Tax Withholding News

Issue No. 15 | June 2012 |

20th Anniversary Issue

prepared by

US Tax Information Reporting & FATCA

In This Issue
US Tax Information
Reporting & FATCA

Korean Tax Changes

GlobeTax Turns 20!

eCerts Canada

Korean ADR Update

Market Updates

France - ECJ Ruling

Team Additions

Upcoming Events

GlobeTax has been providing US Tax Information Reporting and Withholding (TIR)
services since 2008. The TIR suite of products includes our Tax Documentation
Management System (TDMS), Income Allocation Processing System (IAPS), Yearend Reporting and a Compliance Health Check. The web based TDMSs features
include: solicitation, validation, renewal of Tax Forms, as well as storage and
archiving. The IAPSs primary users are Non-Qualified Intermediaries (NQIs), willing
to disclose their account holders, so they may benefit from the reduced withholding
rate. Through the provision from clients of allocation and withholding statements
and a daily income file from the US Withholding Agent, GlobeTax is able to help
reduce manual efforts and provide timely reconciliation, enabling the NQIs to generate YTD reporting and withholding data for each account holder. The data are also
used as the basis for the annual reporting on Forms 1042-S/1042. As an additional
service or as a standalone program, GlobeTax also offers a compliance health check
centered on compliance with the existing IRS regulations (Consulting Services). In
simple terms, the program resembles an IRS Qualified Intermediary (QI) audit and
helps Financial Institutions (FIs) realize their level of compliance with respect to US
Tax Law. In addition to preparing the client for a QI audit, it identifies and resolves
any gaps in the current processes.

FATCA
The US is looking to identify any US person or entity owned by or effectively
FATCA continued on page 2...

Korean Tax Change

On May 16, 2011, the National Tax Service of Korea (NTS) concluded that Luxembourg investment vehicles, SICAVs and SICAFs, are not entitled to benefits under the double taxation treaty between Korea and Luxembourg. Instead, the maximum tax
rate (22%), rather than favorable rate (15%), will be applied to those holders. SICAVs/SICAFs receiving dividends after May 16,
2011 will receive dividends net of the statutory withholding rate and have no ability to file a reclaim for a more favorable rate.
The NTS has also required that all Luxembourg legal entities who received the favorable rate between December 30, 2005 and
December 31, 2010 be retroactively taxed at the maximum rate rather than the favorable rate. This has required disgorgement
through the custody chain from the Korean paying agent down through to the ultimate income recipient. All affected participants
needed to certify their entity type by August 5, 2011 or risk being subjected to the full Korean withholding rate of either 27.5%
for dividends with a Depositary Receipt (DR) record date between December 30, 2005 and June 30, 2008 and 22% for
Korean Tax continued on page 2...

Tax Withholding News

Issue No. 15 | June 2012

20th Anniversary
Twenty years ago, GlobeTax was
founded on the principle that existing service offerings for processing withholding tax reclaim applications were
inadequate
to satisfy the
needs of global investors.
Since then,
GlobeTax
has become
the worlds
Martin S Foont and Len
Lipton at the celebration
leading provider in withholding tax reclamation.
GlobeTax, founded by Martin
S. Foont, who continues today
as President & CEO, offers full
service tax reclaims, and also
manages the infrastructure which
enables expedited refunds and
reclaims on withholdings from
depositary receipt dividends. In
addition, GlobeTax now offers
US tax information reporting.
Eventual offerings will include
FATCA reporting and information
reporting for EU/OECD markets.
Congratulations GlobeTax, on 20
years of success!

