Exempt Beneficial Owner

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FATCA

W8 BEN Definition: An entity that is described in Treas. Reg. §1.1471-6 as: (1) a foreign government, a political subdivision of a foreign government, or a wholly owned agency or instrumentality of any one or more of the foregoing; (2) an international organization or a wholly owned agency or instrumentality thereof; (3) a foreign central bank of issue; (4) a government of a U.S. Territory; (5) a treaty-qualified retirement fund; (6) a broad participation retirement fund; (7) a narrow participation retirement fund; (8) a fund formed pursuant to a plan similar to a section 401(a) plan; (9) an investment vehicle used exclusively for retirement funds; (10) a pension fund of an exempt beneficial owner; or (11) an entity wholly owned by exempt beneficial owners. The term “exempt beneficial owner” also includes any entity treated as an exempt beneficial owner pursuant to a Model 1 or 2 IGA. TD9610 Definition: Any foreign government, any political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing [§1.1471-6(b)]

Solely for purposes of this section and except as provided in paragraph (h) of this section, the term any foreign government, any political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing means only the integral parts, controlled entities, and political subdivisions of a foreign sovereign.

1-6(b)(1) Integral part [§1.1471-6(b)(1)]

Solely for purposes of this paragraph (b), an integral part of a foreign sovereign is any person, body of persons, organization, agency, bureau, fund, instrumentality, or other body, however designated, that constitutes a governing authority of a foreign country. The net earnings of the governing authority must be credited to its own account or to other accounts of the foreign sovereign, with no portion inuring to the benefit of any private person as defined in paragraph (b)(3) of this section. An integral part does not include any individual who is a sovereign, official, or administrator acting in a private or personal capacity. All the facts and circumstances will be taken into account in determining whether an individual is acting in a private or personal capacity.

1-6(b)(2) Controlled entity [§1.1471-6(b)(2)]

Solely for purposes of this paragraph (b), a controlled entity means an entity that is separate in form from a foreign sovereign or that otherwise constitutes a separate juridical entity, provided that-

(2)(i) The entity is wholly owned and controlled by one or more foreign sovereigns directly or indirectly through one or more controlled entities; [§1.1471-6(b)(2)(i)]

(2)(ii) The entity’s net earnings are credited to its own account or to other accounts of one or more foreign sovereigns, with no portion of its income inuring to the benefit of any private person as defined in paragraph (b)(3) of this section; and [§1.1471-6(b)(2)(ii)]

(2)(iii) The entity’s assets vest in one or more foreign sovereigns upon dissolution. [§1.1471-6(b)(2)(iii)] 1-6(b)(3) Inurement to the benefit of private persons [§1.1471-6(b)(3)]

Solely for purposes of this paragraph (b)-

(3)(i) Income does not inure to the benefit of private persons if such persons (within the meaning of section 7701(a)(1)) are the intended beneficiaries of a governmental program carried on by a foreign sovereign, and the program activities constitute governmental functions under the regulations under section 892. [§1.1471-6(b)(3)(i)]

(3)(ii) Income is considered to inure to the benefit of private persons if such income benefits-[§1.1471-6(b)(3)(ii)]

(ii)(A) Private persons through the use of a governmental entity as a conduit for personal investment; [§1.1471-6(b)(3)(ii)(A)]

(ii)(B) Private persons through the use of a governmental entity to conduct a commercial business, such as a commercial banking business, that provides financial services to private persons; or [§1.1471-6(b)(3)(ii)(B)]

(ii)(C) Private persons who divert such income from its intended use by exerting influence or control through means explicitly or implicitly approved of by the foreign sovereign. [§1.1471-6(b)(3)(ii)(C)]

1-6(c) Any international organization or any wholly owned agency or instrumentality thereof [§1.1471-6(c)]

Except as provided in paragraph (h) of this section, the term any international organization or any wholly owned agency or instrumentality thereof means any entity described in section 7701(a)(18). The term also includes any intergovernmental or supranational organization-

1-6(c)(1) That is comprised primarily of foreign governments; [§1.1471-6(c)(1)]

1-6(c)(2) That is recognized as an intergovernmental or supranational organization under a foreign law similar to 22 U.S.C. 288-288f or that has in effect a headquarters agreement with a foreign government; and [§1.1471-6(c)(2)]

1-6(c)(3) Whose income does not inure to the benefit of private persons under the principles of paragraph (b)(3)(ii) of this section, as applied to the intergovernmental or supranational organization in place of the government or governmental entity. [§1.1471-6(c)(3)]

1-6(d) Foreign central bank of issue [§1.1471-6(d)]

1-6(d)(1) In general [§1.1471-6(d)(1)]

[Reserved]. For further guidance, see §1.1471-6T(d)(1).

