larsen, Philadelphia
• Dawn McGuire, Boston +1 202 327 5791
+1 720 931 4488
+1 202 327 6059
+1 212 773 4767
+1 212 773 3628
+1 202 327 5621
+1 212 773 8707
+1 215 448 5606
+1 617 375 3737
deborah.pflieger@ey.com
timothy.morin@ey.com
maria.murphy@ey.com
justin.oBrien@ey.com
terence.cardew@ey.com
george.fox@ey.com
douglas.sawyer@ey.com
todd.larsen@ey.com
dawn.mcGuire@ey.com
Ernst & Young LLP, National Tax
• John McMahon, Minneapolis
+1 612 371 6771
john.mcMahon@ey.com
International Tax Services
• Global ITS, Alex Postma, London
• ITS Director, Americas, Jeffrey Michalak, Detroit
• National Director of ITS Technical Services, Jose Murillo, Washington
Member Firm Contacts, Ernst & Young LLP (US)
• Northeast
Jonny Lindroos, McLean, VA
• Financial Services
Phil Green, New York
• Central
Mark Muktar, Detroit
• Southeast
Scott Shell, Charlotte, NC
• Southwest
Amy Ritchie, Austin
• West
Frederick Round, San Jose, CA
• Canada - Ernst & Young LLP (Canada)
Albert Anelli, Montreal
• Kost Forer Gabbay & Kasierer (Israel)
Sharon Shulman, Tel Aviv
• Mancera, S.C. (Mexico)
Koen Van ‘t Hek, Mexico City
• South America
Alberto Lopez, New York
International Tax Alert
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