Nature equipped our trees with the astonishing ability to drop their summer leaves when fall approaches to get ready for a new start of our everlasting seasonal cycle. The US Internal Revenue Service (IRS) this year is in sync with nature and is ready to replace various W-Forms for the next season. The IRS published new draft Forms W-8BEN, W-8BEN-E, W-8IMY and W-8ECI between late August and early September 2021, as well as the corresponding draft instructions.

While the documents published by the IRS are only early release drafts and cannot be used or relied upon, the final version of the Forms closely resemble the final posted drafts. Thus, provided there is no change in regulations before the publication of the final version, the content of the Forms is not expected to change. If there is indeed a change in regulations, then new draft Forms would first be published. Instructions on the other hand are generally subject to change between the draft and final version incorporating feedback the IRS receives.

When the IRS publishes new versions of Forms W-8, financial institutions (FIs) may continue to accept the prior version of the form until the later of six full calendar months after the revision date indicated on the form, or the end of the calendar year the updated form is issued, provided the IRS does not issue guidance affecting the validity of the prior version.

It is therefore important for FIs to start reviewing the changes in these new forms, so that necessary updates in guidelines and training to relevant personnel can be adapted in a timely manner.

In this blog, we highlight some of the key changes in the draft versions, as well as what Swiss FIs can do to anticipate the publication of the final versions to ensure a smooth transition.

What are the key changes?

• Treaty benefit claims

The instructions of the current version of Form W-8BEN-E (July 2017) provide that in order to claim a reduced rate of, or exemption from, withholding, a resident of a foreign country that has entered into an income tax treaty with the United States containing a limitation on benefits (LOB) article must complete one of the checkboxes of line 14b.

The draft Form W-8BEN-E instructions add that the applicable checkbox on Line 14b must also be completed in case of an entity claiming a reduced rate of, or exemption from, withholding from an income tax treaty if it is resident of a foreign country whose income tax treaty with the United States does not contain an LOB article. As a result, a new checkbox “No LOB article in treaty” has been added to line 14b.

• Foreign Tax Identification Number (FTIN)

A new line “check if FTIN not legally required” has been added to draft Forms W-8BEN and W-8BEN-E. Account holders required to provide an FTIN can now indicate that they are not legally required to obtain an FTIN from their jurisdiction of residence, including if the jurisdiction does not issue FTINs.

Form W-8ECI includes both a new line 8a for account holders to provide their FTIN, as well as a new line 8b “Check if FTIN not legally required” for the same reason mentioned above.

Form W-8IMY now contains an additional line 9b “Foreign tax identification number, if required” for a QDD to indicate its FTIN. Previous line 9 “GIIN (if applicable)” has been redesignated as line 9a. The instructions also clarify in which cases a QDD is required to provide its FTIN, for example if it receives U.S. source income reportable on a Form 1042-S associated with the Form W-8IMY.

• Foreign government classifications

Line 4 of Form W-8ECI has been updated. The general classification for foreign government has been removed and replaced with two possible classifications for a foreign government: (i) an integral part of a foreign government; or (ii) an entity that is controlled by a foreign government. Such classifications are now aligned with the Chapter 3 status codes on Form 1042-S, aligning the due diligence and the reporting requirements.

• Qualified securities lender (QSL) and qualified derivatives dealer (QDD) status claim

The draft Form W-8IMY now includes chapter 3 status certifications for an entity acting as QSL, applicable to either a qualified intermediary (QI) or other entity acting as QSL. The draft Form W-8IMY instructions also clarify when a QI may continue to claim QSL status in a case where it is also a QDD, as provided in the QI Agreement.

These changes follow the publication of Notice 2020-2, which further extended the transition relief of Notice 2018-72 for certain provisions of the section 871(m) regulations, generally for 2021 and 2022. For further information on the content of this Notice, see our prior blog post.

• Foreign seller of a life insurance contract (or interest therein) or who is a recipient of a reportable death benefit

The instructions to all draft Forms W-8 now include under the section “Who must provide Form W-8” the case of a foreign seller of a life insurance contract (or interest therein) or who is a recipient of a reportable death benefit for purposes of reporting under section 6050Y.

