The Comply Catch-Up – August 2021 Issue 9

Aug 31, 2021

Comply Updates

This month we launched our first course on the online training provider, Udemy. This course allows you to get a taste of the ComplyPro experience. Our latest course provides an in-depth walkthrough of the Form W-9. Pick up our Udemy course HERE, or if you’re interested in the full-service suite, visit www.complypro.com for more information.

We are looking for new Client Account Administrators to join our team! Comply is continuing to expand, and as we look to onboard more clients across the globe, we need additional experienced Account Administrator(s) to help with our day-to-day operations. If you’re interested in this opportunity, please apply HERE.

Comply is continuing to build our partnership network. We strive to provide a truly unique end-to-end U.S. Information Reporting and Withholding solution. If you’re interested in partnering with us, please visit our partnership page for more information and to get in touch. 

Key Updates and Reminders

  • On August 1, 2021, the U.S. Senate unveiled their infrastructure package that included information reporting requirements for brokers and digital assets. This impacts the broker reporting rules in Internal Revenue Code (IRC) sections 6045, 6045A, and 6050I and their corresponding regulations and includes the following key updates:
    • Proposed changes to the definition of the term “broker” under section 6045 of the Internal Revenue Code, “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person. This means that brokers would be required to issue Forms 1099-B to owners of digital currency.
    • Proposed addition to the failure to file penalties in section 6724 to include returns for certain digital assets.
    • Proposed definition of the term “digital asset” in new paragraph (D) of section 6045(g)(3) as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.”
    • Proposed addition to section 6045A will include return requirements for certain transfers of digital assets not otherwise subject to reporting. This new paragraph (d) would require any broker, with respect to any transfer, which is not part of a sale or exchange executed by that broker to an account which is not maintained by, or an address not associated with, a person that the broker knows or has reason to know is also a broker, must make a return for that calendar year showing the information otherwise required to be furnished with respect to transfers.
    • Proposed addition to section 6050I will include new paragraph (d)(3) thereby treating digital assets as cash for purposes of reporting under this section.

These proposals would be in effect for returns and statements required to be filed after December 31, 2023. While the bill is likely to undergo changes, crypto reporting has officially arrived.

  • The IRS has published DRAFT Instructions for Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Service of a Nonresident Alien Individual (Rev. 2021). These draft instructions include the following key updates:
    • COVID-19 medical condition travel exception. In addition to removing all references to this exception in the 2021 Instructions, the new rule for tax year 2021 is that individuals cannot claim the COVID-19 medical condition travel exception except to include any days of presence in the United States for purposes of the “substantial presence test.”
    • Non toll-free fax number. The IRS has included a non-toll free fax number for withholding agents to fax in their Form 8233.  That number is 267-466-1365

Review the DRAFT instructions here.

  • On August 17, 2021, the Internal Revenue Service posted a DRAFT 2021 Form 1042-T. Although the form itself has not changed, the instructions include a few key updates. Read our full article with an overview of the key updates here.
  • On August 18, 2021, the IRS published a DRAFT Publication 1167, General Rules and Specifications for Substitute Forms and Schedules.  This impacts tax applications that support tax forms related to:
    • IRS tax forms and their related schedules
    • Worksheets as they appear in the instructions
    • Applications for permission to file returns electronically and forms used as required documentation for electronically filed returns
    • Powers of Attorney
    • Over-the-counter estimated tax payment vouchers
    • Forms and scedules relating to partnerships, exempt organizations, and employee plans

You can check out the full publication here.

  • The IRS released Notice 2021- 51, providing that the Treasury Department and the IRS intend to amend certain regulations under sections 1446(a) and 1446(f) to defer the applicability date to January 1, 2023 for certain provisions relating to the following:
    • (i) withholding under section 1446(f) on transfers of interests in publicly traded partnerships (“PTP interests”);
    • (ii) withholding under section 1446(a) on distributions made with respect to PTP interests; and
    • (iii) withholding under section 1446(f)(4) by partnerships on distributions to transferees.

This deadline shift came as the industry commented on the challenges for implementing these rules including designing, building, testing, and implementing systems and processes to withhold and report under these new rules.

Check out Notice 2021-51 here.

  • If you filed Form 7004, Application for Extension of Time to File Certain Excise, Income, Information, and Other Returns, requesting an extension of time to file Form 1042, then you should mail your Form 1042 by September 15, 2021, to:
    Internal Revenue Service,
    P.O. Box 409101
    Ogden, UT 84409

FATCA / CRS Key Dates & Reminders – Select Jurisdictions

Cayman Islands

  • On September 15, 2021, Cayman filers will have to submit the new CRS Compliance Form, which will be due annually on that date. The CRS Compliance Form is required for the first time this year under the new CRS (Amendment) Regulations that entered into force on April 16, 2020. These Regulations amended Reg. 9 to require the Financial Institutions provide additional information annually to the Authority. The CRS Compliance Form is required this year for both 2019 and 2020 tax years and for all Entities that terminated after 16 April 2020.
  • See page 30 of the Cayman CRS Guidelines for details on what the Compliance Form must include here: https://www.ditc.ky/wp-content/uploads/ditc_crs_guidelines.pdf.

Hong Kong

  • On August 9, 2021, the Inland Revenue Department of Hong Kong published an updated Self-Certification Form – Controlling Person and document outlining the meaning of the terms and expressions used in the self-certification forms.

Maldives

  • The Maldives Inland Revenue Authority (MIRA) signed two Competent Authority Agreements, the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS-MCAA) and the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC-MCAA). The first filing deadline for MNE’s registered under CRS is before July 31, 2022.

United Kingdom

  • At Budget 2021, the United Kingdom government announced that it will consult on the implementation of the OECD’s Model Reporting Rules for Digital Platforms, which require digital platforms to report details of the income of sellers on their platform to the tax authority and to the sellers. This would require UK platforms to report the information to HMRC and provide a copy to the sellers to help them get their tax correct. The consultation will run from 30 July 2021 to 22 October 2021.