prepared by
FATCA...continued from page 1
controlled by a US person having an account outside the US. The legislation has
significantly expanded the definition of what a financial institution is, which includes
most collective investment vehicles including hedge funds, as well as traditional banks
and brokers.
The draft regulations, issued on February 8, 2012 are 389 pages long and complex.
However, the basics are that from January 1, 2013 any firm falling into the definition
of a foreign financial institution (FFI) will have to decide whether to sign an agreement
with the IRS. This will obligate the firm to follow certain documentation and testing
rules with their customer, dependent on what kind of account they are. There are only
three possible results from this analysis: (1) the account is US, substantially US owned
or effectively US controlled; (2) definitively not US or; (3) the account holder has no
FFI agreement with the IRS, or does not provide required answers or documentation
(called recalcitrant accounts).
The consequence of each output is: (1) US accounts: details of global income paid
to the account must be reported to the IRS annually; (2) non-US account: no action,
although there may be re-testing at some point; and (3) recalcitrant account holders:
a penalty of 30% tax on dividends, interest and gross proceeds, followed by eventual
account closure on continued recalcitrance.
A number of outstanding issues and legal concerns remain in the market, and these
variables have led to a delayed or transitional implementation of some portions of
the draft regulations over the period 2013-2017. A number of operational details also
remain to be clarified by the IRS, and they held a public hearing in Washington DC on
May 15th to receive further comment. GlobeTaxs FATCA solutions are focused on
compliance within the due diligence process, ensuring that income recipients are properly documented (valid W8s / W9s) and that the income is properly reported to both
recipients and the IRS. Our FATCA compliance solutions and reporting services are
in development based on already issued guidance. Final design and implementation
will occur once the final regulations have been issued and the reporting mechanisms
have been fully identified.
Please see the Upcoming Events section for further details.

Korean Tax...continued from page 1

dividends with a DR record date since December 31, 2008. Once their status as a SICAV or SICAF had been confirmed, the
NTS also subjected the returns to a 10% penalty.
A 2001 ruling excluded Luxembourg SICAV/SICAF entities from treaty benefits, but a district office of the NTS made an oral
agreement with a Korean sub-custodian to allow such entities to be eligible for the favorable treaty rate. It has been concluded
that the oral agreement was not binding with the NTS.
New forms will be required for all beneficial owners. Please see the Korea Update on page 3 of this newsletter for further
details.

Tax Withholding News

prepared by

Issue No. 15 | June 2012

eCerts - Canada
eCerts (powered by GlobeTax) has now
been expanded to support the creation
of the Canadian Forms NR301, NR302,
and NR303, in relation to expedited
refunds and retroactive reclaims of
Canadian withholding taxes on income
payments to non-residents. One issue
with the new requirements for application of Treaty benefits on Canadian
income is a carve out stating that holders do not need to have the NR301 on
file if equivalent information is acquired.
Since there can often be ambiguity on
whether or not the information is equivalent, many banks and brokers are taking the view that they should gather the
requisite NR Form for all clients. eCerts
provides all of the operational support a
bank or broker would need to facilitate
the solicitation and management of
the NR Forms, without incurring the
internal costs of building such a system
or hiring the people needed to process
the large volume of forms. The service
offers full audit support and can be customized to suit the needs of each bank
or broker. For more information about
the system and GlobeTaxs solution for
blended rate payments please contact
Info@GlobeTax.com.

Korean ADR Update

GlobeTax has recently received information regarding upcoming changes to the
Korean withholding tax reclaim/expedited refund process. After July 1, 2012
payments to holders of ORD shares will
need to have special Certification Forms
on file with the Korean sub-custodian in
order to continue to receive treaty benefits on their account. Depositary Re-

ceipt programs will not have this documentation requirement. However,

beginning with all payments occurring
after January 1, 2013 the Depositaries
ADR Update continued on page 4...

Market Updates

These updates reflect changes made

through May 15, 2012.
New statutory rates in effect
January 1, 2012 except as noted
otherwise:
Belgium: There is a new withholding
tax rate for UCITS. A 21% rate applies
to Strip VVPRs, SICAVs and SICAFs,
with some exceptions.
Croatia: Effective March 1, 2012, the
withholding tax rate for dividends is
12%.

the Swiss will continue to honor the

terms of the treaty.
New treaties effective 2013
Georgia and Israel
The withholding tax rate for dividends is
5%. A 0% rate applies if the beneficial
owner is a government agency, central
bank, or pension fund.
Please note, this is not an exhaustive
list.
For information on subscribing to our
data services, please email:
eTaxDataOnline@GlobeTax.com

Breaking News - France - ECJ

Effective January 1, 2012, the treaty

withholding tax rate for dividends is
15%.

