On 27 June 2014, Treasury and the IRS published Revenue Procedure 2014-39 which provided a revised Qualified Intermediary (QI) Agreement (see our FATCA e-alert 2014-24 / QI News 2014-06 for additional information). The Revenue Procedure provides details for new and existing QI Agreements and deadlines for submissions and renewals. As the deadline approaches, a review of requirements is provided in IRS Issue #2014-03 and is provided below.
The QI Agreement described in Rev. Proc. 2014-39 picks up on the extended termination date of 30 June 2014, for existing agreements and became effective on that date, provided:
- An FFI, an NFFE acting as a QI on behalf of its shareholders, or an NFFE that is a sponsoring entity had QI status before 30 June 2014, and was issued a GIIN before such date, will have a QI agreement with an effective date of 30 June 2014.
- An FFI, an NFFE acting as a QI on behalf of its shareholders, or an NFFE that is a sponsoring entity that applies for QI status on or after 30 June 2014 will have a QI agreement with an effective date on the date it is issued a GIIN.
- A QI that is an NFFE that is not acting on behalf of its shareholders and is not a sponsoring entity and that renewed its QI agreement on or before 30 June 2014 has a QI agreement with an effective date of 30 June 2014, and, if it renews after 30 June 2014, the effective date of the QI agreement will be the date of renewal provided in the IRS approval notice.
- An NFFE that is not acting on behalf of its shareholders, that is not a sponsoring entity, and that is applying to obtain QI status will have a QI agreement with an effective date on the date it is issued a QI-EIN.
With respect to an entity with a QI Agreement in effect before 30 June 2014, the Revenue Procedure provides that its agreement expired on 30 June 2014 and further provides that an entity that has submitted a renewal request, has a revised QI agreement that is effective on 30 June 2014. For purposes of this requirement, the IRS will permit a QI to renew its status as a QI on or before 31 July 2014, to be eligible to act as a QI beginning 30 June 2014. Renewal is encourage on the FATCA Registration portal, but can also be completed using Form 8957.
A QI will not be required to assume the further requirements of the updated agreement in the Revenue Procedure before 1 August 2014 (regardless of whether the QI registered to renew its QI status before 30 June 2014), and may apply the provisions of the expired QI Agreement between 30 June 2014 and 31 July 2014.
It is important to note that a QI that registered on the IRS Portal prior to the issuance of the new QI Agreement and answered questions 6 and 13-15 (QI confirmations), does not need to do anything more to “reconfirm” its QI status.
An entity that has submitted an application for QI status before 31 July 2014, that is approved during calendar year 2014, may act as a QI in accordance with the QI agreement which was in effect at the time. With respect to an entity that applies this allowance, the entity’s QI agreement will be effective on 30 June 2014, regardless of whether the entity’s QI status is approved later during the calendar year. Additionally, the IRS will require that the entity register on the FATCA registration website with respect to its chapter 4 status (if applicable) by the date that is 90 days from the date the entity is approved for QI status.
Agreements not renewed by 31 July 2014 are not retroactive. If a QI is operating under the old QI agreement until 8/1, it may have account holders that should have been withheld upon for FATCA purposes from 7/1 to 8/1 and will need to apply adjustments to underwithholding pursuant to section 9.05 of the agreement.
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.