My impression of FATCA was for Foreign Financial Institutions to report US accounts to the IRS for withholding. I have found some documents indicating that the 30% also applies to foreign entities that have accounts in U.S. Financial Institutions. If this is true does the withholding need to be tracked separately or just reported as Federal Withholding at the 30% rate?

I'm also curious about this as well as if the 30% backup withholding applies for non resident aliens with expired W8s or is the withholding rate 28%?

30%

http://www.irs.gov/publications/p515/ar02.html#en_US_2013_publink1000224769

I'm not really sure what this has to do with FATCA??

Is bank deposit interest for NRAs with expired W8s still subject to a backup withholding rate of 28%?

I see no provisions for a 28% withholding rate on a NRA.

Randy, I think lvc may be referring to 1099 reporting.

That may be the case, but that paragraph does not apply to NRAs.

I'm referring to the withholding rate on Bank deposit interest for NRAs individuals with expired W8s that is referred to in the following Infovault Q&A 2/3/14:

"Question:In regards to withholding on customers with ITINs, what are the guidelines or rules regarding what accounts we start withholding?

Answer: If you do not have a valid W8 BEN on file, you withhold at the standard backup withholding rate of 28%."

Is it still 28% or is it now 30%?

This is also mentioned here: http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1880420

Well, I guess I have to say that I was probably wrong in that previous post. I'm not sure where the 28% came from unless it has since changed (which I did not research).

The 28% withholding rate is in regards to backup withholding for failing to furnish a TIN, failure to certify a TIN, furnishing an incorrect TIN (B Notice) or underreporting (C Notice).

The rate can be found here: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Backup-Withholding-B-Processes

But as you stated earlier, this has nothing to do with NRA withholding and none of what's been discussed so far has any connection to FATCA.

You can find information on witholding for NRAs in this IRS publication: http://www.irs.gov/pub/irs-pdf/p515.pdf

el guapo

Well, I know where the 28% came from, I just meant I have no idea how that percentage got into the past discussion on this issue.

Also, that is the same publication that I linked in my original response.

This is stated in the IRS Publication 515

"Amounts not subject to NRA withholding. The following amounts are not subject to NRA withholding.
- Portfolio interest on bearer obligations or foreigntargeted registered obligations if those obligations meet certain requirements. See Interest, later.
- Bank deposit interest that is not effectively connected with the conduct of a U.S. trade or business. See Interest, later.
- Original issue discount on certain shortterm obligations. See -- Original issue discount, later.
- Nonbusiness gambling income of a nonresident alien playing blackjack, baccarat, craps, roulette, or big6 wheel in the United States. See Gambling winnings, later.
- Amounts paid as part of the purchase price of an obligation sold between interest payment dates. See Interest, later.
- Original issue discount paid on the sale of an obligation other than a redemption. See Original issue discount, later.
- Insurance premiums paid on a contract issued by a foreign insurer."

Sorry to say I'm still not clear as to which rate we are supposed to apply the NRA individual on their Bank deposit interest when they have an expired W8.

1. Is it 28% until July 1st and 30% on/after July 1st? OR
2. Does it remain at 28% and we apply 30% to Foreign Entities on/after July 1st?

Any takers?

This came directly from the IRS:


FATCA Information for U.S. Financial Institutions and Entities


•U.S. financial institutions (USFIs) and other types of U.S. withholding agents are required to withhold 30% on certain U.S. source payments made to foreign entities, if they are unable to document such entities for purposes of FATCA.


•USFIs and U.S. withholding agents must also report to the IRS information about certain non-financial foreign entities with substantial U.S. owners.


•USFIs are also eligible to submit a FATCA Registration application via the FATCA Registration Website for the following reasons:



•A USFI with a foreign branch in a Model 1 IGA jurisdiction to obtain a GIIN for the branch.



•A USFI with a foreign branch that is a qualifying intermediary (QI) to renew the branch’s QI agreement.



•A USFI may register as a sponsoring entity for FFIs and agree to perform, on behalf of the FFI, all the FATCA activities that the FFI otherwise would have to do.



•A USFI may register as a Lead FI to manage the FATCA registration process for members of its Expanded Affiliated Group of FFIs.



Page Last Reviewed or Updated: 21-Apr-2014

Besides the 30% withholding on a NRA, are there any other implications to USFIs?