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.

U.S.-Russia Tax Treaty Suspension

June 18, 2024
The U.S. Department of the Treasury announced on June 17, 2024, that the United States has formally notified the Russian Federation about the suspension of certain articles and provisions of the Convention between the United States of America and the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, signed at Washington, June 17, 1992. This suspension will take effect on August 16, 2024, and will continue until otherwise decided by the two governments. This decision is in response to the Russian Federation's notification on August 8, 2023, expressing its desire to suspend specific articles and provisions of the Convention and the Protocol. The announcement can be seen at United States’ Notification of Suspension, By Mutual Agreement, of the 1992 Tax Convention with Russia | U.S. Department of the Treasury . Taxpayers who rely on the U.S.-Russia income tax treaty should plan for this suspension. Please contact International Capital Associates, LLC if you need help planning for the treaty suspension or if you need other U.S. tax services .

U.S. Internal Revenue Service Releases Updated Form W-8EXP With Updates for Qualified Foreign Pension Funds

December 11, 2023
In November 2023, the U.S. Internal Revenue Service released an updated Form W-8EXP. The Form W-8EXP is a U.S. withholding tax certificate for foreign governments or other foreign organizations. Confusingly, the words “qualified foreign pension fund” do not appear on the Form W-8EXP. However, the updates to the Form W-8EXP are intended to allow a non-U.S. pension fund (or qualifying entity) to certify its Qualified Foreign Pension Fund status. A non-U.S. pension fund may certify that it is a “Withholding Qualified Holder Under Section 1445” provided it meets the requirements of Section 897(l) and Treas. Reg. 1.897(l)-1 as a Qualified Foreign Pension Fund. A “Qualified Holder” includes certain wholly-owned entities that meet the requirements of Treas. Reg. 1.897(l)-1(d)(2) or (3). A “Withholding Qualified Holder” also consists of a non-U.S. partnership wholly owned by Qualified Holders. Unfortunately, Form W-8EXP still does not contain sections to allow the taxpayer to claim the benefits of a U.S. income tax treaty. Non-U.S. pension funds and governments will still need to complete Form W-8BEN-E to claim U.S. income tax treaty benefits with a U.S. withholding agent, such as reduced dividend and interest withholding rates. The release of the updated Form W-8EXP does not invalidate any prior Qualified Foreign Pension Funds certifications. In the future, U.S. withholding agents may request a valid Form W-8EXP instead of other Qualified Foreign Pension Fund certifications. A Withholding Qualified Holder should ensure that the Form W-8EXP is complete and valid to make a Qualified Foreign Pension Fund certification using the Form W-8EXP. Please contact International Capital Associates, LLC if you need help determining if the entity is considered a Withholding Qualified Holder, if you need assistance completing Form W-8EXP , or if you need other U.S. tax services .