We are often asked why you need to supply this and what we do with the information, so we have provided a summary below of the tax reporting regimes that we have to comply with, to help you understand this.
There are three tax reporting regimes which we have to adhere to:
These are explained in the video and the sections below.
This is relevant to any client who invests directly in US stocks and receives US source income, e.g. dividends.
Qualified Intermediary, or “QI” as it is known, is a regime that allows foreign intermediaries (i.e. Ravenscroft) to enter into an agreement with the Internal Revenue Service (the equivalent of HMRC in the UK) to simplify their obligations as withholding agents.
It became effective on 1st January 2001. Ravenscroft’s nominee company has become a Qualified Intermediary and has signed a QI Agreement with the IRS which means that, in return for compliance with the terms of the Agreement in correctly identifying and documenting clients as US or non-US persons, we can simplify our annual reporting to make it as streamlined as possible.
Any client who intends to hold US stock and go on to receive US source income is asked to provide a Form W-8 or W-9 before they trade. This allows you to self-certify your status as either a US or non-US person and ensures that we deduct the correct amount of withholding tax from any amount of US source income that you receive.
There are various types of W-8 form depending on the type of client, but we can identify from your form whether you are considered direct or indirect, whether segregated reporting is required, and in those scenarios for whom we may need to provide reports.
We are required to report all details of US income received and withholding tax applied to the Internal Revenue Service on an annual basis. Most clients are pool-reported but in some scenarios, such as certain flow-through entities ( e.g. partnerships, simple and grantor trusts etc) or US account holders, it may be necessary to report the client on an individually-named basis.
US source income is generally taxed at a default rate of 30%. In certain cases it may be possible to reduce this if you are resident in a country that has a Double Taxation Agreement with the USA. You may be able to claim tax treaty benefit which will ensure you do not pay the full rate of tax twice on the same income: once when you received your dividend, and again in your own country of tax residence when you file your tax return.
For example, the United Kingdom has a Double Taxation Agreement with the USA so UK residents may be able to reduce the withholding tax on their US source income to 15%. Other reduced rates may apply for different countries and this can change from time to time.
If you are eligible for tax treaty benefit, you must claim this on the W-8 form which is Part II on the W-8BEN, or Part III on the W-8BEN-E. More information can be found here.
Ravenscroft’s nominee company as a QI must make periodic certifications to the Internal Revenue Service to confirm compliance with the terms of the QI Agreement. We have robust procedures in place to ensure we are acting in accordance with the terms of the Agreement at all times.
Working closely with our tax advisers, we put ourselves through regular health checks and external audits to ensure we are working in full compliance with the regime and keeping up to date with any regulatory changes.
It’s worth noting that withholding tax will only be charged if you purchase US stocks directly; if you buy US stocks via a fund the tax will not apply.
US Clients - W-9
Non-US individual - W-8BEN
Non-US company - W-8BEN-E
Non-US partnership - W-8IMY and WHS in the name of the partnership, plus W-8BEN/W-9 for each underlying partner
Non-US complex trust - W-8BEN-E in the name of the trust
Non-US simple trust - W-8IMY and WHS in the name of the trust, plus W-8BEN/W-8BEN-E/W-9 for each underlying individual/beneficiary
Non-US grantor trust with named beneficiaries - W-8IMY and WHS in the name of the trust, plus W-8BEN/W-8BEN-E/W-9 for each underlying individual/beneficiary
Non-US grantor trust with discretionary beneficiaries - W-8IMY in the name of the trust, plus W-8BEN/W-9 for the grantor on the basis that the grantor is treated as the beneficial owner
Non-US unit trust - W-8BEN-E
Non-US investment fund - W-8BEN-E
Non-US charity exempt under US law - W-8EXP
Non-US charity not exempt under US law - W-8BEN-E
Non-US pension fund - W-8BEN-E
Non-US government - W-8EXP
Non-US central bank - W-8EXP
Non-US bank, broker or other financial institution that is a Non-Qualified Intermediary - W-8IMY and WHS in the name of the entity, plus W-8BEN/W-8BEN-E/W-9 for each underlying individual/beneficiary. W-8BEN-E only if the entity is acting for its own account (i.e. own assets)
Non-US bank, broker or other financial institution that is a Qualified Intermediary - W-8IMY and WHS in the name of the entity, plus W-8BEN/W-8BEN-E/W-9 for each underlying individual/beneficiary. W-8BEN-E only if the entity is acting for its own account (i.e. own assets)
Useful Links
If your circumstances change which affects the details we hold for you - such as a change of address - you must advise us immediately and provide us with a new Form W-8/W-9 within 30 days of the change occurring.
Please let us know by contacting clientservices@ravenscroftgroup.com
A change to your country of residence may affect the rate of withholding tax applied to your US source income.
Please let us know by contacting clientservices@ravenscroftgroup.com
This is relevant to any client who is a US tax payer, however all new clients are asked to self-certify and provide their tax details.
Also known as FATCA, this is a federal law that was passed by the United States in 2010 as part of the HIRE Act to combat tax evasion by US taxpayers holding investments in foreign accounts. This requires Ravenscroft as a foreign financial institution (“FFI”) to report details of foreign assets held by our US account holders, or be subject to an additional withholding tax on withholdable payments if we do not comply.
