From January 1, 2001, financial institutions in countries which haven't had their 'know-your-customer' rules approved by the IRS won't be able to be Qualified Intermediaries and may incur US sanctions if they don't identify all their customers to the IRS.
This terrifying prospect is concentrating the minds of countries wonderfully. Below we list the countries which have already been approved by the IRS, and the countries whose rule-books are under study.
A Qualified Intermediary is able to identify only its US customers to the IRS, but must withhold tax from payments to US citizens if required to do so by the IRS.
The IRS procedure for obtaining approval is set out in Revenue Procedure 2000-12. It states: 'The IRS will not enter into a qualified intermediary (QI) withholding agreement that provides for the use of documentary evidence obtained under a country's know-your-customer rules if it has not received the know-your-customer practices and procedures for opening accounts and responses to 18 specific questions listed in the revenue procedure.'
The qualified intermediary agreement contains an attachment that lists the specific types of know-your-customer documentary evidence for each country that is sufficient for purposes of the qualified intermediary agreement. The IRS says is working together with the organizations that have submitted acceptable know-your-customer rules to develop standardized attachments.
The IRS also says that if a country is on the approved list, entities and branches located in that country may submit their QI applications even if the IRS has not yet agreed to a specific attachment for that particular country. Once a specific attachment has been developed for a particular country, the IRS will associate the attachment with the qualified intermediary agreement it sends for signature. A qualified intermediary may suggest amendments to the attachment, but departures from the standardized attachment may delay processing of an application.
Next week the LowtaxOnline Newswire will contain a major special feature devoted to a comprehensive analysis of the Qualified Intermediary agreement process, and the underlying withholding tax rules. To subscribe to the NewsWire, click here.
Our thanks to Andrea L Santos-Hillman ( ahillman@tridenttrust.com )
| Jurisdictions With Approved Know-Your-Customer Rules: |
Jurisdictions Awaiting Approval of Know-Your-Customer Rules |
| Barbados |
Austria |
| Belgium | Bahamas |
| Bermuda | Cayman Islands |
| Canada | Israel |
| Denmark | Japan |
| Finland | Liechtenstein |
| France | Monaco |
| Germany |
Netherlands Antilles |
| Gibraltar | |
| Guernsey | |
| Hong Kong | |
| Ireland | |
| Isle of Man | |
| Italy | |
| Jersey | |
| Luxembourg | |
| Netherlands | |
| Norway | |
| Singapore | |
| Spain | |
| Sweden | |
| Switzerland | |
| United Kingdom |
.
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