Client Alerts

IRS Issues Final Instructions for New FATCA Forms

Client Alerts | June 27, 2014 | Hedge Funds


We have previously issued newsletters discussing FATCA generally, preparation for compliance, and developments in the timeline for implementing FATCA. On June 25, 2014, the IRS released final instructions to new Form W-8BEN-E. This follows last week’s release of final instructions to Form W-8IMY. The FATCA world has been waiting for these instructions.


FATCA requires foreign financial institutions (“FFIs”), including offshore hedge funds, to comply with due diligence, information reporting, and withholding requirements, aimed at identifying an FFI’s direct or indirect U.S. owners, or face withholding on certain payments from U.S. sources or other FFIs (and, beginning in 2017, on gross proceeds from the sale of certain property). Non-financial foreign entities (“NFFEs”) are subject to similar withholding, unless such entities furnish withholding agents with information identifying the NFFE’s shareholders or elect to report such information to the IRS.


Proper compliance with a fund’s obligations under FATCA requires documentation of the FATCA classification and residence of the fund’s investors and other payees.

Form W-8BEN-E is a new form prescribed by the IRS for a foreign entity to document its status as the beneficial owner of income for Chapter 3 withholding (i.e., for interest and dividends) and as a payee for purposes of Chapter 4 withholding (i.e., FATCA).

Form W-8IMY is the form designated for intermediaries and other flow-through entities (e.g., foreign master funds, and other foreign funds treated as partnerships for U.S. federal income tax purposes) to similarly certify its status under withholding and reporting rules, including FATCA, as well as information on its direct and indirect owners. Form W-8IMY has recently been revised to include FATCA classification information.

Offshore funds generally should update their records by obtaining new W-8BEN-Es or W-8IMYs, or other applicable forms, from their investors. Offshore funds should also update any forms it provides to counterparties. Maintaining updated documentation regarding the FATCA status of the fund and its investors is necessary to avoid FATCA withholding, and the final instructions should facilitate completion of these forms by investors and funds.

To view our previous coverage of FATCA and the timeline for its implementation see, FATCA–What Hedge Fund Managers Need To Do Now and FATCA Extension Announced.