FATCA Update - March 2019
13 December 2018 – Proposed regulations were released intended to reduce the burden of FATCA. Of particular note, Treasury and the IRS propose to eliminate FATCA withholding on non-cash value insurance premiums by including such premiums in the definition of an “excluded nonfinancial payment,” meaning that such payments are no longer considered withholdable payments subject to FATCA withholding. Taxpayers may rely on these regulations until Final Regulations are issued.
Prior to this change, insurance brokers and other entities paying premiums were required to collect Forms W-8 from all insurance companies, even those that did not issue cash value insurance products (and thus were likely not FFIs under FATCA). As these payments did not generally need to be documented for chapter 3 purposes, obtaining such documentation strictly for FATCA caused a substantial change in due diligence obligations for the insurance industry. This rule change now scales back the collection of documentation for insurance premiums and limits the focus to insurance premiums that are likely to be made to FFIs, or intermediaries acting on behalf of FFIs.
7 March 2019 – the IRS announced a notice of public hearing in relation to the proposed regulations released in December 2018, scheduled for 10 April 2019.