Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘IGA’

A Proposal to Leverage FATCA to Punish Black and Grey Hat Governments.

Posted by William Byrnes on February 16, 2017


please download my proposal https://ssrn.com/abstract=2916444

Abstract: Professor William Byrnes examines whether it is prudent for taxpayers to trust the governments of the 117 countries that scored a fifty or below on Transparency International’s Irs_logocorruption index. The complete information system invoked by the Foreign Account Tax Compliance Act (FATCA) encourages, even prolongs, the bad behavior of black hat governments by providing fuel (financial information) to feed the fire of corruption and suppression of rivals. Professor Byrnes recommends that the United States leverage a “carrot-stick” policy tool to incentivize bad actors to adopt best tax administration practices.  Article download at https://ssrn.com/abstract=2916444

Keywords: FATCA, Common Reporting Standards, OECD, Exchange of Information, Taxpayer Rights, IGA, corruption

Professor William Byrnes is the primary author of Lexis’ Guide to FATCA and Common Reporting Standard Compliance – 2017.  He designed then wrote the initial 2012 edition and has grown it to the #1 FATCA resource for advisors and institutions.  Now in its fifth edition for 2017!

Over 1,800 pages of analysis of the FATCA and CRS compliance challenges,  79 chapters by FATCA and CRS contributing experts from over 50 countries. Besides in-depth, practical analysis, the 2017 edition includes examples, charts, timelines, links to source documents, and compliance analysis pursuant to the IGA, CRS agreement, and local regulations for many financial centers.   This fifth edition will provide the financial enterprise’s FATCA and CRS compliance officer the tools for developing and maintaining a best practices compliance strategy.  No filler of forms and regs – it’s all beef !  See Lexis’ order site and request a copy of the forthcoming 2017 edition – http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327

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FATCA Research Project – Help Us Find IGA Model 1 Reporting Deadlines !!!

Posted by William Byrnes on March 20, 2015


d27f6-6a00d8341bfae553ef01b7c6eb77bd970b-piHaydon Perryman has posted a list of Model 1 IGA Countries that have at least one FFI registered with the IRS. We already know the deadlines for Non IGA and Model 2 IGA countries. Please help us in this important research!

In most Model 1 Countries that deadline will be by the end of June 2015 (but not always). Thus, please post by comment any reporting dates you know by jurisdiction – on his blog (if you post here I will copy it over for you).

http://haydonperryman.com/fatca-reporting-deadline-by-jurisdicion/

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112 Intergovernmental Agreements and counting …. only 123 countries left out in the FATCA cold

Posted by William Byrnes on January 9, 2015


read the post at International Financial Law Prof Blog.

http://lawprofessors.typepad.com/intfinlaw/2015/01/112-intergovernmental-agreements-and-counting-only-123-countries-left-out-in-the-fatca-cold.html

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FATCA GIIN January 2015 FFI Registration Analysis … by the numbers

Posted by William Byrnes on January 5, 2015


d27f6-6a00d8341bfae553ef01b7c6eb77bd970b-piThe IRS published its first FATCA GIIN list of 2015 (on New Years Day!) a list of “approved FFIs” i.e. a list of those who have registered on the IRS FATCA portal by December 23, 2014.  FATCA’s 30% withholding regime on “withholdable payments” for non-IGA countries has applied since July 1, 2014.  But since New Years Day this FATCA (Chapter 4) withholding also applies to IGA countries’ FFIs that do not supply a GIIN upon the proper W8 (or ‘equivalent’) certification documentation.

read the full analysis of the numbers at International Financial Law Prof Blog:

http://lawprofessors.typepad.com/intfinlaw/2015/01/fatca-giin-january-2015-ffi-registration-analysis-by-the-numbers-.html

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IRS Releases FATCA Q&A for IGA FFIs Registration

Posted by William Byrnes on December 24, 2014


d27f6-6a00d8341bfae553ef01b7c6eb77bd970b-piIGA Question 8: Announcement 2014-38 provides that a jurisdiction that is treated as if it has an IGA in effect, but that has not yet signed an IGA, retains such status beyond December 31, 2014, provided that the jurisdiction continues to demonstrate firm resolve to sign the IGA that was agreed in substance.  Given this additional time to sign the IGA, does a reporting Model 1 FFI in such a jurisdiction need to register and obtain a GIIN before January 1, 2015?

Announcement 2014-38 does not change the requirement in the chapter 4 regulations that for payments made on or after January 1, 2015, in order for withholding not to apply, a withholding agent may treat a reporting Model 1 FFI as a registered deemed-compliant FFI only if the withholding agent has a withholding certificate identifying the payee as a registered deemed-compliant FFI and the withholding certificate contains a GIIN for the payee that is verified in the manner described in those regulations.  Thus, to avoid withholding on certain payments made on or after January 1, 2015, a reporting Model 1 FFI should register and obtain a GIIN to properly certify its status to a withholding agent required to document the FFI for chapter 4 purposes.   A reporting Model 1 FFI that has registered but not yet obtained a GIIN should indicate to its withholding agent that its GIIN is “applied for,” and in such case, the withholding agent will have 90 days from the date it receives the Form W-8 to obtain a GIIN and to verify the accuracy of the GIIN against the published IRS FII list before it has reason to know that the payee is not a registered deemed-compliant FFI.

Announcement 2014-38 similarly does not change the timing of any other due diligence and reporting requirements in the chapter 4 regulations.