Solely for purposes of this section and except as provided in paragraph (h) of this section, the term foreign central bank of issue means an institution that is by law or government sanction the principal authority, other than the government itself, issuing instruments intended to circulate as currency. Such an institution is generally the custodian of the banking reserves of the country under whose law it is organized.

1-6(d)(2) Separate instrumentality [§1.1471-6(d)(2)]

A foreign central bank of issue may include an instrumentality that is separate from a foreign government, whether or not owned in whole or in part by a foreign government. For example, foreign banks organized along the lines of, and performing functions similar to, the Federal Reserve System qualify as foreign central banks of issue for purposes of this section.

1-6(d)(3) Bank for International Settlements [§1.1471-6(d)(3)]

The Bank for International Settlements is a foreign central bank of issue for purposes of this section. 1-6(d)(4) Income on certain collateral [§1.1471-6(d)(4)]

[Reserved]. For further guidance, see §1.1471-6T(d)(4).

Solely for purposes of determining whether an entity is an exempt beneficial owner of a payment under this paragraph (d), a foreign central bank of issue is a beneficial owner with respect to income earned on cash and securities, including cash and securities held as collateral or securities held in connection with a securities lending transaction, held by the foreign central bank of issue in the ordinary course of its operations as a central bank of issue.

1-6(e) Governments of U.S. territories [§1.1471-6(e)]

Except as provided in paragraph (h) of this section, whether a person or entity constitutes a government of a U.S. territory for purposes of this section is determined by applying principles analogous to those set forth in paragraph (b) of this section.

1-6(f) Certain retirement funds [§1.1471-6(f)]

A fund is described in this paragraph (f) if it is described in paragraphs (f)(1) through (6) of this section. In addition, if a withholding agent may treat a withholdable payment as made to a payee that is a retirement fund in accordance with §1.1471-3, then the withholding agent may also treat such retirement fund as the beneficial owner of the payment. See §1.1471-3(d)(9)(ii).

1-6(f)(1) Treaty-qualified retirement fund [§1.1471-6(f)(1)]

A fund established in a country with which the United States has an income tax treaty in force, provided that the fund is entitled to benefits under such treaty on income that it derives from sources within the United States (or would be entitled to such benefits if it derived any such income) as a resident of the other country that satisfies any applicable limitation on benefits requirement, and is operated principally to administer or provide pension or retirement benefits;

1-6(f)(2) Broad participation retirement fund [§1.1471-6(f)(2)]

A fund established to provide retirement, disability, or death benefits, or any combination thereof, to beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration for services rendered, provided that the fund-

(2)(i) Does not have a single beneficiary with a right to more than five percent of the fund’s assets; [§1.1471-6(f)(2)(i)]

(2)(ii) Is subject to government regulation and provides annual information reporting about its beneficiaries to the relevant tax authorities in the country in which the fund is established or operates; and [§1.1471-6(f)(2)(ii)]

(2)(iii) Satisfies one or more of the following requirements-[§1.1471-6(f)(2)(iii)]

(iii)(A) The fund is generally exempt from tax on investment income under the laws of the country in which it is established or operates due to its status as a retirement or pension plan; [§1.1471-6(f)(2)(iii)(A)]

(iii)(B) [Reserved]. For further guidance, see §1.1471-6T(f)(2)(iii)(B). [§1.1471-6(f)(2)(iii)(B)]

The fund receives at least 50 percent of its total contributions (other than transfers of assets from accounts described in §1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), from retirement and pension accounts described in an applicable Model 1 or Model 2 IGA, or from other retirement funds described in this paragraph (f) or in an applicable Model 1 or Model 2 IGA) from the sponsoring employers; (iii)(C) [Reserved]. For further guidance, see §1.1471-6T(f)(2)(iii)(C). [§1.1471-6(f)(2)(iii)(C)]

Distributions or withdrawals from the fund are allowed only upon the occurrence of specified events related to retirement, disability, or death (except rollover distributions to accounts described in §1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), to retirement and pension accounts described in an applicable Model 1 or Model 2 IGA, or to other retirement funds described in this paragraph (f) or in an applicable Model 1 or Model 2 IGA), or penalties apply to distributions or withdrawals made before such specified events;

