QI alert 2019-01 - KPMG Luxembourg
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QI alert 2019-01

QI alert 2019-01

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Today’s business environment is a highly dynamic one, marked by close regulatory attention and rapid technological development, and so in this newsletter we want to help you test how complaint your organization is with operational taxes.

Operational taxes are the withholding taxes (WHT), transactional taxes, and compliance obligations (due diligence and tax/investor reporting) that exist under the US Qualified Intermediary (QI), FATCA and CRS regimes, as well as US tax compliance requirements. Below you will find our 5-question checklist, designed to help you determine to what extent your organization is compliant.

Key compliance priorities

  1. QI Certification: The QI certification due date for a QI that selected 2017 for its periodic review is 1 March 2019. By then, all internal or external periodic reviews should have been completed.

  2. Withholding: Correct QI withholding requires that custodian accounts be well documented with the appropriate material (W8-IMY, withholding allocations, affidavits, etc.)

  3. Documentation: The remediation period for pre-existing accounts has expired (under both FATCA and CRS). For QI accounts documented with KYC and for which treaty benefits are being claimed, the QI is required to obtain the appropriate limitation on benefits statement prior to 1 January 2020.

  4. QI Reporting: It is essential to assess clients who received US-source income during 2018 and who are thus subject to 1042-s electronic reporting.

  5. FATCA and CRS Reporting: Although FATCA and CRS reporting mainly reflect the situation at year-end, preparation should start early on in the year, to account for changes in circumstances, additional due diligence needs, account closures, etc.

QI Checklist

  1. Documentation: Have you collected, updated, and reviewed all IRS forms (or equivalents) and KYC for clients investing in the US market?
  2. Withholding: Are you confident that the amount withheld by you or your upstream custodian on US-source income is correct?
  3. Reporting: Do you use an internal or external tool to produce 1042-S electronic reports and systematically validate 1042 returns to avoid errors and penalty notices?
  4. Training: Do the employees of the bank receive periodic QI training?
  5. Governance: Does your bank have a comprehensive QI compliance program?


To find out more, click here.

FATCA and CRS Checklist

  1. Pre-existing accounts: Have you completed the FATCA and CRS remediation of pre-existing accounts?
  2. Onboarding: Are you comfortable with the FATCA/CRS status provided by your clients?
  3. Reporting: Do you have a comprehensive system for annual FATCA and CRS reporting?
  4. Risk Framework: Does your entity maintain an internal control framework for FATCA and CRS?
  5. Governance: Are regulatory changes sufficiently monitored by your organization?

To find out more, click here.

US Tax Compliance Checklist

  1. PFIC Reports: Is one of your entities a passive entity with US investors?
  2. Tax Return or reclaim: Are you confident that the correct amount of US withholding taxes was paid on your past US investments?
  3. K-1 Statements: Is one of your entities a partnership engaged in a trade or business in the US and do you receive K-1 statements from your counterparty or investments?
  4. 871(m): Have you made an assessment as to whether your organization is affected by section 871 (m)?
  5. Check-the-box election: Have you considered making the check the box election to change an entity’s classification from transparent to corporation (or vise-versa)?


To find out more, click here.

KPMG Luxembourg has built a broad range of tools and managed services to help financial institutions face their operational tax compliance challenges.

Qualified Intermediary FATCA and CRS US Tax compliance
Healthcheck: Standardized review of compliance  Healthcheck: 
Standardized review of compliance
PFIC Reporting: 
For certain Luxembourg entities with US investors
Reporting:
Annual 1042-S electronic reporting
Classification: 
Determining FATCA/CRS status
Tax reclaim: 
Simplified reclaim of US withholding tax 
Tax Return:
1042 Validation tool
Reporting:
Annual reporting to the Luxembourg tax authorities
K-1: statements: 
For partnerships reporting the partner’s income
Training:
Online or onsite training (as per QI Compliance Program)
AEoI Tracker: 
Status in multiple jurisdictions
871(m) Compliance

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