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IRS extends FATCA IGA Signatory Deadlines Beyond January 1

Posted by William Byrnes on December 1, 2014


Announcement 2014-38  provides guidance with respect to jurisdictions that are treated as if they had a FATCA intergovernmental agreement (IGA) in effect pursuant to Announcement 2014-17, 2014-18 I.R.B. 1001, but that do not sign the IGA before December 31, 2014.

Announcement 2014-38 provides that a jurisdiction that is treated as if it had an IGA in effect, but that has not yet signed an IGA, retains such status beyond December 31, 2014, provided that the jurisdiction demonstrates firm resolve to sign the IGA as soon as possible.

After December 31, 2014, Treasury will review the list of jurisdictions having an agreement in substance on a monthly basis to assess whether it continues to be appropriate to treat such a jurisdiction as if it had an IGA in effect or whether a jurisdiction should be removed from the list.

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UK trusts under the UK-US Intergovernmental Agreement (IGA)

Posted by William Byrnes on September 16, 2014


August 2014, STEP, alongside ICAEW and The Law Society of England and Wales, updated their joint guide to the treatment of UK trusts under the UK-US Intergovernmental Agreement (IGA) to take into account minor revisions from HMRC. The trust tests (left hand side of the flowchart) have been amended. Detailed questions in Appendix II of the guidance have also been revised to reflect this.  The changes are not fundamental.

book cover

 

download for free –> LexisNexis® Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA)

 

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FATCA FFI Update and It Doesn’t Look Pretty. September Did Not Break 100,000!

Posted by William Byrnes on September 2, 2014


The IRS published its September list of 99,861 FFIs registered for FATCA.  But that’s just an increase of about 4,500 registrations since the August list of 95,239.  The disappointing September result is a harbinger of the rough waters ahead for general FATCA compliance.  Considering the growth in registrations has slowed dramtically from the July to August increase of only7,246 additional entities (up from 87,993 in July), many industry watchers are sounding the alarm bells.

How Many Foreign Financial Institutions Are Still Not Registered?  Most!

read the country by country analysis at International Financial Law Prof Blog.

Read the August analysis and a country-by-country, and IGA, breakdown at International Financial Law Professor

Who We Are?

Haydon Perryman, FATCA Compliance expert of Strevus, and I have been undertaking (and publishing) the leading, same-day, analysis of the previous June 2nd  and the July 1st  of the FATCA FFI GIIN list by country, by IGA, by EAG, as well as exploring other interesting aspects of registered FFIs, and FATCA compliance documentation (e.g. W-8s and equivalent forms allowed by IGA). Haydon brings the practical side to bear having established the FATCA compliance system for Tier 1 UK institutions and Tier 1 EU ones, and I the academic side being the primary author of Lexis’ Guide to FATCA Compliance and an international tax professor.

free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

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New FATCA FAQ – Application of the Preexisting Obligation Election to Intermediaries and Flow-through Entities

Posted by William Byrnes on August 8, 2014


FATCA book coverQuestion: Notice 2014-33, 2014-21 I.R.B. 1033, provides that a withholding agent or FFI may treat an obligation as a preexisting obligation if the obligation (i) is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015, and (ii) is held by an entity.  How does this provision of Notice 2014-33 apply when the recipient of a payment made under the obligation is a flow-through entity or intermediary?

Answer: A withholding agent may treat an obligation held by an entity (including an entity acting as an intermediary with respect to the obligation or a flow-through entity) as a preexisting obligation to the extent permitted in Notice 2014-33.  Therefore, an obligation held by an intermediary or flow-through entity is treated as a preexisting obligation if it is issued, opened, or executed before January 1, 2015.  In such a case, the withholding agent may rely on a pre-FATCA Form W-8 to document the holder of the obligation throughout 2014.  If the flow-through entity or intermediary provides the withholding agent with a withholding statement allocating a portion of a payment to a chapter 4 withholding pool of recalcitrant account holders or NPFFIs (or payee-specific information for such persons), then the withholding agent is required to apply chapter 4 withholding to the portion of the payment allocated to each such pool of payees (or each such payee), even though it is not yet required to document the chapter 4 status of the flow-through entity or intermediary.  However, a withholding agent must determine the chapter 4 status of a flow-through entity or intermediary as a PFFI or RDCFFI when provided with a withholding statement allocating a portion of a payment to a chapter 4 withholding rate pool of U.S. payees that the withholding agent reports on Form 1042-S as made to the pool rather than requiring payee-specific documentation for each payee in the pool or withholding and reporting in accordance with the applicable presumption rules.

If the withholding agent receives documentation from a flow-through entity with respect to an interest holder in the entity or from an intermediary with respect to its account holder and confirms (in writing) that the intermediary or flow-through entity treats the obligation as a preexisting obligation (including under Notice 2014-33, if applicable), the withholding agent may treat the obligation as a preexisting obligation provided that the withholding agent does not have documentation showing the interest holder or account holder to be an NPFFI.  The preceding sentence would apply, for example, to documentation provided with respect to a passive NFFE that is an account holder in an intermediary and that does not provide the information or certification described in Treas. Reg. § 1.1471-3(d)(12)(iii) with respect to its owners.

FATCA – FAQsGeneral Compliance, See Q7

download free  –> the 58 page Lexis Guide to FATCA Compliance, Chapter 1.

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IRS Posts New and updated FATCA FAQs

Posted by William Byrnes on August 5, 2014


New and updated FATCA Registration System and FFI List FAQs have been posted to the FATCA Website.

  • What is the maximum number of points of contact allowed on the Registration? Updated: 8-1-2014
  • What is the maximum number of points of contact allowed on the Registration? Updated: 8-1-2014
  • What information will be in the notification e-mail the RO receives? Updated: 8-1-2014
  • Why is the RO not receiving FATCA notification emails regarding the FI’s status and account updates? Updated: 8-1-2014

book cover

free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

Over 600 pages of 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).