(iii)(D) Contributions (other than certain permitted make-up contributions) by employees to the fund are limited by reference to earned income of the employee or may not exceed $50,000 annually. [§1.1471-6(f)(2)(iii)(D)]

1-6(f)(3) Narrow participation retirement funds [§1.1471-6(f)(3)]

A fund established to provide retirement, disability, or death benefits to beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration for prior services rendered, provided that-

(3)(i) The fund has fewer than 50 participants; [§1.1471-6(f)(3)(i)]

(3)(ii) [Reserved]. For further guidance, see §1.1471-6T(f)(3)(ii).[§1.1471-6(f)(3)(ii)]

The fund is sponsored by one or more employers and each of these employers are not investment entities or passive NFFEs;

(3)(iii) [Reserved]. For further guidance, see §1.1471-6T(f)(3)(iii).[§1.1471-6(f)(3)(iii)]

Employee and employer contributions to the fund (other than transfers of assets from other retirement plans described in paragraph (f)(1) of this section, from accounts described in §1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), or retirement and pension accounts described in an applicable Model 1 or Model 2 IGA) are limited by reference to earned income and compensation of the employee, respectively;

(3)(iv) Participants that are not residents of the country in which the fund is established or operated are not entitled to more than 20 percent of the fund’s assets; and [§1.1471-6(f)(3)(iv)]

(3)(v) The fund is subject to government regulation and provides annual information reporting about its beneficiaries to the relevant tax authorities in the country in which the fund is established or operates. [§1.1471-6(f)(3)(v)]

1-6(f)(4) Fund formed pursuant to a plan similar to a section 401(a) plan [§1.1471-6(f)(4)]

A fund formed pursuant to a pension plan that would meet the requirements of section 401(a), other than the requirement that the plan be funded by a trust created or organized in the United States.

1-6(f)(5) Investment vehicles exclusively for retirement funds [§1.1471-6(f)(5)]

[Reserved]. For further guidance, see §1.1471-6T(f)(5).

A fund established exclusively to earn income for the benefit of one or more retirement funds described in paragraphs (f)(1) through (5) of this section or in an applicable Model 1 or Model 2 IGA, accounts described in §1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), or retirement and pension accounts described in an applicable Model 1 or Model 2 IGA.

1-6(f)(6) [Reserved]. For further guidance, see §1.1471-6T(f)(5). Pension fund of an exempt beneficial owner [§1.1471-6(f)(6)]

[Reserved]. For further guidance, see §1.1471-6T(f)(6). A fund established and sponsored by an exempt beneficial owner described in paragraph (b), (c), (d), or (e) of this section or an exempt beneficial owner (other than a fund that qualifies as an exempt beneficial owner) described in an applicable Model 1 or Model 2 IGA to provide retirement, disability, or death benefits to beneficiaries or participants that are current or former employees of the exempt beneficial owner (or persons designated by such employees), or that are not current or former employees, but the benefits provided to such beneficiaries or participants are in consideration of personal services performed for the exempt beneficial owner.

1-6(f)(7) [Reserved]. For further guidance, see §1.1471-6T(f)(6). Example [§1.1471-6(f)(7)]

FP, a foreign pension fund established in Country X, is generally exempt from income taxation in Country X, and is operated principally to provide retirement benefits in such country. The U.S.-Country X income tax treaty is identical in all material respects to the 2006 U.S. model income tax convention. FP is a resident of Country X under Article 4(2)(a) and a qualified person under Article 22(2)(d) of the U.S.-Country X income tax treaty. Therefore, FP is a pension fund described in paragraph (f)(1) of this section.

1-6(g) Entities wholly owned by exempt beneficial owners [§1.1471-6(g)]

[Reserved]. For further guidance, see §1.1471-6T(g).

A person is described in this paragraph (g) if it is an FFI solely because it is an investment entity, each direct holder of an equity interest in the investment entity is an exempt beneficial owner described in paragraph (b), (c), (d), (e), (f), or (g) of this section or an exempt beneficial owner described in an applicable Model 1 or Model 2 IGA, and each direct holder of a debt interest in the investment entity is either a depository institution (with respect to a loan made to such entity), an exempt beneficial owner described in paragraph (b), (c), (d), (e), (f), or (g) of this section, or an exempt beneficial owner described in an applicable Model 1 or Model 2 IGA.

Also see Rule Map

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