Interactive Brokers Company Account - FFI?

[kid hustlr]

Hi,

Does anyone have a company account with interactive brokers?

What the heck is all this tax information about GIIN's and FFI.

I have no idea how to complete this form?

 

[Roller_1]

Take a look at these two links and see if any of these apply to you - they helped me out
i.e passive or active NFFE (non financial foreign entity)
or try your accountant, but mine didn't know

http://intltax.typepad.com/intltax_...nd-draft-w-8ben-e-unnecessary-complexity.html

http://www.macquarie.com.au/dafiles...latforms/wrap-tax/docs/w8ben-guide-entity.pdf

 

[kid hustlr]

The Macquarie link is handy.

Up until now I thought I had an FFI but perhaps I qualify as a NFFE. If that's the case then I think it's quite easy?

 

[Roller_1]

The Macquarie link is handy.

Up until now I thought I had an FFI but perhaps I qualify as a NFFE. If that's the case then I think it's quite easy?

I am not sure on your circumstances, i would have thought an NFFE would be more the average trader.. but like you i was kind of struggling through it

 

[kid hustlr]

I am not sure on your circumstances, i would have thought an NFFE would be more the average trader.. but like you i was kind of struggling through it

Effectively we have 3 blokes who have pooled our cash and formed a company.

The definition I found for an FFI was:

Foreign Financial Institution Any foreign entity that:

Accepts deposits in the ordinary course of a banking or similar business (banks, credit unions),
Holds financial assets for the account of others as a substantial portion of its business (brokerages, custodians),or
Is engaged (or holding itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest (including a futures or forward contract or option) in such securities, partnership interests, or commodities (mutual funds, private equity funds, hedge funds).

Which made me think we must be an FFI.

Yet on the Macquarie Link it they use an example which appears the same as my situation and they tick Passive NFE. The tick box states:

'I certify that the entity identified in Part I is a foreign entity that is not a financial institution (other than an investment entity organized in a possession of the United States) and is not certifying its status as a publicly traded NFFE (or affiliate), excepted territory NFFE, active
NFFE, direct reporting NFFE, or sponsored direct reporting NFFE.'

Bolded makes me think that's us. I mean realistically we are not a financial institution - we don't take investors funds.

Then the question becomes are we active or passive (I believe active?)

Confusing!

 

[rnr]

Just started an account application using the Small Business option, which would presumably apply to you (KH) and your 2 friends, and then selected the Limited Liability Company (LLC) option.

You are effectively a private company that is involved in investing which doesn't fit into any category that you have mentioned so far.

Cheers
Rob

 

[Roller_1]

Just started an account application using the Small Business option, which would presumably apply to you (KH) and your 2 friends, and then selected the Limited Liability Company (LLC) option.

You are effectively a private company that is involved in investing which doesn't fit into any category that you have mentioned so far.

Cheers
Rob

I am still setting my small business/company account up and at first i selected LLC option but that doesnt give you access to a Reg-T account so i had to start again and select Corporation which is the correct option i think.


yes passive or active. I wasn't really sure because my company in theory hasn't made any money or done any investing yet...

 

[rnr]

I am still setting my small business/company account up and at first i selected LLC option but that doesnt give you access to a Reg-T account so i had to start again and select Corporation which is the correct option i think.

That seems to fly in the face from what is stated in this IB's info link.

 

[Roller_1]

That seems to fly in the face from what is stated in this IB's info link.

oh well see how you go i guess, maybe i selected something else...

 

[rnr]

oh well see how you go i guess, maybe i selected something else...

Hi Trent

Not meant as a criticism, just hard to fathom which path to take.

Cheers
Rob

 

[Roller_1]

Hi Trent

Not meant as a criticism, just hard to fathom which path to take.

Cheers
Rob

No worries, from what i can remember thats what happened to me, but as i said i might have selected something different to you.

 

[DaveDaGr8]

Just going through this now.

I am thinking for a corporate family trust i am a nonreporting IGA FFI ( whatever that is ). MAC selected it for all there trusts SMSF's etc

Thank god for that macquarie site.

 

[brissmith]

Even these Guys think it is unnecessarily complex!!!

I chose NFFE as trader not Financial institution then ticked both on the form and read which sounded more like myself. which was passive i.e. specifically mention trading securities where as active stipulates passive income less that 50% passive I.E. it sounds like someone earning income from physical endeavours i.e.

Any way this is from the link above.

http://intltax.typepad.com/intltax_blog/2015/06/when-an-active-nffe-can-be-a-passive-nffe.html

FATCA, NFFEs, and Draft W-8BEN-E - Unnecessary Complexity



UPDATE (6/3/15): The unnecessary complexity of the form was removed with the release of the final Form W-8BEN-E. See: When an Active NFFE Can Be a Passive NFFE.



UPDATE (9/22/14): For foreign performed services, see:

Payments to Foreign Contractor Entities: Form W-8BEN-E.

