IRS publishes New Form W-8EXP

IRS publishes W-8EXP Form

On November 20, 2023 the Internal Revenue Service (IRS) published the new W-8EXP form with a revision date of October 2023. These updates enable Qualified Foreign Pension Funds to confirm their status and claim exemption from FIRPTA withholding. The final version has a new Chapter 3 status and a sizeable format update impacting chapter 4 statuses and Certification section of the form, therefore any Financial Institutions with 1042S reporting obligations will be affected.

Summary of W-8EXP Form Changes

Changes from revision of 2017 W-8EXP to the 2023 W-8EXP include:

• New Chapter 3 status of “Withholding qualified holder under section 1445”
• Part II - boxes 10d and 10e added
• Part II - new 15a and 15b to reflect elections of new Chapter 3 status code
• Part III - every item has a new number due to new Chapter 3 status code in Part II
• Certification:
  • Language has been updated.
  • Check box has been moved above the signature line.
• Expiration of new Chapter 3 status
  • Under Reg 1.1445-5(b)(3)(ii)(B)(3), there is a 2 year expiration for this status instead of the standard 3 year rule

How will the new W-8EXP form impact financial institutions?

Financial institutions servicing these instruments and reviewing the new W-8EXP forms will have questions around the impact of the revision and what it will mean for updating procedures and withholding and reporting processes. Organizations should start to plan updates of information collecting and form validation to accept the new Form W-8EXP.

The revision effective date is listed as October 2023. Since this is Final, the validation of prior versions of the W-8EXP form will be allowed for up to 6 months before only the 2023 version is acceptable, meaning latest date to adopt would be May 1, 2024.

TAINA has currently developed a solution for accepting the new revision of the W-8EXP and will roll out for our customers by the end of January, 2024.

W-8EXP Instructions Update

The instructions highlight what's new for the form and instuctions such as:

• Purpose of this form:  this section has been revised to provide additional background on the withholding regimes that may apply to payments to foreign entities and the exemptions to withholding that may be claimed with Form W-8EXP. These revisions are not intended to be substantive changes.
• Qualified foreign pension funds: These instructions have been updated to reflect final regulations published in December 2022 (87 FR 80042) regarding qualified foreign pension funds and claiming an exemption to withholding under section 1445.
• Non-private foundation status:. The instructions to line 13c have been updated for revisions to the supporting information required for an entity qualifying under section 501(c)(3) to represent that it is not a foreign private foundation. 

If you have any questions about the W-8EXP updates and would like to have a chat about them please reach out to us.

If you would like to see how the TAINA FATCA, CRS and QI Compliance Platform can add value to your business, request a demo today.