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Comply Connect – January 2024 – Issue 7

David Marley CEO

As the initial DAC7 deadline approaches in various jurisdictions, the task of navigating through competing tax regulations and regimes becomes increasingly challenging. Businesses are now required to not only skillfully align compliance efforts but also to elevate the customer experience, striking a delicate balance in this complex tax landscape. At Comply Exchange, our solutions are designed with these things in mind. We understand that each organization’s makeup and compliance journey is unique, and so are we.

Our latest solution is designed to ease the challenges of the impending DAC7 rollout, layering on top of existing data collection and reporting obligations. Comply Exchange’s innovative product seamlessly collects, manages, and verifies required personal identification information allowing you to comply with the latest DAC7 requirements with ease.

David Marley | CEO

COMING UP IN February 2024:

COMING UP IN FEBRUARY 2024:

British Virgin Islands: Live Seminar for Investment Entities

On January 22, 2024, the International Tax Authority (ITA) of the British Virgin Islands published a notice that the ITA will be hosting an informative session on February 28, 2024, related to the Common Reporting Standard. The ITA invites you to submit your questions or concerns in preparation for the session by February 2, 2024, to info@bviita.vg with the subject “Questions for Investment Entity Seminar”. A detailed agenda will be provided in advance of the session once all submissions have been received. 

Chile: Income Tax Treaty

The Chile tax treaty was approved in the U.S. Senate on June 22, 2023, and President Biden signed the instrument of ratification in December. For taxes withheld at source, the Chile tax treaty will have effect for amounts paid or credited on or after February 1, 2024. For all other taxes, the Chile tax treaty will have effect for the taxable periods beginning on or after January 1, 2024.

Press Release

Treaty

JANUARY 2024 KEY UPDATES:

Form 1099-NEC

The deadline to furnish and file the Form 1099-NEC, Nonemployee Compensation, is January 31, 2024. Remember:

  • The IRS does not grant an automatic extension for Form 1099-NEC, like with other Forms 1099.
  • The Form 1099-NEC is a single-use form, and it was reintroduced by the IRS in 2020 to help reduce confusion with deadlines while dealing with the Form 1099-MISC. Quick history note: Until the form was reintroduced in 2020, the Form 1099-NEC was last used in 1982!
  • You will also need to file Form 1099-NEC if the business withholds federal income tax from a nonemployee’s compensation, regardless of the amount of the payment.


The instructions are available here for your reference.

Forms 1099

Here is a list of some upcoming 1099 reporting obligations and key updates. Note, this is not an expansive list so if you have 1099 reporting obligations outside of those noted below, visit the IRS website for the latest form revisions and instructions.

  • Form 1099-MISC (Rev. January 2024):
    • Deadline: You are required to furnish the payee statements by January 31, 2024, and file with the IRS by February 28, 2024, if filing on paper or if filing electronically, by April 1, 2024 (the last day of March falls on a weekend).
  • Form 1099-K (Rev. January 2022):
    • Deadline: The Form 1099-K is due to recipients by January 31, 2024. It is due to be filed with the IRS by February 28, 2024, if paper filing, and if filing electronically, it is required to be filed by April 1, 2024 (the last day of March falls on a weekend).
    • Key Updates: In November 2023, the IRS announced that the $600 threshold for payment apps and online marketplaces to report payments on Form 1099-K is delayed for the tax year 2023. For 2023, the current reporting threshold remains in effect at $20,000 or more in qualifying receipts and more than 200 transactions. The IRS is planning to phase in the new thresholds and announced a threshold of $5,000 for tax year 2024, something to keep in mind.
  • Form 1099-INT (Rev. January 2024):
    • Deadline: Forms 1099-INT need to be sent to recipients by January 31, 2024, and the filing date to the IRS by mail is February 28, 2024. If you are electronically filing these forms, they are due to the IRS by April 1, 2024 (the last day of March falls on a weekend).
  • Form 1099-DIV (Rev. January 2024):
    • Deadline: Forms 1099-DIV need to be sent to recipients by January 31, 2024, and the filing date to the IRS by mail is February 28, 2024. If you are electronically filing these forms, they are due to the IRS by April 1, 2024 (the last day of March falls on a weekend).
  • Form 1099-OID (Rev. January 2024):
    • Deadline: Forms 1099-OID need to be sent to recipients by January 31, 2024, and the filing date to the IRS by mail is February 28, 2024. If you are electronically filing these forms, they are due to the IRS by April 1, 2024 (the last day of March falls on a weekend).

Form 1042-S Data Integrity Tool

The IRS released Issue Number 2024-01 reminding withholding agents that the Form 1042-S Data Integrity Tool is available to assist in improving Form 1042-S compliance. A few things to note:

  • The tool is free to use and will perform a quality review of the data before you submit to the IRS.
  • Form 1042-S information can be input into the tool in a few different ways, then you will receive a notification when the results are ready to download.
  • The withholding agent remains responsible for correcting any errors identified and furnishing and filing Forms 1042-S by the required deadline.
  • There is no limit on how many times the tool can be utilized, and the information input into the tool cannot be accessed by the IRS.

Hungary Income Tax Treaty

As a reminder, in July 2022 the United States issued an Announcement that it would be terminating the existing income tax treaty with Hungary. For withholding rate purposes, the termination went into effect on 1/1/2024. This means that residents of Hungary can no longer claim reduced rates of withholding by making a tax treaty claim. It is recommended that you review your recipients to determine any withholding impact.

