The IRS made several changes to the rules for withholding foreign partnerships and trusts under FATCA. WFPs and WFTs were required to renew their status with the IRS by August 2014. The changes align the requirements for WFPs and WFTs more closely with those of qualified intermediaries. Specifically, the changes allow WFPs and WFTs to assume primary withholding responsibilities, use know your customer documentation, and develop internal compliance programs instead of undergoing external audits. All WFP and WFT agreements will need to be periodically renewed to maintain status.

1. Updated Rules Under
FATCA
Freeman Tax Law
(855)935-5945

2. Several Changes
The IRS required all withholding
foreign partnerships (WFPs) and
withholding foreign trusts (WFTs) to
renew their status with the IRS by
the end of August 2014. This is the
first of several changes that effect
WFPs and WFTs under the
commonly referred to FATCA
"Chapter 3" rules.
Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

3. Existing FATCA Rules
When a US person makes a payment to a non-US
person of US source interest, dividends, or other
income (excluding capital gains) they must withhold
a 30% tax. Exemptions and reduced rates exist, but
would require the beneficial owner to document
on the appropriate Form W-8 their right to the
exemption. Payments must be reported to the IRS
on Form 1042-S even is the payment is exempt
from withholding.
Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

4. Change is good and the changes that WFP/WFT
are seeing give them more requirements that
line up with those of qualified intermediaries.
Logical and reducing procedural paperwork, the
six changes listed below are positive changes
for WFP and WFT alike.
- Withholding Responsibilities: The WFP or
WFT is responsible for primary FATCA
withholdings just as it was responsible for
primary withholding responsibilities pre-FATCA.
Changes Under New Procedures
Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

5. Changes Under New
Procedures (continued)
- Account-level reporting:WFP or WFT that
are not US, US-owned, or acting through a US
branch will no longer need to perform
payment-level 1099 reporting or backup
withholding on US partners/beneficiaries
accounts.
- Assuming Primary Withholding
Responsibilities: For a partner or beneficiary
that is a foreign partnership or trust the WFP
or WFT can now assume primary withholding
responsibilities. Previously this was restricted
and the WFP/WFT had to pass withholding tax
documentation for "indirect"
partners/beneficiaries to its withholding
agent. Two limited exceptions existed, but
now WFP/WFT have this ability.
Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

6. Changes Under New
Procedures (continued)
-Use "Know Your Customer" Rules: WFP/WFT were previously
restricted from using the "know your customer" (KYC)
documentation and were only allowed to use IRS forms to
document their partners or beneficiaries. This restriction has
been lifted, for WFP/WFT located in a jurisdiction approved by
the IRS to utilize KYC documentation to establish the status of
its partners/beneficiaries in the same manner that a "qualified
intermediary" (QI) is able to do so.
- No More Audits: Read that again, WFPs and WFT will not
have to undergo periodic external audits to prove compliance
to their agreements. They will now have to adopt programs
similar to QI where they develop internal compliance
programs. There is a catch, these compliance programs will still
have the requirement in them for periodic external review.
- Renew: Hence the reason for all WFP/WFT renewing their
status with the IRS in August 2014, all WFP/WFT agreements
will expire periodically and will need to be renewed to maintain
their status.
Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

7. Our Locations
International
Locations:
Basel, Switzerland
Bern, Switzerland
Geneva, Switzerland
Zurich, Swizterland
Atlanta, Georgia
Austin, Texas
Birmingham, Michigan
Boston, Massachusetts
Charlotte, North Carolina
Chicago, Illinois
Cleveland, Ohio
Dallas, Texas
Denver, Colorado
Greenwich, Connecticut
Houston, Texas
Irvine, California
Las Vegas, Nevada
Los Angeles, California
Miami, Florida
New York, New York
Palo Alto, California
Phoenix, Arizona
Pleasanton, California
San Antonio, Texas
San Diego, California
San Francisco, California
San Jose, California
Short Hills, New Jersey
Tampa, Florida
Washington DC
Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

8. Freeman Tax Law
About Freeman Tax Law
Freeman Tax Law is a boutique tax law firm with national
exposure equipped to handle all domestic and international tax
law matters. At Freeman Tax Law, the attorneys and
professional staff have vast experience with foreign tax
compliance, international tax planning, and resolving tax
controversies involving offshore banking matters. Freeman Tax
Law helps taxpayers and foreign entities become in compliance
with laws such as Foreign Account Tax Compliance Act
(FATCA) and Offshore Voluntary Disclosure Program (OVDP).
In addition to handling complex tax controversies, the Freeman
Tax Law team has extensive expertise in assisting clients with
wealth management and estate planning.
Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com