• Chris Goddard, Director |
  • Lina Novak, Senior Manager |

The new Form W-8EXP issued by the U.S. Internal Revenue Service (IRS) enables Qualified Foreign Pension Funds (QFPFs) to confirm their status and claim exemption from FIRPTA withholding tax. This is a welcome development, clarifying how the QFPF self-certification ought to be documented.

IRS updates on QFPF status documentation

In late December 2022, the IRS published the final regulations concerning QFPF status. Compared to the previous temporary regulations, the final regulations provide greater clarity and comfort for non-U.S. pension funds on the requirements to qualify as QFPF, as well as how to assess and document compliance. However, until recently, there was no official form available to document the QFPF status towards counterparties such as investment fund managers. In the absence of an official standard, each fund manager developed their own self-certification form (with varying levels of detail and U.S tax technical complexity), which led to frustrations in the market. As expected, the IRS has now revised Form W-8EXP (Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting) to allow QFPF status to be self-certified on this official form going forward. The revised Form W-8EXP is available here.

For a refresher on the benefits of QFPF status, the final regulations and the key take-aways thereof for Swiss pension funds, we refer to our previous tax blog.

Our observations

While the publication of an official IRS Form to standardize the process for documenting QFPF status is welcomed, we anticipate that Swiss pension funds are likely to encounter certain challenges and questions when they attempt to complete the form. We discuss two of the key issues below that we expect Swiss pension funds to encounter:

  • The language used in the revised Form W-8EXP is very U.S. tax technical, and unfortunately the phrase “Qualified Foreign Pension Fund” (or “QFPF”) is not used on the face of the Form – this is likely to be a source of confusion for Swiss pension funds that are trying to complete the form without the support of a U.S. tax advisor. Swiss pension funds that are using Form W-8EXP to document their QFPF status will instead need to check the box that they qualify as a “Withholding qualified holder under section 1445”.
  • Form W-8EXP will be used solely to document the QFPF status so as to enable exemption from FIRPTA withholding. Form W-8EXP completed in this way will not enable exemption from ordinary U.S. withholding tax on dividends or interest (e.g. under a U.S. double tax treaty). Swiss pension funds will still need to complete Form W-8BEN-E to claim the benefits of the U.S.-Swiss double tax treaty (i.e. Swiss pension funds claiming QFPF status will likely need to complete both Form W-8BEN-E and Form W-8EXP going forward). Since both forms contain an area for the mandatory FATCA classification certification, this information will need to be certified twice (once on each Form).

Pension funds are not required to proactively contact any existing investments to re-certify their QFPF status again on the newly published official IRS Form W-8EXP. However, it is possible that the fund managers may reach out in the coming months with a request to re-document their QFPF status using the new Form W-8EXP.

It is strongly recommended to seek advice should you encounter any issues with documenting the QFPF status using the new Form W-8EXP.

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