BearingPoint offers a 871 (m) solution relying on EasyTax for classification and tax calculation, and on FiTAX for tax reporting.

The new QI (Qualified Intermediary) Agreement allows certain non-US derivatives dealers and securities lenders that are QIs to enter into an agreement with the IRS to act as Qualified Derivative Dealers (QDDs) with respect to transactions that give rise to payments under Code Section 871(m). Section 871(m) regulation subjects US dividends paid to non-US residents to withholding tax (standard rate: 30%), when paid or accrued within non-US derivatives which are closely linked to US equity.

BearingPoint proposes a solution relying on EasyTax for classification and tax calculation, and on FiTAX solution for reporting.

Classification

For classification (liable/non-liable), EasyTax relies on a financial data provider’s input, bank input for instruments issued by the bank, automated mailing for issuer of “potentially-in-scope” instruments on which no classification data is available.

Calculation

  • Taxes on dividend-equivalent payment events for both QDD and intermediaries. Rates are calculated based on the client’s situation (30% or reduced rate).
  • Taxes are either booked directly by the solution, or mirror and challenge the amount withheld upstream
  • Check of combination rules on investor’s safekeeping account level
  • Calculation of Swiss additional withholding amount and generation of an extract
  • Calculation of the total tax liability per tax period and aggregation into a report
  • EasyTax relies on its existing real-time calculation platform (EasyTax OLTP).

Reporting

FiTAX extends its QI reporting in order to cover new Qualified Derivative Dealer reporting duties and to include Dividend Equivalent Payments: Form 1042-S covering 871(m) transactions, Forms 1042 incl. section 4 attachment, Form 1120-F.

All the standard features of FiTAX are available with this extended scope (client reports, amendments, figures analysis, etc.).

In addition to the regulatory reports produced by FiTAX, EasyTax offers reports and data extraction features.

On the client side (EasyTax) as well as on tax authorities side (FiTAX), banks will benefit from an already established team network of a well-known provider. EasyTax and FiTAX are two complementary reporting tax software which offer financial institutions a one stop shop solution, covering both client and regulatory tax reporting and facilitating harmonized data management.

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