Instructions for the Requester of Form W-9

The IRS released draft Instructions for the Requester of Form W-9 (Rev. December 2023). A summary of the changes includes:

  • Clarification that Line 3a is not applicable for disregarded entities;
  • Modification of Line 3b to specify that it is required for partnerships, trusts, or estates to indicate the presence of foreign partners, owners, or beneficiaries only if the entity is a flow-through entity obtaining a new Form W-9 from its partner, owner, or beneficiary;
  • Inclusion of broader language regarding the certification of non-foreign status for withholding under chapters 3 and 4, with a note that section 1446 withholding is considered chapter 3 withholding in this context; and
  • Updated information on withholding and reporting under sections 1446(a) and (f) from 2023 onwards, accompanied by an updated QI agreement, as previously communicated.


IRS Audits

With the IRS ramping up audits on the 76 largest partnerships using AI technology, the landscape of tax compliance is evolving rapidly. This initiative, part of the IRS’s Large Partnership Compliance program, targets complex structures and tax issues in large partnerships, including hedge funds and real estate investments. While these audits may not specifically focus on information reporting and withholding, we know that like an onion, these things can start to unravel once the audit begins.

During and after the reporting season, seize the opportunity to enhance your information reporting and withholding processes. This phase allows you to gain valuable insights into your challenges and identify areas in need of improvement. The foundation for accurate information reporting and withholding lies in meticulous documentation collection and validation from the outset. Let us guide you towards a smoother and more robust process, ensuring seamless and resilient operations.

JANUARY 2024 FATCA AND CRS HEADLINES:

Guernsey: Bulletin 2024/01

On January 4, 2024, the States of Guernsey Revenue Service issued Bulletin 2024/01, which includes CRS Reportable and Participating Jurisdictions for reporting period 2023/2024.

Isle of Man: Industry Advisory Notice

On January 5, 2024, the Income Tax Division of the Isle of Man published an Industry Advisory Notice. The notice included the following updates:

  • Guidance – Updated versions of Isle of Man’s CRS and FATCA guidance notes, GN53 and GN55.
  • FATCA – Tax Identification Numbers
  • CRS – Mandatory ‘BirthDate’
  • CRS – Isle of Man Reportable Jurisdictions 2023
  • CRS – Provisional List of Isle of Man Reportable Jurisdictions 2024
  • CRS – Isle of Man Participating Jurisdictions

Mauritius: CRS Participating and Reportable Jurisdictions

The Mauritius Revenue Authority published updated lists of Reportable Jurisdictions for CRS and Participating Jurisdictions for CRS for the 2024 reporting year, in respect of 2023 reportable accounts.

Singapore: Common Reporting Standard (CRS) e-Tax Guide

On January 12, 2024, the Inland Revenue Authority of Singapore (IRAS) published the Third Edition of the Common Reporting Standard (CRS) e-Tax Guide. Key amendments include:

  • Clarified the definition of “Participating Jurisdiction” and “Reportable Jurisdiction” under the Glossary (Section 3.1) and paragraph 4.4.1 to align with the CRS.
  • Removed the original paragraph 4.4.2 on the transitional approach as the transitional approach for Participating Jurisdictions has expired.
  • Clarified the requirements for the collection of valid self-certifications, in line with OECD’s CRS related FAQs in paragraph 10.5.8.
  • Updated the names of the respective Singapore’s Acts of Parliament.

United Kingdom: CRS Reportable Jurisdictions

In early January, the United Kingdom’s HMRC published an updated list of Reportable Jurisdictions for the 2024 reporting year, in respect of 2023 reportable accounts. Updates include the additions of Georgia, Kenya, Moldova, and Ukraine to the list.

Dac7 reporting headlines:

The DAC7 deadline for most reporting jurisdictions is January 31, 2024. Complying with these regulations is important in order to avoid potential penalties imposed by participating jurisdictions.

While most countries are holding to the January 31, 2024 deadline, some countries have permitted extensions and issued key guidance and FAQs:

Cyprus

During January, the Tax Department of Cyprus published two announcements related to DAC7:

  • On January 15, 2024, Cyprus Tax Department published an announcement informing all Reporting Platform Operators that the data submission for the year 2023 has started. The process will be performed through the DAC7 Portal using XML type files. The submission process requires the following steps:
    • Register with the Government Gateway Portal CY Login
    • Register to the DAC7 e-service using the DAC7 Portal
    • File submission through the option ‘Submit XML Files’
  • On January 17, 2024, Cyprus Tax Department published an announcement informing all Reporting Platform Operators that the reporting deadline for 2023 for DAC7 purposes is being extended to February 16, 2024. Any submission after this date will be considered overdue and administrative penalties according to the Administrative Cooperation in the Field of Taxation Law (Amended) of 2023 (N.105(I)/2023) may be imposed.

Germany

The German Federal Tax Office issued a newsletter extending the deadline for the 2023 DAC7 reporting period March 31, 2024 (originally January 31, 2024).

Luxembourg

The Luxembourg Tax Authorities issued a newsletter extending the deadline for the 2023 DAC7 reporting period to February 19, 2024 (originally January 31, 2024).

Slovenia

On January 22, 2024, the Slovenia Financial Administration issued new guidelines around DAC7 reporting. These new guidelines walk through how to report business income from online platforms generated in 2023.

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