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United States: New FAQs for QI / WP / WT

United States: New FAQs for QI / WP / WT

The IRS announced it has published new “frequently asked questions” (FAQs) concerning qualified intermediaries / withholding foreign partnerships / withholding foreign trusts (QI/WP/WT) on a FATCA webpage.


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New FAQs

The new FAQs (text of which is provided below) are under the following topics on the FAQ webpage:

Provisions for 2017 QI Agreement (Q4) 

Q4. What are a Qualified Intermediary’s (QI) obligations under the 2017 and 2014 QI Agreements with respect to certain tax-free savings accounts formed as trust arrangements under applicable non-U.S. law?

A4. A QI is permitted to treat the account holder that is the beneficiary of the trust arrangement as a direct account holder of the QI for purposes of sections 5, 6, and 8 of the QI Agreement where all of the following apply:

- The trust is registered with the applicable government as a tax-free plan. 

- In order to qualify as a tax-free plan, applicable non-U.S. law mandates that where the plan holds assets in a brokerage account, a trust be established for the account holder that is the sole beneficiary under the plan. 

- The account holder maintains general control over investments in the plan and can withdraw the funds at any time.

- The QI is required to document the account holder under applicable AML/KYC regulations or procedures.

- The trust itself is not eligible for a reduced rate of withholding under an applicable income tax treaty.

Added:  8-02-2018


Certifications and Periodic Reviews (Q14, Q15 and Q16) 

Q14.  Can the sample size calculated for the documentation review, (performed as part of the Periodic Review), using the safe harbor statistical sample design contained in Appendix II of the 2017 QI Agreement (Rev. Proc. 2017-15) exceed 321?

A14. A sample size calculated using the safe harbor sample design contained in Appendix II of Rev. Proc. 2017-15 generally should not exceed 321 sample units (i.e., accounts).  The possible exceptions are: (1) when the QI uses “optional further stratification by dollar amounts” (Rev. Proc. 2017-15, Appendix II, section II.A.6.) or when the sample population includes any accounts of, (2) Private Arrangement Intermediaries (PAI), (3) Partnerships or Trusts for which the QI is using the Agency Option, or (4) Joint Account Option.  Additionally, the QI or its reviewer can always decide to have a sample population larger than that resulting from the Safe Harbor Method.

Added:  07-31-2018


Q15.  In instances where there are less than 60 accounts in a stratum population, must the difference between 60 and the number of accounts in the stratum population be reallocated to the remaining strata? 

A15.  No, it is not necessary to reallocate the difference between 60 and the actual number of accounts in a stratum population over the other strata; and, therefore, such an instance should not increase the total sample size.

Added:  07-31-2018


Q16.  If the number of accounts allocated to a stratum is less than 60 and less than the number of accounts in that stratum population, how many accounts from that stratum should be selected for the sample?  What effect will this have on the other strata?

A16. The number of accounts to be sampled from that stratum is the lesser of 60 accounts or the number of accounts in that stratum population. The difference between the number of accounts to be sampled and the number of accounts allocated to that stratum should reduce the number of accounts allocated to all other strata with a stratum population greater than 60 accounts, on a pro rata basis.  Strata created for PAI and Agency Option Accounts should not be affected by such stratum.

Added:  07-31-2018


Read more on the FATCA – FAQs General page

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