U.S. Treasury and Internal Revenue Service issue final Qualified Foreign Pension Fund Regulations
December 28, 2022

On December 28, 2022, the U.S. Department of Treasury (“the Treasury”) released final regulations regarding the Qualified Foreign Pension Fund exemption from taxation concerning gain or loss attributable to certain U.S. real property interests. The regulations are effective on December 29, 2022, when the regulations are published in the Federal Register.


The regulations address the qualifications for Qualified Foreign Pension Fund (“QFPF”) and the withholding requirements under Sections 1441, 1445, and 1446 regarding dispositions subject to FIRPTA and distributions described in Section 897(h) (e.g., distributions from real estate investment trusts and mutual funds).


QFPFs should note the new certification requirements below. U.S. withholding agents will require the new certification for eligible transactions on or after December 29, 2022, until the new Form W-8EXP is released.


The regulations provide changes and clarifications regarding the requirements of a QFPF. The clarifications addressed the condition that a QFPF is established to provide retirement and pension benefits. For the first time, the regulations define retirement and pension benefits. The definition of retirement and pension benefits is intended to be broad to accommodate a wide variety of non-U.S. pension funds and non-U.S. laws. The regulations also provide limited exceptions when a pension fund provides more than retirement and pension benefits. The rules also clarify ownership requirements for Qualified Controlled Entities of pension funds.


The regulations also clarify the requirement for a pension fund to provide, or otherwise make available, annual information about its beneficiaries to the relevant tax authorities in the country where the pension fund is established or operates. The final regulations require that the pension fund annually provides information about the amount of qualified benefits provided to each recipient to the relevant tax authorities or other relevant governmental units. The requirement is also met if such information is otherwise available to the relevant tax authorities or other governmental units.


The preamble to the final regulations acknowledges that Internal Revenue Service will be revising the Form W-8EXP withholding tax documentation for use by QFPFs. Until the new Form W-8EXP is released, a QFPF should indicate its status with a certification signed under penalties of perjury. Notably, the QFPF is not required to provide a U.S. Employer Identification Number if it does not have one.


Also of interest, the regulations provide a withholding exemption for certain non-U.S. partnerships wholly owned by QFPFs.


Please contact International Capital Associates, LLC if you need help with inbound tax planning and structuring or U.S. investment tax reviews.

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