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FINCEN Issues New Due Diligence for Beneficial Owners of US Accounts to Provide FATCA Reciprocity to Foreign Governments

Posted by William Byrnes on August 4, 2014


FBARThe U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM) to amend existing Bank Secrecy Act (BSA) regulations to help prevent the use of anonymous companies to engage in or launder the proceeds of illegal activity in the U.S. financial sector.  See Proposed Rules and New Beneficial Ownership Form (Appendix A) here.

The proposed rule would clarify and strengthen customer due diligence obligations of banks and other financial institutions (including brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities).

The proposed amendments would add a new requirement that these entities know and verify the identities of the real people (also known as beneficial owners) who own, control, and profit from the companies they service to facilitate reporting and investigations in support of tax compliance, and advancing international commitments made to foreign counterparts in connection with the provisions commonly known as the Foreign Account Tax Compliance Act (FATCA).

FATCA’s USA Reciprocity to Report Foreign Nationals Financial Information to Foreign Governments

The United States has collaborated with foreign governments to enter into intergovernmental agreements that facilitate the effective and efficient implementation of these requirements. Pursuant to many of these agreements, the United States has committed to pursuing reciprocity with respect to collecting and reporting to the authorities of the FATCA partner information on the U.S. accounts of residents of the FATCA partner.  A general requirement for U.S. financial institutions to obtain beneficial ownership information for AML purposes advances this commitment, and puts the United States in a better position to work with foreign governments to combat offshore tax evasion and other financial crimes.

Required Due Diligence by US Financial Institutions

The rulemaking clarifies that customer due diligence includes four core elements:

  1. identifying and verifying the identity of customers;
  2. identifying and verifying the beneficial owners of legal entity customers;
  3. understanding the nature and purpose of customer relationships; and
  4. conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions.

The proposed requirement to identify and verify the identity of beneficial owners is addressed through the proposal of a new requirement for covered financial institutions to collect beneficial ownership in a standardized format.

Those financial institutions will have to identify and verify any individual who owns 25 percent of more of a legal entity, and an individual who controls the legal entity.

Determining Beneficial Ownership

The second element of CDD requires financial institutions to identify and verify the beneficial owners of legal entity customers.  FinCEN proposes a new requirement that financial institutions identify the natural persons who are beneficial owners of legal entity customers, subject to certain exemptions.

The definition of “beneficial owner” proposed herein requires that the person identified as a beneficial owner be a natural person (as opposed to another legal entity). A financial institution must satisfy this requirement by obtaining at the time a new account is opened a standard certification form (Appendix A of Proposed Rules) directly from the individual opening the new account on behalf of the legal entity customer.

Financial institutions would be required to verify the identity of beneficial owners consistent with their existing CIP practices.  However, FinCEN is not proposing to require that financial institutions verify that the natural persons identified on the form are in fact the beneficial owners. In other words, the requirement focuses on verifying the identity of the beneficial owners, but does not require the verification of their status as beneficial owners. This proposed requirement states minimum standards.

In order to identify the beneficial owner, a covered financial institution must obtain a certification from the individual opening the account on behalf of the legal entity customer (at the time of account opening) in the form of Appendix A.  The form requires the individual opening the account on behalf of the legal entity customer to identify the beneficial owner(s) of the legal entity customer by providing the beneficial owner’s

  • name,
  • date of birth,
  • address and
  • social security number (for U.S. persons).

This information is consistent with the information required under the CIP rules for identifying customers that are natural persons. The form also requires the individual opening the account on behalf of the legal entity customer to certify, to the best of his or her knowledge, that the information provided on the form is complete and correct.  Obtaining a signed and completed form from the individual opening the account on behalf of the legal entity customer shall satisfy the requirement to identify the beneficial owners.

This section also requires financial institutions to verify the identity of the individuals identified as beneficial owners on the certification form.  The procedures for verification are to be identical to the procedures applicable to an individual opening an account under the existing CIP rules.

Accordingly, the financial institution must verify a beneficial owner’s identity using the information provided on the certification form.  For foreign persons, the form requires –

  • a passport number and country of issuance, or
  • other similar identification number (name, date of birth, address, and social security number (for U.S. persons), etc.),

according to the same documentary and non-documentary methods the financial institution may use in connection with its customer identification program (to the extent applicable to customers that are individuals), within a reasonable time after the account is opened.

A financial institution must also include procedures for responding to circumstances in which it cannot form a reasonable belief that it knows the true identity of the beneficial owner, as described under the CIP rules.

Definition of Beneficial Owner

The proposed definition of “beneficial owner” includes two independent prongs:

(a) an ownership prong and

(b) a control prong.

A covered financial institution must identify each individual under the ownership prong (i.e., each individual who owns 25 percent or more of the equity interests), in addition to one individual for the control prong (i.e., any individual with significant managerial control).

If no individual owns 25 percent or more of the equity interests, then the financial institution may identify a beneficial owner under the control prong only. If appropriate, the same individual(s) may be identified under both criteria.