Officially introduced on 1st July 2014, the regime is now well established and is considered part of our everyday procedures. Most jurisdictions in which Ravenscroft operates have signed an Intergovernmental Agreement with the United States of America confirming our intention to participate in FATCA. Ravenscroft has registered its reportable FFI entities with the Internal Revenue Service signalling our intention to fully comply.
US Persons must be reported by Ravenscroft to the Internal Revenue Service on an annual basis, providing information relating to the account as shown below. Reportable persons include direct account holders and in some cases, the Controlling Persons of entities.
Reportable Persons information to be reported:
1) Name
2) Address
3) Tax Identification Number (TIN) for Specified US Persons, where available
4) Date of birth
5) Name, address and TIN (if any) of the entity
6) The account number or functional equivalent
7) The name and Global Intermediary Identification Number of the Reporting Financial Institution
8) The account balance or value as of the end of the calendar year or other appropriate period (there are some exceptions to this rule)
Custodial account:
9) Total gross amount of interest paid or credited to the account
10) Total gross amount of dividends paid or credited to the account
11) Total gross amount of other income paid or credited to the account
12) Total gross proceeds from the sale or redemption of property paid or credited to the account
Depository account:
In addition to 1) to 8) above, where the account is a Depository Account the following information is also required:
13) Total amount of gross interest paid or credited to the account in the calendar year or other appropriate period
Ravenscroft is required to collect and hold full tax details of all clients who hold a financial account with us. We have previously collected tax details for our longer standing account holders as part of a remediation exercise and now collect full tax details for every new client account that we open. You will need to provide us with your country(ies) of tax residence and tax identification number(s) or your country’s functional equivalent – for example, Guernsey and Jersey use the Social Security number for reporting. You will also need to declare your status as a US Person or otherwise.
Each of Ravenscroft’s FFIs must follow guidelines based around the Inter-Governmental Agreements between the jurisdiction in which the financial account is held, and the IRS. We must also make regular declarations to the IRS to confirm compliance with the regime, which includes annual reporting of our in-scope clients.
If your circumstances change which affects the details we hold for you - such as a change of address - you must advise us immediately and provide us with a tax self-certification form within 30 days of the change occurring.
Please let us know by contacting clientservices@ravenscroftgroup.com
Please let us know by contacting clientservices@ravenscroftgroup.com
This is relevant to any client who holds an account in a jurisdiction that is participating in Common Reporting Standard and if the client is tax resident a reportable jurisdiction. All clients are asked to self-certify and provide their tax details when opening an account.
Also known as CRS, this regime was introduced by the Organisation for Economic Co-operation and Development (OECD) and as with FATCA, the aim is to combat tax evasion. More than 100 countries have signalled their intention to participate in the global automatic exchange of tax information.
Further information can be found here.
Officially introduced on 1st January 2016, the regime is well established and is considered part of our everyday procedures. Most of the jurisdictions in which Ravenscroft operates have committed to the adoption of the global Common Reporting Standard regime. If your account is held in a jurisdiction that is participating in CRS and you are tax resident in a reportable jurisdiction, we are obliged to report your details to the tax authority of that jurisdiction on an annual basis.
Reportable persons include direct account holders and in some cases, the Controlling Persons of entities.
Reportable Persons information to be reported:
1) Name
2) Address
3) Tax Identification Number (TIN) or functional equivalent
4) Date and place of birth (in the case of an individual)
5) Name, address and TIN (if any) of the entity
6) In the case of any Controlling Persons of an entity, lines 1-4 should also be reported for each of them
7) The account number or functional equivalent
8) The account balance or value as of the end of the calendar year or other appropriate period (there are some exceptions to this rule)
Custodial account:
In addition to 1) to 8) above, where the account is a Custodial Account the following information is also required:
9) Total gross amount of interest paid or credited to the account
10) Total gross amount of dividends paid or credited to the account
11) Total gross amount of other income paid or credited to the account
12) Total gross proceeds from the sale or redemption of property paid or credited to the account
Depository account:
In addition to 1) to 8) above, where the account is a Depository Account the following information is also required:
13) Total amount of gross interest paid or credited to the account in the calendar year or other appropriate period
Ravenscroft is required to collect and hold full tax details of all clients who hold a financial account with us. We have previously collected tax details for our longer standing account holders as part of a remediation exercise and now collect full tax details for every new client account that we open. You will need to provide us with your country(ies) of tax residence and tax identification number(s) or your country’s functional equivalent – for example, Guernsey and Jersey use the Social Security number for reporting.
Each of Ravenscroft’s entities must follow guidelines based around the Inter-Governmental Agreements between the jurisdiction in which the financial account is held, and the IRS. We must also make regular declarations to the IRS to confirm compliance with the regime, which includes annual reporting of our in-scope clients.
If your circumstances change which affects the details we hold for you - such as a change of address - you must advise us immediately and provide us with a tax self-certification form within 30 days of the change occurring.
Please let us know by contacting clientservices@ravenscroftgroup.com
Please let us know by contacting clientservices@ravenscroftgroup.com
Ravenscroft is unable to provide tax advice but we suggest you speak to your accountant or tax advisers if you need any specific advice. If you have any general questions in regard to the above, we would be delighted to assist.
Contact us on clientservices@ravenscroftgroup.com
This week's note is written by our advisory investment team in Jersey.
A fourth defibrillator has been installed in the centre of Town after Ravenscroft covered the cost of supplying and fitting it to its office.