US Withholding Tax - Services for Foreign Financial Institutions (FFIs) and Qualified Intermediaries (QIs)

The U.S. withholding tax regime is a complex system of rules which ensures the collection of tax on certain income at source. The withholding tax rules impose two regimes; one applicable only to non-U.S. persons and foreign corporations and the second applies to U.S. residents. The former regime, subjects certain payments of U.S. source income payable to a non-U.S. person to a 30% U.S. withholding tax (or lower treaty rate). The latter regime requires anyone who pays income from whatever sources to a U.S. resident to report this income to the IRS and the recipient.

In 2000, U.S. legislation introduced the "Qualified Intermediary" (QI) regime to foreign financial institutions (FFIs) in order to streamline the FFIs U.S. withholding tax compliance by aggregating the account holder information and payment of withholding taxes, while enabling the FFI to shield the identity of the account holders. Under this legislation the FFIs who qualify for QI status sign an agreement with the IRS to withhold and report under both regimes.

The newly enacted Hiring Incentives to Restore Employment ("HIRE") Act of 2010, which is effective for payments after December 2012, increases the reporting requirements for FFIs. The new rules apply not only to FFIs but also to non-financial foreign entities (NFFEs) under IRC sec. 1472. "Withholdable payments" to FFIs and NFFEs are subject to 30% withholding tax unless the FFI or NFFE enters into an agreement with the IRS which is different from the existing QI Agreements. The IRS will issue regulations and transition rules by the end of 2010 and US Tax is here to walk you through the complexities.

US Tax offers foreign financial institutions (FFIs) and non-financial foreign entities (NFFEs) in Switzerland and the UK solutions to comply with these U.S. tax withholding regimes.

Our multidisciplinary team of tax lawyers, accountants and IT professionals brings value to an FFI's management and clients by:

designing and implementing U.S. withholding tax compliant systems and procedures

assisting FFIs in obtaining Qualified Intermediary (QI) status

perform QI health check (pre-QI audit review)

training FFI's staff to fully comply with its QI Agreement with the IRS

assist with the U.S. withholding tax compliance burden

perform QI external audit

post- FATCA transitioning of QIs out of QI status

ad hoc consultations on transactions

We team up with various the leading QI software providers to deliver a seamless QI withholding tax compliance product