Purpose of New CDD Rules

Clarifying and strengthening CDD requirements for U.S. financial institutions, including an obligation to identify beneficial owners, advances the purposes of the BSA by:

  • Enhancing the availability to law enforcement, as well as to the federal functional regulators and SROs, of beneficial ownership information of legal entity customers obtained by U.S. financial institutions, which assists law enforcement financial investigations and regulatory examinations and investigations;
  • Increasing the ability of financial institutions, law enforcement, and the intelligence community to identify the assets and accounts of terrorist organizations, money launderers, drug kingpins, weapons of mass destruction proliferators, and other national security threats, which strengthens compliance with sanctions programs designed to undercut financing and support for such persons;
  • Helping financial institutions assess and mitigate risk, and comply with all existing legal requirements, including the BSA and related authorities;
  • Facilitating reporting and investigations in support of tax compliance, and advancing international commitments made to foreign counterparts in connection with the provisions commonly known as the Foreign Account Tax Compliance Act (FATCA); and
  • Promoting consistency in implementing and enforcing CDD regulatory expectations across and within financial sectors.

Cost of New Compliance?

FinCEN believes that there are approximately eight million such accounts opened annually by covered financial institutions. Based on the total number of covered financial institutions,65 this would result in each covered financial institution opening approximately 368 such accounts per year, or 1.5 per day. Estimating an average time for a covered financial institution to receive the certification and verify the information of 20 minutes and an average cost of $20 per hour, this results in a cost of approximately $54 million.

I will draft a topic chapter on the new FINCEN Beneficial Ownership Due Diligence requirements for the Winter release of LexisNexis’ Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide

book cover

LexisNexis’ Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide – This eBook with commentary and analysis by hundreds of AML experts from over 100 countries,  is designed to provide the compliance officer accurate analyses of the AML/CTF Financial and Legal Intelligence, law and practice in the nations of the world with the most current references and resources. The eBook is organized around five main themes: 1. Money Laundering Risk and Compliance; 2. The Law of Anti-Money Laundering and Compliance; 3. Criminal and Civil Forfeiture; 4. Compliance and 5. International Cooperation.  As these unlawful activities can occur in any given country, it is important to identify the international participants who are cooperating to develop methods to obstruct these criminal activities.

 

 

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August FATCA GIIN list analysed by country and by IGA

Posted by William Byrnes on August 1, 2014


By William Byrnes and Haydon Perryman

Treasury-Dept.-Seal-of-the-IRSThe IRS published its August list of 95,239  FATCA registered FFIs, including entities that completed the registration process by July 25th.  The increase has been disappointing to say the least.  Only 7,246 additional entities completed registration this past month, up from 87,993 in July.

89,718 FFIs (94%) are registered from the 101 IGA countries on the GIIN list.  Only 4,801 FFI (5%) registered from the 143 countries without an IGA for which FATCA withholding began July 1st.

June GIINs 77,354 -> July GIINs 87,993 -> August GIINs 95,239 (7,246 increase)

How Many Foreign Financial Institutions Are Still Not Registered?  Most!

Most pundits thought at least 20% of the FFIs requiring FATCA registration would have done so by now.  We were wrong.  I was personally thinking that 110,000 would be registered for the August 1st FFI list.  The small increase of just 7,246 is troubling.  Total global compliance remains in the single digits by both the IRS and foreign government estimated numbers.

The 30% FATCA withholding began July 1st on 143 countries (101 have IGAs that forestall withholding until January 1, 2015).  Only 4,801 FFI (5%) registered from these 143 countries.  Thus, FATCA compliance is running in the low, single digits for these countries.

read our analysis and a country-by-country, and IGA, breakdown at International Financial Law Professor

Who We Are?

Haydon Perryman, FATCA Compliance expert of Strevus, and I have been undertaking (and publishing) the leading, same-day, analysis of the previous June 2nd  and the July 1st  of the FATCA FFI GIIN list by country, by IGA, by EAG, as well as exploring other interesting aspects of registered FFIs, and FATCA compliance documentation (e.g. W-8s and equivalent forms allowed by IGA). Haydon brings the practical side to bear having established the FATCA compliance system for Tier 1 UK institutions and Tier 1 EU ones, and I the academic side being the primary author of Lexis’ Guide to FATCA Compliance and an international tax professor.

book cover

free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

Over 600 pages of 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).

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BVI Guidance Notes for the US and UK FATCA Agreements

Posted by William Byrnes on July 30, 2014


 

BVI

 

This document is a DRAFT of the proposed Guidance Notes for the US and UK FATCA Agreements with the Government of the British Virgin Islands and at this stage it is for discussion purposes ONLY!  

153 page draft FATCA guidance issued by BVI available > here <.

 

3. DEEMED COMPLIANT FINANCIAL INSTITUTIONS – US AGREEMENT ONLY

4. NON-REPORTING FINANCIAL INSTITUTIONS – UK AGREEMENT ONLY

13.4. Pre-existing Cash Value Insurance Contracts or Annuity Contracts unable to be sold to US residents – US Agreement only

13.4.1. Assignment of Pre-existing Insurance Contracts

13.5. Lower Value Accounts
13.6. Electronic Record Searches and Lower Value Accounts
13.6.1. Identifying Indicia – US Agreement
13.6.2. Curing Indicia – US Agreement
13.6.3. Identifying Indicia – UK Agreement
13.6.4. Curing Indicia – UK Agreement

UK AGREEMENT – SPECIFIC ELEMENTS
1. Annex IV – Alternative Reporting Regime for UK Resident
Non-Domiciled Individuals
2. Other differences to the US Agreement

 

 

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FATCA download makes top 10 list on SSRN

Posted by William Byrnes on July 29, 2014


book coverYour paper, “LEXISNEXIS® GUIDE TO FATCA COMPLIANCE (CHAPTER 1, BACKGROUND AND CURRENT STATUS OF FATCA)”, was recently listed on SSRN’s Top Ten download list…

 

free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

 

 

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FATCA FAQs Updated by IRS

Posted by William Byrnes on July 23, 2014


book coverFATCA Q&A Updated by IRS – the updates are below.  Link to New and Updated FAQs have been Posted with Regard to QI Agreements, Financial Institutions, and General Compliance 

free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

Over 600 pages of 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).