The U.S. Treasury Department recently finalized the FATCA regulations.(FN 1)

The bulk of the regulations deal with certain U.S. source payments to foreign financial institutions (“FFIs”).

However, the regulations also require a withholding agent to generally withhold 30% of certain U.S. source payments (made after December 31, 2013) to a payee that is a non-financial foreign entity (“NFFE”) unless three requirements are met. The three requirements are:

The beneficial owner of the payment is the NFFE or another NFFE;
The withholding agent can treat the beneficial owner of the payment as an NFFE that does not have any substantial U.S. owners, or as an NFFE that has identified its substantial U.S. owners; and
The withholding agent reports certain information relating to substantial U.S. owners of the NFFE.(FN 2)


Simple Reporting in Many Circumstances

In many circumstances it will be quite easy to confirm that the NFFE has no substantial U.S. owners or to identify who the substantial U.S. owners are. For example, a Canadian non-financial company that is wholly owned by a Canadian citizen who lives in Canada should be able to easily certify that it is the beneficial owner of a payment and that it has no substantial U.S. owners.

Similarly, if that same Canadian company were 50% owned by the Canadian citizen and 50% owned by a U.S. citizen, the company should be able to easily certify that it is the beneficial owner of a payment and that it has a 50% substantial U.S. owner. The reporting of the substantial U.S. owner will be done on I.R.S. Form 8966 (or such other form as the I.R.S. may prescribe).(FN 3)

Excepted NFFEs

No withholding is required under the FATCA rules if the payment is beneficially owned by an “excepted NFFE.”(FN 4) Excepted NFFEs include:

Publicly traded companies;
Affiliates of publicly traded companies;
Certain entities organized in U.S. territories;
Active NFFEs;
Certain non-financial entities (such as holding companies, treasury centers, captive financial companies of a non-financial group, start-up companies, liquidating or bankrupt companies, and not-for-profit organizations).

An “active NFFE” is an entity that meets an income test and an asset test.(FN 5) Under the income test, the entity must have less than 50% of its gross income for the preceding calendar year as passive income. Under the asset test, the entity must have less than 50% of its assets for the preceding calendar year as passive assets (i.e., assets that produce or are held for the production of passive income).

Very generally, “passive income” can be thought of as investment income, such as dividends, interest, rents and royalties (other than certain active rents and royalties), annuities, the excess of gains over losses from the sale or exchange of the foregoing types of property, etc.(FN 6)

A “passive NFFE” is an NFFE other than an excepted NFFE.(FN 7)

Draft Form W-8BEN-E

The current draft version of the Form W-8BEN-E (found here) is eight pages long and has 25 parts.

Parts 1, 2, 3, and 24 represent the four parts included in the existing W-8BEN. Parts 4 through 22 include various categories, including multiple types of FFIs and excepted NFFEs.

Part 23 addresses passive NFFEs and requires that the foreign entity certify that (i) it is not a financial institution, (ii) it is not an excepted NFFE, and (iii) either (a) it has no substantial U.S. owners, or (b) it has provided certain information about each of its substantial U.S. owners in Part 25 of the form.

Unnecessary Complexity

Unfortunately, the way that the W-8BEN-E is currently drafted, a foreign non-financial entity must certify that it is either an active NFFE (in Part 22) or a passive NFFE (in Part 23). If it is an active NFFE, then there is no need to provide information about the substantial U.S. owners. If it is a passive NFFE, then it must provide information about the substantial U.S. owners in Part 25 of the form.

As currently drafted, there is no option to avoid the legwork required to determine whether the NFFE is active or passive, and to simply volunteer the information about the substantial U.S. owners (or lack thereof).

To determine whether a foreign entity is an active or passive NFFE, both its income statement and its balance sheet must be reviewed for the prior calendar year. What if the NFFE has a fiscal year rather than a calendar year? Must calendar year financial statements be created and reviewed? What if there are substantial book-tax differences? Are assets valued on a fair market value basis or using U.S. tax basis? If using fair market value, must a valuation be performed? If using U.S. tax basis, has the foreign entity been tracking the U.S. tax bases of its assets (even though it may be 100% foreign owned)?

Foreign non-financial entities should be able to avoid making the determination as to whether they are active or passive NFFEs. The NFFE would voluntarily provide the information about the substantial U.S. owners (or lack thereof). The I.R.S. would get the information that it seeks without requiring an extensive analysis to be performed with respect to the foreign entity’s financial statements.

The Form W-8BEN-E should be modified to allow a NFFE to volunteer the substantial U.S. owner information in Part 25 and not have to certify that it is or is not an active NFFE (or any other type of excepted NFFE). One can only hope that the Treasury Department will add this simplification to the final Form W-8BEN-E.

________________________________________________

 

[skyQuake]

Stumbled across a MS guide on the W8-BEN form. Quite handy

https://www.morganstanley.com.au/resources/docs/Guide_to_completing_your_W8-BEN-E.pdf