On May 10, 2012 the ECJ ruled that

charging foreign investment funds
withholding tax on French dividends
is contrary to the free movement of
capital. French investment funds are
exempt from French tax on dividends
received from a French company, while
foreign funds are subject to a 30%
withholding tax unless reduced by a
double taxation agreement. This opens
the way for potential additional reclaims
by investment funds resident in the
EU or a third country (including the
United States). The French government
is likely to amend the withholding tax
regulations in 2012 to treat resident and
non-resident investment funds identically with respect to French dividends
going forward.

Argentina and Switzerland

Effective January 16, 2012, Argentina
has terminated the treaty. However,

For information on filing claims under

the ruling, please contact:
Info@GlobeTax.com

Spain: The withholding tax rate is

increased from 19% to 21%.
Spain (Navarre): The withholding tax
rate is increased from 18% to 19%.
Effective from February 23, 2012, the
withholding tax rate for dividends is
increased from 19% to 20%.
New treaties in effect retroactively,
giving preferential treatment to residents for withholding tax on dividends:
Albania and Germany

Tax Withholding News

prepared by

Issue No. 15 | June 2012

Team Additions

Upcoming Events

GlobeTax is pleased to welcome Isa

Simmons as Manager of Tax Information Reporting. Isa will be working with
the team who is developing and implementing products related to US tax information reporting and withholding.

GlobeTax team members are participating in these upcoming events.

Prior to joining GlobeTax, Isa worked

as a Tax Analyst/
Project Manager
of the Tax Operation department
at Royal
Bank
of Scotland (RBS).
Before
joining
RBS, she worked
at Bear Stearns and Smith Barney / Citigroup.
GlobeTax has also
welcomed Christian
Graham to the sales
team. Christians career focus has been
in investment management and most recently worked with Fisher Investments
Private Client Group as a Registered Investment Advisor and holds his FINRA
Series 65 license.
Isas and Christians valuable experience
will be great additions to the GlobeTax
team.

2012 OECD International Tax

Conference
Washington, DC
June 4 - 5, 2012
www.uscib.org

is published by Globe Tax Services, Inc., for the general

information of our clients, friends and business associ-

24th Annual International Tax Withholding & Information Reporting

New York, NY
June 5 - 6, 2012
www.eeiconferences.com
INSITE 2012 - Pershing
Hollywood, FL
June 6 - 8, 2012
www.pershing.com

ates and should not be acted upon without prior professional advice. If you have any inquiries or would like
to have your name added to our distribution list, please
contact us at:
Info@GlobeTax.com
Len A. Lipton, Editor, Managing Director
Ross K. McGill, Editor, Managing Director
Contributing Writers:
Sharon Hirschhorn, Director
Michael Lempert, Director

2012 SEI Connections Conference

Oaks, PA
June 11, 2012
www.seic.com

Brett Lewis, Director

Lindsay Bisson, Marketing Associate
Globe Tax Services
90 Broad Street
New York, NY

APIC Annual Conference

Dallas, TX
June 12 - 15, 2012
www.apicmssb.com
TLFFRA
Galveston, TX
September 16 - 19, 2012
www.ffpc.state.tx.us

ADR Update...continued from page 3

will require additional data elements,
specifically, beneficial owner address
and beneficial owner Tax ID number.
A DTCC Important Notice will be published shortly detailing these changes.

Tax Withholding News

Network Management 2012 - Asia

Kuala Lumpur, Malaysia
September 25 - 26, 2012
www.icbi-events.com/nemaasia

Tel +1 212 747 9100

London, England
Tel +44 (0)20 7096 2162
Madrid, Spain
Tel +34 606 377820
Milan, Italy
Tel +39 02 6467 2678
Sydney
Tel +61 (0)2 8667 3133
Hong Kong
Tel +852 3960 6575

www.GlobeTax.com