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| Under new rules added to the US Tax Code in January 2012, credit card processing companies must now collect and verify the tax identification number (TIN) and legal name associated with that number for each merchant customer.Section 6050W of the US Internal Revenue Code now requires merchant-acquiring entities in the US such as American Express to document the status of any US or foreign business they settle transactions with.Although section 6050W is aimed at American taxpayers, who have to provide their taxpayer identification number, foreign merchants using the payment services are subject to the regulation if their establishment has a physical address or bank account in the US, or if it processes transactions in US dollars, as it is the case with credit cards.All transactions using US-based credit cards are subject to an automatic 28 percent withholding tax unless the merchant is compliant with new regulations. So far, American Express appears to be the only company enforcing this law, although it should eventually apply to all US-based cards.To comply with the regulation, regional businesses that accept US credit cards have to complete US tax form W-8BEN to certify their status as a non-US merchant and submit it to their payment processing provider.Kevin Teslyk, managing director of Scotiabank (Bahamas) Limited, expressed concern that no financial institution will be spared. He said that American Express is getting “huge feedback” from clients globally, both from cardholders and merchants carrying out transactions.“The larger customers have dealt with this and completed the form. So I think it is broadly reaching a number of others that are feeling the impact right now,” he explained. “We are proactively working with clients. It hit us on Monday of this week and we are now assisting clients.”Fortunately, he noted that only American Express customers have been hit thus far, which represents a relatively small portion of the market. Visa and MasterCard appear to be giving clients more time to transition.“The industry was surprised by the effective date. This is an IRS withholding that American Express is making on behalf of them in the settlement of payment. This is not financial institutions withholding the amount,” he added.If there is a discrepancy between the merchant’s TIN and associated legal name in the credit card processing company records and IRS records, or if the merchant does not provide a TIN, the IRS now requires the processing company to withhold 28 percent of the merchant’s future payment credit card transactions until the issue is resolved. The ‘back up withholding’ provision of the law went into effect for transactions on and after January 1,Cheap Jerseys, 2013, according to a recent warning by the Bahamas Hotel and Tourism Association (BHTA).The new law represents another effort by the US government to boost transparency and possible tax collection for Americans overseas. (Caribbean News Now) |
