New FATCA guidance is out

Long awaited instructions for completing Form W-8BEN-E, which foreign LPs will need to certify their FATCA compliance, has been released.

The US Internal Revenue Service has produced much-needed instructions for foreign LPs that must complete “Form W-8BEN-E” to certify their tax status under the US Foreign Account Tax Compliance Act (FATCA).

In late March a final version of the form was released by the IRS without any accompanying instructions. The eight-page form (much lengthier than the previous one-page Form W-8BEN) was met with confusion, leaving many GPs to wait for release of the instructions before updating their LP tax files ahead of FATCA’s July go-live date.

The instructions can be found by clicking HERE.

Typically the IRS allows firms (and taxpayers) a six-month grace period to use old forms. However, due to industry concerns that withholding agents will have to collect FATCA forms in a tight time frame, the IRS is allowing GPs to continue relying on pre-FATCA Forms W-8 to be supplemented with information required for FATCA under certain circumstances. 

Six months after the IRS releases the new Forms W-8, a withholding agent cannot rely on a newly furnished old version of Form W-8. However, due to the late release of the new Form W-8BEN-E, market sources close to the IRS speaking with pfm said that it is likely the tax agency will allow GPs to continue using the old W-8BEN form until the end of 2014, a few more months than originally anticipated. The IRS did not return a request for comment.  

Some GPs may take advantage of this extra breathing space because the old forms don’t force them to ask LPs if they are FATCA compliant (because if not, they would have to begin apply a 30 percent withholding tax on them beginning this July).

FATCA was passed in 2010 to catch tax cheats hiding money in overseas accounts. For more on where GPs stand today with their FATCA compliance planning as the July deadline approaches, see the July issue of pfm.