William Byrnes' Tax, Wealth, and Risk Intelligence

Foreign financial institutions (FFIs) and US withholding agents (USWAs) have presented compliance concerns to Treasury and the IRS about the status of FFIs in jurisdictions that are known to be in an advanced stage of concluding an IGA, but have not yet signed such agreement.  Treasury has signed IGAs with 26 jurisdictions and has reached agreements in substance or is in advanced discussions with many others.

Treasury and the IRS have on April 2, 2014 issued Announcement 2014-17 to provide some level of comfort to FFIs in such jurisdictions that already have reached an IGA in substance and to USWAs paying agents.

Moreover, the IRS has also granted an extension of 10 (ten) days, previously April 25 but now May 5, 2014 (GMT -5), for an FFI to register via the FATCA Registration Portal to be included on the PFFI Global Intermediary Identification Number (GIIN) list to be issued June 2, 2014.

On July 1, 2014 FATCA withholding must be implemented for certain transactions (see Chapter 12 FATCA Withholding Compliance, LexisNexis® Guide to FATCA Compliance).  FATCA requires that a withholding agent must obtain an FFI’s GIIN for payments made from July 1, 2014 and must confirm that the GIIN appears on the IRS FFI List. However, an exception provides that a withholding agent does not need to obtain a reporting Model 1 FFI’s GIIN for payments made before January 1, 2015.

The IRS disclosed that “some FFIs that expect to be reporting Model 2 FFIs may not be able to register by April 25 if legal impediments would prevent them from agreeing to the terms of the FFI Agreement that would apply absent the modifications applicable to reporting Model 2 FFIs under a signed Model 2 IGA.”

“Some FFIs”, continued the IRS Notice, “…expect to be reporting Model 1 FFIs … are concerned about missing the April 25 deadline in case the relevant IGA is not in fact signed, and therefore treated as being in effect, by July 1.”

Relevant portions of Announcement 2014-17 are excerpted below.

Expansion of IGAs Treated as Being in Effect to Include Agreements in Substance

This announcement aims to address these concerns by providing that the jurisdictions listed on the Treasury and IRS websites as jurisdictions that are treated as having an IGA in effect will also include jurisdictions that, before July 1, 2014, have reached agreements in substance with the United States on the terms of an IGA and have consented to be included on the Treasury and IRS list, even if those agreements have not yet been signed.

Such jurisdictions will be treated as having an IGA in effect from the date that the jurisdiction provides its consent (or April 2, 2014, the date of the public release of this announcement, if later) until December 31, 2014, the date by which the IGA must be signed in order for this status to continue without interruption. Treasury expects to add jurisdictions to this list in the coming weeks as additional jurisdictions consent to inclusion on the list and additional agreements in substance are reached. Jurisdictions that reach agreements in substance on or after July 1, 2014, will not be included in the list of jurisdictions that are treated as having an IGA in effect until the IGA is signed.

The text of the agreements in substance that are treated as being in effect will not be published by the IRS or Treasury until the IGA is signed. Instead, the list will specify only whether the relevant IGA is a Model 1 or a Model 2 IGA. Until the IGA is signed, the jurisdiction will be treated as having in effect the relevant model provisions. This means that an FFI resident in, or organized under the laws of, a jurisdiction that is listed on the Treasury and IRS websites as having reached an agreement in substance will be permitted to register on the FATCA registration website consistent with its treatment under the relevant model IGA and will be permitted to certify its status to a withholding agent consistent with that treatment.

New Dates for Registering to Ensure GIIN Inclusion on the IRS FFI List

Finally, Treasury and the IRS remind all withholding agents that, in accordance with Reg. §1.1471-3(e)(3), a withholding agent that receives a Form W-8 from a payee with a GIIN that does not yet appear on the published IRS FFI List has 90 days to verify that the GIIN appears on the list before the withholding agent will be treated as having reason to know that the chapter 4 status of the payee is unreliable or incorrect. In addition, a withholding agent that receives a Form W-8 from a payee indicating that the payee has applied for a GIIN has 90 days to obtain the GIIN from the payee and verify it against the IRS FFI List before the withholding agent will be treated as having reason to know that the chapter 4 status of the payee is unreliable or incorrect.

Jurisdictions that have signed agreements:

Model 1 IGA

• Canada (2-5-2014)
• Cayman Islands (11-29-2013)
• Costa Rica (11-26-2013)
• Denmark (11-19-2012)
• Finland (3-5-2014)
• France (11-14-2013)
• Germany (5-31-2013)
• Guernsey (12-13-2013)
• Hungary (2-4-2014)
• Honduras (3-31-2014)
• Ireland (1-23-2013)
• Isle of Man (12-13-2013)
• Italy (1-10-2014)
• Jersey (12-13-2013)
• Luxembourg (3-28-2014)
• Malta (12-16-2013)
• Mauritius (12-27-2013)
• Mexico (11-19-2012)
• Netherlands (12-18-2013)
• Norway (4-15-2013)
• Spain (5-14-2013)
• United Kingdom (9-12-2012)

Model 2 IGA

• Bermuda (12-19-2013)
• Chile (3-5-2014)
• Japan (6-11-2013)
• Switzerland (2-14-2013)

Jurisdictions that have reached agreements in substance and have consented to being included on this list (beginning on the date indicated in parethesis):

Model 1 IGA

• Australia (4-2-2014)
• Belgium (4-2-2014)
• Brazil (4-2-2014)
• British Virgin Islands (4-2-2014)
• Czech Republic (4-2-2014)
• Gibraltar (4-2-2014)
• Jamaica (4-2-2014)
• Kosovo (4-2-2014)
• Latvia (4-2-2014)
• Liechtenstein (4-2-2014)
• Lithuania (4-2-2014)
• New Zealand (4-2-2014)
• Poland (4-2-2014)
• Portugal (4-2-2014)
• Qatar (4-2-2014)
• Slovenia (4-2-2014)
• South Africa (4-2-2014)
• South Korea (4-2-2014)
• Romania (4-2-2014)

Model 2 IGA

• Austria (4-2-2014)

Practical Compliance Aspects of Exchange of Information, FATCA and GATCA

For in-depth analysis of the practical compliance aspects of financial service business providing for exchange of information of information about foreign residents with their national competent authority or with the IRS (FATCA), see Lexis Guide to FATCA Compliance, 2^nd Edition just published!

The LexisNexis® Guide to FATCA Compliance (2^nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance challenges (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA.  Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters.