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New IRS policy automates international tax process

Commerce is in no way limited by geographic borders. There is a constant flow of money, resources and goods between organizations conducting business overseas, as well as global corporations with locations around the world.

For businesses looking to take advantage of the global marketplace and expand their operations beyond U.S. borders, this often means establishing partnerships with foreign suppliers and corporations that have the expertise and geographical advantage to aid in expansion. When operating on a global scale, special provisions must be made within financial departments to ensure compliance with international tax laws and regulations. One of which is the submission of a Form W-8, a form the IRS recently updated to allow for greater submission automation.

A Form W-8 provides documentation to financial institutions allowing foreign entities to establish status as a “non-resident” and claim exempt status from certain taxes. Submitting the form is necessary for AP departments executing business in compliance with the Foreign Account Tax Compliance Act (FATCA). Many AP departments are rejoicing after a recent memorandum was released from the IRS Office of Chief Counsel stating a signed Form W-8 can be scanned, e-mailed or faxed as an accepted method of submission.

For businesses, as well as financial institutions interested in taking advantage of the policy changes, there are a few IRS-established safeguards that must be met. The original memorandum lists these stipulations in the general requirements section and addresses the necessary parameters with which the document may be accepted. In a recent Financial Operations Mattersarticle, Diane Sears discusses the implications of the new provision and taps a Washington, D.C., law firm to provide a clear analysis of the memorandum.

An excerpt from the analysis explains the ways senders can ensure their forms are properly submitted:

  • Print it out
  • Fill it out
  • Sign it
  • Scan it
  • Email or fax it
  • Verify the sender
  • Validate the form
  • Receive a memorandum of understanding (MOU) from the IRS that it received the form

You can read the full analysis here and stay updated on the latest IRS news by visiting the IRS News and Events page.

Topics: Paperless ERP