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new FATCA PodCast (#4) from expert Haydon Perryman

Posted by William Byrnes on July 22, 2014


 

An esteemed FATCA expert Haydon Perryman, who is director of FATCA compliance solutions of Strevus, designed the FATCA programs for two Global Banks, and managed the FATCA programs for over three years for Barclays, Lloyds Banking Group and RBS.

 

He shares his thoughts about designing a FATCA compliance system in his latest podcast: http://justcast.herokuapp.com/shows/haydon-perryman-gatcast/audioposts/7063

 

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FATCA Chapter 1 complementary download

Posted by William Byrnes on July 9, 2014


free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

The second edition of the “LexisNexis® Guide to FATCA Compliance,” discussing the Foreign Account Tax Compliance Act of 2010 (FATCA), has been vastly improved based on over thirty in-house workshops and interviews with tier 1 banks, company and trust service providers, government revenue departments, and central banks. The enterprises are headquartered in the Caribbean, Latin America, Asia, Europe, and the United States, as are the revenue departments and the central bank staff interviewed.Chapter 1 of the book, “Background and Current Status of FATCA,” is available here for free download on SSRN, and also from LexisNexis. The full book is available for purchase from LexisNexis. See weblinks provided in attached PDF. Chapter 1 is primarily authored by Associate Dean William H. Byrnes, IV, of Thomas Jefferson School of Law’s Walter H. & Dorothy B. Diamond International Tax & Financial Services Program, with contributions by Professor Denis Kleinfeld and Dr. Alberto Gil Soriano. The lead author and editor of the overall book is Dean Byrnes (with Dr. Robert J. Munro).

The second edition of the book has been expanded from 25 to 34 chapters, with 150 new pages of regulatory and compliance analysis based upon industry feedback of internal challenges with systems implementation. The 25 chapters in the previous edition have been substantially updated, including many more practical examples, to assist a compliance officer in contextualizing the relevant regulations, provisions of inter-governmental agreements (IGAs), and national rules enacted pursuant to IGAs.

The nine new chapters in this second edition include, for 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 (Brazil, Russia, India, China) and European country chapters.

This second edition will provide the financial enterprise’s FATCA compliance officer with the tools needed for developing and maintaining a best practices compliance strategy, starting with determining what information is needed for planning the meetings with outside FATCA experts.

book coverPractical Compliance Aspects of FATCA and GATCA

Over 600 pages of 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, 2nd Edition just published!

 

free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671

Number of Pages in PDF File: 58

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Do the West Bank and Gaza need separate IGAs from the State of Palestine?

Posted by William Byrnes on July 8, 2014


Quick update Tuesday night, July 8th.  Besides Brazil being decimated this afternoon 7 to 1 by Germany (leading to a very unhappy spouse and mother-in-law)  …

Anguilla and Uzbekistan entered the Model 1 IGA list Monday (albeit dated June 30).  Thus, 101 countries and jurisdictions have IGAs and 143 do not, based on the IRS’ revised country list published July 1.  Approximately 95% of the 87,993 registered FFIs are from these IGA countries.  Only 13 of the IGAs are Model 2, with 15,239 FFIs registered. The remainder 88 are Model 1 IGAs.

Curious if the IRS intends to treat the West Bank and Gaza as dependencies of the State of Palestine with each requiring a distinct IGA – being that all three are included on the IRS list (and yet not on the US State Department list as discussed in my early June articles).  Or whether, a “Palestine” IGA will cover all three territories.  If any readers know, please comment below and inform me.

I am also curious of the following: in Treasury’s opinion, IGAs do not require either Congressional approval or Senatorial consent.  That we all know.  Is it also Treasury’s opinion that it can enter into an IGA with Palestine and Cuba?     What is State’s perspective of the IRS including the “State of” Palestine, as well as Gaza and the West Bank, on the FATCA country and jurisdiction list.  Enough cynicism.

My previous articles on this subject of the IRS versus State department include my June 17 State Department listing and my June 8 discussion of the FFI GIIN List of June.

Model 1 IGA – 34 

  1. Australia (4-28-2014)
  2. Belgium (4-23-2014)
  3. British Virgin Islands (6-30-2014)
  4. Canada (2-5-2014)
  5. Cayman Islands (11-29-2013)
  6. Costa Rica (11-26-2013)
  7. Denmark (11-19-2012)
  8. Estonia (4-11-2014)
  9. Finland (3-5-2014)
  10. France (11-14-2013)
  11. Germany (5-31-2013)
  12. Gibraltar (5-8-2014)
  13. Guernsey (12-13-2013)
  14. Hungary (2-4-2014)
  15. Honduras (3-31-2014)
  16. Ireland (1-23-2013)
  17. Isle of Man (12-13-2013)
  18. Israel (6-30-2014)
  19. Italy (1-10-2014)
  20. Jamaica (5-1-2014)
  21. Jersey (12-13-2013)
  22. Latvia (6-27-2014):
  23. Liechtenstein (5-19-2014)
  24. Luxembourg (3-28-2014)
  25. Malta (12-16-2013)
  26. Mauritius (12-27-2013)
  27. Mexico (4-9-2014)
  28. Netherlands (12-18-2013)
  29. New Zealand (6-12-2014)
  30. Norway (4-15-2013)
  31. Slovenia (6-2-2014)
  32. South Africa (6-9-2014)
  33. Spain (5-14-2013)
  34. United Kingdom (9-12-2012)

Jurisdictions that have reached agreements in substance:

Model 1 IGA – 54 (followed by number of registered FFIs)

  1. Algeria (6-30-2014)
  2. Anguilla (6-30-2014)
  3. Antigua and Barbuda (6-3-2014)
  4. Azerbaijan (5-16-2014)
  5. Bahamas (4-17-2014)
  6. Bahrain (6-30-2014)
  7. Barbados (5-27-2014)
  8. Belarus (6-6-2014)
  9. Brazil (4-2-2014):
  10.  Bulgaria (4-23-2014)
  11. Cabo Verde (6-30-2014)
  12. China (6-26-2014)
  13. Colombia (4-23-2014)
  14. Croatia (4-2-2014)
  15. Curaçao (4-30-2014)
  16. Czech Republic (4-2-2014)
  17. Cyprus (4-22-2014)
  18. Dominica (6-19-2014):
  19. Dominican Republic (6-30-2014)
  20. Georgia (6-12-201)
  21. Greenland (6-29-2014)
  22. Grenada (6-16-2014)
  23. Guyana (6-24-2014)
  24. Haiti (6-30-2014)
  25. India (4-11-2014)
  26. Indonesia (5-4-2014):
  27. Kosovo (4-2-2014)
  28. Kuwait (5-1-2014)
  29. Lithuania (4-2-2014)
  30. Malaysia (6-30-2014)
  31. Montenegro (6-30-2014)
  32. Panama (5-1-2014)
  33. Peru (5-1-2014):
  34. Poland (4-2-2014):
  35. Portugal (4-2-2014):
  36. Qatar (4-2-2014):
  37. Romania (4-2-2014):
  38. St. Kitts and Nevis (6-4-2014)
  39. St. Lucia (6-12-2014):
  40. St. Vincent and the Grenadines (6-2-2014)
  41. Saudi Arabia (6-24-2014):
  42. Serbia (6-30-2014)
  43. Seychelles (5-28-2014)
  44. Singapore (5-5-2014):
  45. Slovak Republic (4-11-2014)
  46. South Korea (4-2-2014)
  47. Sweden (4-24-2014)
  48. Thailand (6-24-2014):
  49. Turkey (6-3-2014)
  50. Turkmenistan (6-3-2014)
  51. Turks and Caicos Islands (5-12-2014):
  52. Ukraine (6-26-2014)
  53. United Arab Emirates (5-23-2014)
  54. Uzbekistan (6-30-2014)

Model 2 IGA – 5

  1. Austria (4-29-2014)
  2. Bermuda (12-19-2013)
  3. Chile (3-5-2014)
  4. Japan (6-11-2013)
  5. Switzerland (2-14-2013)

Jurisdictions that have reached agreements in substance:

Model 2 IGA – 8

  1. Armenia (5-8-2014)
  2. Hong Kong (5-9-2014)
  3. Iraq (6-30-2014)
  4. Moldova (6-30-2014)
  5. Nicaragua (6-30-2014
  6. Paraguay (6-6-2014):
  7. San Marino (6-30-2014)
  8. Taiwan (6-23-2014)

FATCA by the Numbers….

Haydon Perryman, FATCA Compliance expert of Strevus, and I are undertaking an analysis of this July 1st FATCA FFI list release by country, by IGA, by EAG – already published in earlier articles July 1 and July 2nd.  Check out Haydon Perryman’s blog at http://haydonperryman.wordpress.com/

IRS Registered FFI List (Sum of Registrations) July ’14# County #
Model 1A IGA 48,265 85
Model 1B IGA 19,580 2
Model 2 IGA 15,239 13
US 620 1
US Territory 61 5
No IGA 4,228 144
Total 87,993 250
Non IGA 4,228 143
Non IGA% 5%
IGA 83,084 101
IGA% 94%
US and US Territories 681 6

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Has Treasury Changed Its Position Regarding Capital Flight Resulting from FATCA?

Posted by William Byrnes on July 5, 2014


free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

In 2013, I participated in a constitutional law conference regarding international agreements, held in Siberia, Russia.  My invited role was to discuss FATCA’s IGAs basis in US domestic law and international law policy, and comparatively discuss IGAs in the context of various EU countries.  Some of those slides are available in my broader FATCA lecture at the University of Amsterdam International Tax Program Winter Session at http://www.slideshare.net/williambyrnes1/uv-a-winter-2014-fatca-and-eoi

In light of my academic interest in this subject matter, today I came across two pertinent blog posts that I share below, wherein Treasury justifies its policy based upon the potential for capital flight, followed by the Treasury opposite stance to the Court just months before in Florida Bankers Assn v Treasury.  Below I post some of my lecture comments from 2010 regarding FATCA and capital flight.

Does Treasury have new information / data that it did not previously have, leading to its change of stance?  Should we (voters with an interest in a stable financial system) be concerned?  I am being facetious because Treasury (the IRS) does from time to time, in tax cases on an identical issue, advance opposing arguments (I have heard even in front of the same judge), depending on what outcome it wants from the taxpayer.  After all, in law school, we teach our students to argue for both sides on every issue.

Treasury Argues Capital Flight Requires FATCA IGAs With Other Countries 

Professor Jack Townsend’s Blog wherein he posts a letter from Treasury’s Asst. Secretary for Legislative Affairs to a Congressman (Bill Posey) wherein Treasury states its authority to create and enter into IGAs with other nations and their dependencies:  http://federaltaxcrimes.blogspot.com/2014/07/irs-letter-to-congressman-defending-its.html

Treasury’s stated authority is: “Your letter also asks about statutory authority to enter into and implement the IGAs. The United States relies, among other things, on the following authorities to enter into and implement the IGAs: 22 USC Section 2656; Internal Revenue Code Sections 1471, 1474(f), 6011, and 6103(k)(4) and Subtitle F, Chapter 61, Subchapter A, Part III, Subpart B (Information Concerning Transactions with Other Persons).”

