IRS Notice 2013-44 alerts payers that the Internal Revenue Service and the Treasury Department will amend sec. 301.7701-2(b)(8) of the Procedure and Administration Regulations to add the Croatian dionicko drustvo to the list of entities that are always treated as corporations under section 7701 of the Internal Revenue Code. Reg. section 301.7701-2(b)(8) provides a list of certain foreign business entities that are always classified as corporations for U.S. federal tax purposes. This list is known as the per se corporation list, and the foreign business entities on this list are referred to as per se corporations. The effective date is July 1, 2013, because that is the date on which Croatia becomes a member of the European Union, making it possible for a European public limited liability company (a Societas Europaea or SE) to have a registered office in Croatia. Remember that treatment as a corporation does not in itself exempt a foreign entity from U.S. tax reporting and withholding in the way that corporate status exempts a U.S. entity from Form 1099 reporting for many types of payments. Listing on the sec. 301.7701-2(b)(8) per se list merely informs a U.S. payer that the foreign entity is classified as a corporation. Without further documentation, under the presumption standards the entity is subject to 30% Chapter 3 withholding and 1042-S reporting, and could be subject to FATCA requirements in 2014.
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