• Publicly traded partnership interests (PTP interests)

Final regulations under section 1446(f) provide that for transfers of PTP interests, a broker effecting a transfer of a PTP interest on behalf of a foreign partner must perform the withholding. In order to incorporate the use of Form W-8ECI for transfers of PTP interests by dealers in securities eligible to claim an exception from the withholding, a new line 12 (securities dealer exception from section 1446(f) withholding) has been added to Form W-8ECI.

In addition, the IRS also announced in Notice 2021-51 that the Treasury Department and the IRS intend to amend certain regulations under sections 1446(a) and 1446(f) to defer the applicability date to 1 January 2023 for certain provisions relating to (i) withholding under section 1446(f) on transfers of interests in PTP; (ii) withholding under section 1446(a) on distributions made with respect to PTP interests; and (iii) withholding under section 1446(f)(4) by partnerships on distributions to transferees.

• Withholding statements and electronic signatures

Instructions to all draft Forms W-8 published by the IRS have been updated to include additional guidance regarding the use of electronic signatures on withholding certificates, as included in final regulations issued under chapter 3 (T.D. 9890). A withholding agent may now rely on an electronically signed withholding certificate if the person giving such certificate provides any additional information or documentation requested by the withholding agent to support that the form was signed by this person or other person authorized to do so. The US Treasury regulations provide as an example that a withholding agent may treat as validly signed a withholding statement which contains, in the signature block, the name of the person authorized to sign, a time and date stamp, as well as a statement that such certificate has been electronically signed.

Deloitte's view

What actions can you take now?

Unless a new draft version is published, the content of the final version of the Forms should be in line with the recently published drafts. Several changes can however be expected for the instructions. Hence, it is important that Swiss FIs monitor IRS announcements and new publications.

While it is not clear when the final version of Forms W-8 will be published, the current draft versions indicates October 2021 as the revision date. Swiss FIs should therefore start to review and update their guidelines on acceptance of the relevant Forms W-8. Communication to client facing staff should be drafted and support documents such as review checklists need to be adapted.

An FI’s systems may also require updates in order to reflect changes in fields and possible values of the Forms W-8.

If If you would like to discuss more on this topic, please do reach out to our key contacts below.

Key contacts

Brandi Caruso - Partner, Financial Services Tax & Legal

Brandi heads Deloitte’s Financial Services Tax team in Switzerland and Liechtenstein. She has extensive expertise in advising the Swiss financial services industry on the implementation of U.S. and international transparency regimes (including QI, FATCA, Section 871(m), CRS, MDR and DAC6). Brandi leads the Financial Services Tax team efforts related to innovative technology solutions. Brandi is a U.S. Certified Public Accountant and has 20 years of experience with Deloitte and has worked in London and San Diego.

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Michael Grebe - Director, Financial Services Tax

Michael is a Director in the Financial Services Tax practice. He advises banks, trust companies, and insurers in relation to the interpretation and implementation of the global transparency related regimes. He has over ten years of experience in the financial industry covering a broad spectrum ranging from Process- over Project- to Product- Management. Prior to joining Deloitte, he led the FATCA and CRS implementation project for a global financial institution.

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Karim Schubiger – Director, Financial Services Tax 

Karim leads the Tax Transparency team in the Suisse Romande and Ticino markets within the Financial Services Tax & Legal practice, responsible for services related to QI, FATCA, CRS, 871(m) and DAC6. He is a technical advisor and subject matter expert to financial institutions in the banking, trust, and insurance sectors. Prior to joining Deloitte, Karim worked for eight years in support teams of Swiss banks, in particular in areas such as operations, project and change management as well as operational taxes.

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Robin King - Senior Manager, Financial Services Tax

Robin is a Senior Manager working in Financial Services Tax. He is currently advising leading Swiss universal and private banks, acting as subject matter expert in the area of QI, FATCA , CRS and DAC6. Robin is the author of several articles on CRS. Prior to joining Deloitte, he worked as a cross-border tax compliance expert at a Swiss private bank.

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Camille von Roten - Assistant Manager

Camille is an Assistant Manager working in the Financial Services Tax team. She provides QI, FATCA and CRS advice and expertise to global, regional and private banks as well as banking industry groups in Switzerland. Camille holds a Master of Law and Economics from Lausanne University, Switzerland. 

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