Professor Townsend (Houston) includes in the comments to the letter a rebuttal by Professor Allison Christians (McGill) “None of these sources of law contain any authorization to enter into or implement the IGAs.  It is patently clear that no such authorization has been made by Congress, and that the IGAs are sole executive agreements entered into by the executive branch on its own under its “plenary executive authority”.  As such the agreements are constitutionally suspect because they do not accord with the delineated treaty power set forth in Article II.” See Professor Christians full response at http://taxpol.blogspot.com.au/2014/07/irs-claims-statutory-authority-for.html

The above highlight is interesting enough mind you.  But I must point out another aspect of the Treasury justification for IGAs.  Treasury states that: “Suspending further negotiation of IGAs would negatively affect the United States’ ability to enforce the provisions of FATCA without the imposition of substantial withholding tax. … This could result in harm to the interests of the United States because it could prompt divestment from U.S. investments by affected financial institutions.” (emphasis added)

Treasury Argues Capital Flight Is Not a FATCA Concern

But Treasury argued quite the opposite in its recent, successful defense against the Florida and Texas Bankers Associations in Florida Bankers Assn v Treasury.

Quoting the Court:

“The IRS admits that it does not know exactly how much money non-resident aliens have deposited in U.S. banks. …

Instead of using exact data, the IRS estimated, based on a mountain of existing information from the Treasury Department, that non-resident alien deposits in U.S. banks amounted to no more than $400 billion. …

… The IRS was unconcerned because it had determined that very little of this mo.ney would be affected – namely, because these regulations would not deter any rational actor other than a tax fraud from using U.S. banks.

4. Capital Flight

At the heart of the Bankers Associations’ argument – albeit buried somewhat in their brief – is the contention that the regulations should not have been issued given the negative impact they may have on banks. Plaintiffs claim that the IRS “disregarded” a flood of comments arguing that the new regulations would cause non-residents to withdraw their deposits en masse and thereby trigger substantial and harmful capital flight. The IRS, however, did not ignore those comments; indeed, it dedicated a majority of the preamble to addressing concerns about capital flight.

… As a result of those protections, the Government concluded that the “regulations should not significantly impact the investment and savings decisions of the vast majority of non-residents.”

Plaintiffs raise one additional, related issue: They claim that the IRS ignored the massive capital flight that took place after the Canadian reporting requirements became effective in January 2000.  The IRS, by contrast, contends that the alleged Canadian capital flight is a fiction: While the amount of Canadian interest-bearing deposits may have dipped after the reporting requirements were issued, they climbed back up shortly after that.”

See the full article at https://profwilliambyrnes.com/2014/02/25/court-upholds-irs-regulations-for-foreign-taxpayer-interest-reporting-by-us-banks/

Comments from my 2010 lecture on tax elasticity of deposits

Tax Elasticity Of Deposits

In the 2002 article International Tax Co-operation and Capital Mobility, prepared for an ECLAC report, from analysing data from the Bank for International Settlements (“BIS”) on international bank deposits, Valpy Fitzgerald found “that non-bank depositors are very sensitive to domestic wealth taxes and interest reporting, as well as to interest rates, which implies that tax evasion is a determinant of such deposits….”[1]  Non-bank depositors are persons that instead invest in alternative international portfolios and financial instruments.

Estimating How Much Latin American Tax Evasion are US Banks Involved With?

Some Miami based commentators, like the renown author Professor Marshall Langer, estimated that at least $300B of capital outflow will occur from the USA pursuant to its exchange of tax information with Brazil and other Latin American countries, like Argentina and Venezuela.  Based on their discussions with South Florida real estate firms, information exchange will lead to a withdrawal of Latin American interest in its real estate market.  (Note that since 2010, we now know that US information collection will not look through company entities as is required by FATCA from FFIs, and because most real estate for estate tax purposes is held via corporate structures, it will not capture information on most real estate investment.)  

Three historical benchmarks regarding the imposition of withholding tax on interest illustrate the immediate and substantial correlation that an increase in tax on interest has on capital flight.  The benchmarks are (1) the 1964 US imposition of withholding tax on interest that immediately led to the creation of the London Euro-dollar market;[2] (2) the 1984 US exemption of withholding tax on portfolio interest that immediately led to the capital flight from Latin America of US$300 billion to US banks;[3] and (3) the 1989 German imposition of withholding tax that led to immediate capital flight to Luxembourg and other jurisdictions with banking secrecy[4].  The effect was so substantial that the tax was repealed only four months after imposition.

The Establishment of London as an International Financial Center

The 1999 IMF Report on Offshore Banking concluded that the US experienced immediate and significant capital outflows in 1964 and 1965 resulting from the imposition of a withholding tax on interest.  Literature identifies the establishment of London as a global financial centre as a result of the capital flight from the US because of its imposition of Interest Equalisation Tax (IET) of 1964.[5]  The take off of the embryonic London eurodollar market resulted from the imposition of the IET.[6]  IET made it unattractive for foreign firms to issue bonds in the US.  Syndicated bonds issued outside the US rose from US$135 million in 1963 to US$696 million in 1964.[7]    In 1964-65, the imposition of withholding tax in Germany, France, and The Netherlands, created the euromark, eurofranc and euroguilder markets respectively.[8]

The Establishment of Miami as an International Financial Center

Conversely, when in 1984 the US enacted an exemption for portfolio interest from withholding tax, Latin America experienced a capital flight of $300 billion to the US.[9]  A substantial portion of these funds were derived from Brazil.  In fact, some pundits have suggested that Miami as a financial center resulted not from the billions generated from the laundering of drug proceeds which had a tendency to flow outward, but from the hundreds of billions generated from Latin inward capital, nearly all unreported to the governments of origination.

