Luxembourg

Details

  • Industry: Financial Services
  • Type: Newsletters
  • Date: 4/10/2013

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Gerard Laures

Partner

Tel. +352 22 51 51 5549

gerard.laures@kpmg.lu

 

Claude Poncelet

Partner

Tel. +352 22 51 51 5567

claude.poncelet@kpmg.lu

 

Frank Stoltz

Partner

Tel. +352 22 51 51 5520

frank.stoltz@kpmg.lu

FATCA and QI - e-alert 

April 2013

IRS Issues Draft Form 1042-S for Calendar Year 2014

 

The IRS has released a draft of the 2014 version of Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, which must be filed by 15 March 2015.  At the same time, the IRS issued the 2013 draft Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, which must be filed by 15 March 2014.  Instructions have not yet been released for either form.  Therefore, the changes noted below have not yet been defined by the IRS.  Items to note on the forms are described below.

 

FORM 1042 – No changes noted on the form.

 

FORM 1042-S: significant changes noted as follows:

  • Almost all boxes have been redefined (with the exception of boxes 1, 2 and 21-25)
  • Many existing boxes have been renumbered to accommodate the new information that withholding agents will be required to report under FATCA

New boxes on the form:

  • Chapter 3 check box, exemption code and tax rate
  • Chapter 4 check box, exemption code and tax rate
  • Check box for indicating if tax was not deposited under escrow procedure
  • Tax assumed by withholding agent
  • Withholding agent’s Chapter 3 and Chapter 4 status code – 30 potential codes
  • Withholding agent’s GIIN
  • Intermediary or flow-through entity’s EIN, Chapter 3 and Chapter 4 status code (30 potential codes) and GIIN
  • Recipient date of birth

New Income Codes:

  • Code 22: Interest paid on deposit with a foreign branch of a domestic corporation or partnership
  • Code 21: Gross income – capital gain dividend
  • Code 20: Gross income – other
  • Code 44: Transportation and freight income
  • Code 50: Income previously reported under escrow procedure (re-characterized code)
  • Code 51: Other income (formerly code 50)
  • Footnote to code 50

Exemption Codes:

Chapter 3 codes are mainly the same with the following exceptions:

  • Code 09: redefined to be: Territory FI treated as U.S. person
  • Code 10: QI represents that income is exempt (formerly Code 09)
  • Code 11: QSL that assumes primary withholding responsibility (formerly code 10)
  • Code 12: Payee subjected to chapter 4 withholding

 

Chapter 4 new codes:

  • Code 13: Grandfathered payment
  • Code 14: Effectively connected income
  • Code 15: Payee not subject to chapter 4 withholding
  • Code 16: Excluded nonfinancial payment
  • Code 17: Foreign reportable amounts
  • Code 18: Foreign entity that assumes primary withholding responsibility
  • Code 19: U.S. payees – of participating FFI or registered deemed-compliant FFI
  • Code 20: Recalcitrant account holders exempt from withholding under IGA
  • Code 21: Dormant account (plus footnote)

 

Chapter 3 Recipient Codes:

  • Most codes redefined and many new codes added for FATCA purposes
  • 30 potential codes to be used for recipient, withholding agent and intermediary
  • Pooled reporting codes 31 and 32 added

 

Chapter 4 Recipient Codes:

  • 34 potential codes to be used for recipient, withholding agent and intermediary
  • Pooled reporting codes 35 through 42 added

For your reference

The draft Form 1042-S can be accessed by clicking here:  1042-S (PDF, 152KB)


For further information, please do not hesitate to contact us.

 

 

 

 

 

 

Any tax advice in this communication is not intended or written by KPMG to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

 

 

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