FATCA Update: Treasury and IRS Release Wave of Guidance as July 1 Approaches

IRS Forms, W-8, W-9, W-8BEN-E, W-7, W-8IMY, W-4,  W-8ECI, W-8EXP are a confusing alphabet soup of IRS forms.  They have become more difficult to understand now because of the intricacies of the law of FATCA. In short, these forms are designed to “track taxpayers”; their assets and their accounts.  The forms track and identify USCs who are individuals and if they are “substantial owners” (basically 10%) in various foreign entities; explained more below.
With the July 1, 2014, implementation date of the Foreign Act Tax Compliance Act (FATCA) just two days away, the Treasury Department and the Internal Revenue Service have published long-awaited, and much anticipated, guidance in a number of important areas over the past week, as described below:

• Instructions for Form W-8BEN-E (see my post from 6/26) , entitled “Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities),” have finally been released (available here).
• Instructions for Form 8966, entitled “FATCA Report,” have been released (available here).  From 8966 is used by foreign financial institutions to report information about their U.S. accounts to the IRS.
• Instructions to Form 1042-S (available here).  Form 1042-S, entitled “Foreign Person’s U.S. Source Income Subject to Withholding,” is used by withholding agents to report any U.S. source payments or withholding under FATCA.
• Instructions for the Form W-8IMY, entitled “Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting,” were also published (available here).
• An updated FFI Agreement has been released and posted to the FATCA website (available here).   The revised FFI Agreement was published in Revenue Procedure  2014-38, which updates and supersedes the FFI Agreement originally released as Revenue Procedure 2014-13.

In another significant development, Treasury announced that the United States and China initialed an Intergovernmental Agreement (IGA) on June 26.  More than 80 countries have now either signed IGAs or are close to finalizing such agreements.  A full list of countries with agreements with the U.S. is available here.
In a related development, the IRS also released draft revised instructions to Form 8938 (available here).  Form 8938, which is entitled “Statement of Foreign Financial Assets,” is required to be filed by individual taxpayers who have certain foreign assets.  This filing requirement, which was imposed as part of the FATCA legislation, has been the law since 2011.