Final regulations reducing burden under QI & FATCA


On 27 December 2019, the U.S. Department of Treasury and the U.S. Internal Revenue Service IRS released final regulations under chapter 4 (FATCA) and chapter 3 (QI) providing burden relief under QI & FATCA. The final regulations (TD 9890) adopt the proposed regulations of 13 December (as described in our previous blog) with minor modifications resulting from subsequent industry comments, as well as certain documentation rules already in effect under prior temporary regulations.

Relevant aspects for Swiss financial institutions

Our U.S. colleagues discuss the specific highlights of the final regulations in more detail in their blog article. The key areas for Swiss financial institutions (SFIs) to consider are listed below, together with KPMG’s commentary where relevant.

  1. Foreign Tax Identification Numbers (FTINs) and Date of Birth
    KPMG comments: This matter only concerns SFIs that maintain financial accounts in the U.S. (e.g. U.S. branch or subsidiary).
  2. Nonqualified Intermediary (NQI) Withholding Statements
    KPMG comments: SFIs with NQI clients are reminded that the withholding statement is an integral part of the NQI’s Form W-8IMY. For SFI to properly document an NQI account and rely on the NQI withholding statement, it must contain all of the fields stated in the instructions to Form W-8IMY, or meet the requirements of an alternative withholding statement including the following representation from the NQI:
    “I hereby certify that the information contained on the withholding certificates associated with the persons identified on this withholding statement does not conflict with the account information maintained in my files with respect to such person.”
  3. Electronically Signed Withholding Certificates
  4. Withholding Certificates and Withholding Statements Obtained Through Third Party Repositories
  5. Limitation on Benefits (LOB) Requirement for Treaty Claims
    KPMG comments: If this has not already been the case, SFIs relying on a treaty statement for granting treaty benefits to entity accounts should ensure that they have on file a valid treaty statement including the applicable LOB clause. Where this is not the case, the withholding rate on U.S. dividends (and any other U.S. source income subject to a reduced treaty rate) should be adjusted to 30% as of 1 January 2020 to avoid underwithholding.
  6. Permanent Residence Address Subject to Hold Mail Instructions
  7. Technical Corrections and Conforming Changes

Next steps

Affected SFIs should verify the impact of the final regulations for their organization, seeking specialist support where necessary.

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