Part II: IRS Form W8-IMY – FATCA Driven – More on the W-9 and W-8 Alphabet Soup with FATCA: IRS Form W8-IMY

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Part II:   IRS Form W8-IMY – FATCA Driven – More on the W-9 and W-8 Alphabet Soup of FORMs:  IRS Form W-8-IMY

FATCA, “Chapter 4”, withholding started the first week of this month, July 1, 2014.  Presumably the amount of FATCA withholding will be nominal, if for no other reason, virtually all of the major world economies are countries that have actually signed an IGA or “reached an agreement [FATCA] in substance”.W-8IMY p1

See the complete and most recent list of countries who have signed FATCA IGAs or “reached an agreement in substance.”  See, Russia Joins the FATCA Group – On the Last Day? Complete List of Countries to Date (Very Few Notable Absences)

As explained in previous posts, the U.S. federal tax authority, the Internal Revenue Service (IRS) has been modifying dramatically the tax forms required to be filled out and filed by both individuals, financial institutions around the world (FFI) and by non-financial foreign entities (NFFE) all due to FATCA. See, specifically the post that focused on new form W8-BEN-E. See, FATCA Driven – New IRS Forms W-8BEN versus W-8BEN-E versus W-9 (etc. etc.) for USCs and LPRs Overseas – It’s All About Information and More Information

United States Citizens (USCs) and Lawful Permanent Residents (LPRs) who reside outside the U.S. will need to have a general understanding of  how these forms are to be completed.  This is particularly important, since they are to be signed under “penalty of perjury” as to their accuracy.  There will be a host of institutions that will be requesting USCs and LPRs residing overseas to complete these forms, including their banks, investment and brokerage houses, investment funds, private companies, mutual funds, etc. in their home country of residence or any other country outside the U.S.

What information and how it needs to be provided, depends upon whether the USC or LPR is being asked to sign as an individual.  If that is the case see, FATCA Driven – New IRS Forms W-8BEN versus W-8BEN-E versus W-9 (etc. etc.) for USCs and LPRs Overseas – It’s All About Information and More InformationW8-imy p2

If the account with the financial institution is not an individual account, a W8-BEN-E or W8-IMY will typically be required to be completed by the entity, when the USC or LPR has an ownership interest in the entity (e.g., corporation, partnership or trust).  Specifically when a USC or LPR is a “substantial U.S. owner” as defined by the statute and FATCA regulations.  In short, a “substantial U.S. owner” is a “U.S. person” (which always includes USCs and sometimes includes LPRs) with more than a 10% interest by vote or value in a foreign corporation, partnership or trust.

There is no 10% ownership threshold for “foreign investment vehicles” (as defined in IRC Sections 1473(2)(B) and 1471(d)(5)(C))  such as investment funds, private equity funds, private companies, etc. where itis engaged (or holding itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest (including a futures or forward contract or option) in such securities, partnership interests, or commodities.

As you can see, this is a very broad definition that does not require any ownership threshold to cause reporting;  a .00001% ownership interest in a “foreign investment vehicle” will give rise to a “U.S. owner” and hence subject to FATCA reporting.

This post and follow-up posts focuses on a few key aspects of the Form W-8IMY.W-8IMY p9 certification under penalty of perjury.

Incorporated into this post are key pages, showing the different categories that a partnership or a trust (or other “flow through” entity) will be required to complete when representing their status to different third parties, including foreign financial institutions.

Normally, the individual USC or LPR will not need to complete the W-8IMY (but certainly may be required if they are the managing partner of a partnership, trustee of a trust, or fall into other categories identified in the law).  It will be the trust or partnership itself that will be collecting information about its U.S. owners (e.g., through an IRS Form W-9).  The trust or partnership itself, will then be reporting this information to the foreign financial institution that will then report to the IRS (or to their own country who will then report to the IRS if there is an IGA in place).





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