In order to keep up with international financial institutions, more and more Taiwan financial institutions, especially stockbrokers, applied for QI status to the IRS during 2018 and 2019. It is important to remember that, once you become a QI and have the benefits of being a QI, you must meet QI obligations.

The QI Agreement states that you must certify your compliance to the IRS every three years. To do that, you must first have had a Periodic Review.  If you became a QI in 2018, you must have a Periodic Review completed in 2022, so you can make IRS certification by December 31st, 2022. If you became a QI in 2019, you must have a Periodic Review completed by July 2023.

A Periodic Review means you must appoint an independent and competent person to check that you met all the QI obligations. The rules are very complicated, and you cannot use your current consultant to do this.

Reviewers must be independent

The QI Agreement mandates the reviewer must have sufficient independence to conduct the review and cannot review the work of anyone in the same “firm.” So, one principle of QI Periodic Review and certification is that the Responsible Officer must know the reviewer is “independent”. If they have a consultant who has helped with any QI matters such as QI application and compliance program conduct before, the IRS says their consultant is NOT independent. So that QI cannot use their original consultant as their reviewer. That means the RO must look for an independent person to check whether the QI has complied with their obligations thoroughly.

Reviewers must be competent

A reviewer must test the QI’s accounts to make sure they documented customers correctly and that the documentation was valid, withheld tax correctly and reported correctly in FATCA and QI. For most financial institutions, it’s not easy to do periodic review by using their internal auditor because they are not knowledgeable enough and don’t have experience of US withholding tax compliance. So, most QIs rely on external auditors or third-party consultants. However, in Taiwan most financial institutions also use a third-party consultant to support them with their day-to-day QI compliance, which means that consultant firm can’t be the reviewer to do Periodic Review because they are not independent.

Find the subject matter experts who are independent

Never think that Periodic Review and certification are easy routines. If QIs don’t prepare properly or don’t check accurately, QIs can be penalized by the IRS. TConsult Ltd is used by customers in 19 countries including many FIs in Taiwan and Asia as subject matter experts and the most important is that we are independent. If you’d like help understanding and planning how to do QI periodic review and certification, get in touch with us at [email protected].