The IRS has published its 2018 version of Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. This publication provides substantive guidance to those with Form 1042-S filing obligations under FATCA and for payments to nonresident aliens (Chapter 4 and 3 withholding, respectively). There are several revisions and updates of which filers should be aware:
- New information on Qualified Intermediaries (QI) and Qualified Derivatives Dealers (QDD), who may have Chapter 3 reporting obligations under Section 871(m). The Account Management Systemallows a QI, a Withholding Foreign Partnership (WP), and a Withholding Foreign Trust (WT) to apply, renew, or update its status as a QI, WT, or WP. A new QI Agreement was released on December 30, 2016 and is effective on or after January 1, 2017. The former agreement expired on December 31, 2016.
- New WP and WT Agreements were released on January 19, 2017 – effective on or after January 1, 2017. The former agreements expired on December 31, 2016.
- Beginning in 2018, a financial institution is required, under certain circumstances, to collect and report an account holder’s Foreign Taxpayer Identification Number (FTIN).
- Final and temporary regulations under Chapters 3 and 4 were published in early 2017. This publication has been updated to be reflective of these. Forms in the W-8 series have also been updated accordingly.
- Deductions of personal exemptions have been suspended for tax years beginning after December 31, 2017 and before January 1, 2026.
- The new Section 1446(f) requires a transferee of partnership interest to withhold 10% of the amount realized in the disposition of such an interest. However, this section has been temporarily suspended with regard to the disposition of certain Publicly Traded Partnership (PTP) interests until further notice.
About the Author
Tom Hospod is a member of the Tax Research Team for the Direct Tax division at Sovos Compliance, where his main areas of focus are Tax Withholding and Automatic Exchange of Information (AEOI). Prior to Sovos, Tom worked as a legislative aide in the Massachusetts House of Representatives. He also has experience in securities law—focusing on broker-dealer disputes and representing clients in FINRA arbitration. Tom is a member of the Massachusetts Bar, earned his B.A. from Boston College and his J.D. from the University of Miami.More Content by Tom Hospod