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US Withholding Tax

US Withholding Tax Practical Implications of QI and FATCA

  • Author:
  • Publisher: Palgrave Macmillan
  • ISBN: 9780230364615
  • Published In: November 2013
  • Format: Hardback , 352 pages
  • Jurisdiction: U.S. ? Disclaimer:
    Countri(es) stated herein are used as reference only
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    The United States of America is the largest securities and capital market in the world attracting inward investment of several trillion dollars a year from over two hundred countries. Receipt of US sourced investment income by non-US investors is subject to strict US withholding tax regulations – Internal Revenue Code (IRC) Chapter 3 which control how income and withheld tax paid to non-US recipients is calculated, withheld and reported. US resident investors themselves are also some of the most active in outbound investment into the world's other major markets. The US claims the right to tax the global income of its citizens and so income derived from such outbound investment must be disclosed to the IRS. However, failure by some Americans to disclose their offshore assets has led to some recent high profile cases of tax evasion and the subsequent regulation of non-US financial institutions by the US government in IRC Chapter 4, also known as 'FATCA'. FATCA requires all non-US financial institutions to meet strict due diligence rules to identify and report accounts substantially owned by or effectively controlled by Americans - or suffer serious financial penalties. As with any regulations, the challenge for industry is to efficiently translate regulation into workable operational practices.

    This book gives practical insights into the day to day challenges that both sets of these regulations present for non-US financial institutions as well as those who provide support services to them. For those intermediary firms receiving US sourced income on behalf of non-US investors under IRC Chapter 3, awareness of the consequences of their status as qualified intermediaries (QIs) or non-qualified intermediaries (NQIs) is absolutely critical, yet rarely fully understood. While only around 35,000 firms globally are affected by IRC Chapter 3, over a million firms are expected to be impacted by FATCA as the IRS has widened its definition of 'financial intermediary' to include most pooled investment vehicles. This book includes both commentary on the key aspects of FATCA that will affect FFIs and NFFEs as well as appendices of the important reference documents. As the worlds of withholding tax and tax evasion deterrence converge, many countries are seeking to review, improve and simplify the US model. This book includes an update on the important work done in this area by the OECD and European Commission including standards and automation initiatives.

  • Introduction
    PART I: THE QI REGULATIONS
    1. Principles of Code Chapter 3
    2. QI Contracts
    3. Documentation 
    4. Withholding, Depositing and Refunding Tax
    5. Information Reporting
    6. Control and Oversight
    7. Penalties
    8. Issues for NQIs
    PART II: FATCA
    9. Moral Outrage and Righteous Indignation
    10. Principles of FATCA
    11. Simplifying FATCA
    12. Identification and Documentation
    13. Reporting
    14. FATCA Withholding
    15. FATCA Accreditation
    PART III: Related Global Tax Initiatives
    16. OECD
    17. European Union

  • ROSS MCGILL is a well-known industry subject matter expert on US withholding tax and regulatory compliance. He sits on many industry bodies, international committees and associations and has worked with many of the world's largest financial institutions to support their operational compliance.

  • 'From the G8 meeting on the shores of Lough Erne to the G20 summit in the palaces of St Petersburg, tax is now up there on the agenda with economic recovery, financial stability and geo-political strife. The lines between tax probity, tax avoidance and tax evasion are becoming blurred through political and economic necessities faced by governments and financial services firms are both a target and a conduit for regulators. The risks to financial services firms and their clients are sizeable. Ross McGill's latest book is a timely and important addition to the armoury that investment professionals need to understand and address the deluge of increasingly intrusive regulation facing their clients.'

    - George Littlejohn MA FCA MCSI, Senior Adviser, Chartered Institute for Securities & Investment

    'This is a must read book for people in financial services that will sit proudly on any bookshelf. The writing skill of the author makes a complex topic easy to understand.' 

    - Gary Wright, Founder and Managing Director of B.I.S.S. Research Ltd

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