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W-8BEN-E in No-Man Land Until….When?
June 04, 2014
Miscellaneous
On this blog I’ve voiced my skepticism about FATCA, both as a policy rationale and as a logistical undertaking. Recently I started observing the effects of something I can only describe as a blunder on part of the U.S. taxing authorities. So, W-8BEN-E is out for a few months now. Many people waited eagerly for the form to be released.  What happened, however, is that there are no instructions! Well, that apparently does not prevent some withholding agents from sending out the form to foreign businesses. I would describe this as overzealousness that is not necessarily valid or logical. Per the latest iteration of the FATCA regulations published in 79 FR 12725 (I’ve lost track how many FATCA updates there has been so far), withholding agents are required to start using the new forms “six months after the revision date shown on the updated withholding certificate, unless the IRS has issued guidance that indicates otherwise.”  Considering that FATCA technically kicks on July 1st and the form came out in March, one would reason that overzealous tax VP-s should start sending these as early as next month and as late as Aug-Sept.

Not the case in practice, however. It appears that in this regard there is a tendency to put the burden on the payee. When the payee is your client, it is a bit difficult to explain to him/her, that out of a sudden he/she needs to fill in a form that is 10 times longer than the old one, and has to do it, without any instructions. This is even more troublesome when the recipient is a non-FFI, who has no clue about FATCA.  Then out of a sudden, this business has to go and figure out whether it is a passive or active NFFE, most importantly, by applying US tax principles, again without any layman instructions. The form, of course, unhelpfully refers to “see instructions” for key definitions.  Lack of instructions may be all dandy if the client is a multi-billion international business with a 100 person tax department, but if he/she is not an enterprise with such capabilities, well, he or she is left with some distaste for U.S. tax laws. The client is left with paying a pretty penny to a US tax adviser to lead her through the form, or do the best it can on its own and save the thousands of dollars in fees. I am no Nostradamus, but I’d venture to say that for the smaller businesses, it would be the eyeball test, which in turn makes me somewhat skeptical about the accuracy and utility of some of these W-8BEN-Es that will be collected prior to the availability of instructions. After the instructions are issued, who knows? Maybe things will be better.
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Tags: FATCA, FATCA compliance, W8-BEN-E