The Establishment of Luxembourg as an International Financial Center

In January of 1989, West Germany imposed a 10% withholding tax on savings and investments.  In April it was repealed, effective July 1st, because the immediate cost to German Banks had already reached DM1.1 billion.[10]  The capital flight was so substantial that it caused a decrease in the value of the Deutsche mark, thereby increasing inflation and forcing up interest rates.  According to the Financial Times, uncertainty about application of the tax, coupled with the stock crash in 1987, had caused a number of foreign investment houses to slow down or postpone their investment plans in Germany.  A substantial amount of capital went to Luxembourg, as well as Switzerland and Lichtenstein.

Switzerland’s Fisc May Come Out Ahead

Perhaps ironically given the nature of the UBS situation currently unfolding, a Trade Based Money Laundering study by three prominent economists and AML experts focused also on measuring tax evasion uncovered that overvalued Swiss imports and undervalued Swiss exports resulted in capital outflows from Switzerland to the United States in the amount of $31 billion within a five year time span of 1995-2000.[11]  That is, pursuant to this transfer pricing study, the Swiss federal and cantonal revenue authorities are a substantial loser to capital flight to the USA.  The comparable impact of the lost tax revenue to the much smaller nation of Switzerland upon this transfer pricing tax avoidance (and perhaps trade-based money laundering) may be significantly greater than that of the USA from its lost revenue on UBS account holders.  Certainly, both competent authorities will have plenty of work on their hands addressing the vast amount of information that needs to be exchanged to stop the bleeding from both countries’ fiscs.

 

[1] International Tax Cooperation and Capital Mobility, Valpy Fitzgerald, 77 CEPAL Review 67 (August 2002) p.72.

[2] See Charles Batchelor, European Issues Go from Strength to Strength: It began with Autostrade’s International Bond in 1963, The Financial Times (September 25, 2003) p.33; An E.U. Withholding Tax?

[3] Globalisation, Tax Competition, and the Fiscal Crisis of the Welfare State, Reuven Avi-Yonah, 113 HVLR 1573, 1631 (May 2000).

[4] Abolition of Withholding Tax Agreed in Bonn Five-Month-Old Interest Withholding To Be Repealed, 89 TNI 19-17.

[5] See Charles Batchelor, European Issues Go from Strength to Strength: It began with Autostrade’s International Bond in 1963, The Financial Times (September 25, 2003) p.33; An E.U. Withholding Tax?

[6] 1999 IMF Offshore Banking Report  p.16.

[7] 1999 IMF Offshore Banking Report  p.16-17.

[8] 1999 IMF Offshore Banking Report  p.17.

[9] Globalisation, Tax Competition, and the Fiscal Crisis of the Welfare State, Reuven Avi-Yonah, 113 HVLR 1573, 1631 (May 2000).

[10] Abolition of Withholding Tax Agreed in Bonn Five-Month-Old Interest Withholding To Be Repealed, 89 TNI 19-17.

[11] Maria E. de Boyrie, Simon J. Pak and John S. Zdanowicz The Impact Of Switzerland’s Money Laundering Law On Capital Flows Through Abnormal Pricing In International Trade Applied 15 Financial Economics 217–230 (Rutledge 2005).

 

book coverPractical Compliance Aspects of FATCA and GATCA

Over 600 pages of 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, 2nd Edition just published!

 

 

 

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FATCA Expanded Affiliated Group (EAG) by Country – the FFI List

Posted by William Byrnes on July 2, 2014


free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

3,778 Lead Entities of EAGs among the approximately 88,000 FFI registrations from 250 countries.  Haydon Perryman, FATCA Compliance expert of Strevus, and I are undertaking an analysis of this July 1st FATCA FFI list release by country and by IGA, and now by EAG.  Haydon has put together the below chart based upon the excel formulae he created.  Check out Haydon Perryman’s FATCA blog at http://haydonperryman.wordpress.com/

FATCA EAG Definition

The FFI and its branches and affiliates are defined as an “expanded affiliated group” (“EAG”).  An entity is a part of an EAG if it is affiliated with a common parent that directly or indirectly owns over 50% of the stock by vote and value of such corporation, or in the case of a partnership or non-corporate entity, owns over 50% by value of the beneficial interest of such partnership or non-corporate entity.[1]

Subject to certain phase-in provisions regarding “Limited Branches” and “Limited Affiliates, discussed below, each FFI that is a member of an EAG must obtain the status of either a PFFI or RDCFFI before any of the other group members are able to obtain the benefit of either  such status.  Said another way, one bad apple poisons the barrel, and leads to FATCA withholding for all.

Except to the extent that the rules allowing limited branches and limited affiliates apply (described below the chart), each member of an EAG (including all of its branches, units, offices, and divisions) must conduct due diligence on its accounts, enact FATCA policies and procedures, abide by the terms of the FFI-agreement, and close U.S. accounts if the holder fails to provide required disclosure and reporting information.

  Model 1A IGA Model 1B IGA Model 2 IGA No IGA US Grand Total
Andorra       4   4
Angola       2   2
Anguilla       3   3
Antigua and Barbuda 1         1
Argentina       17   17
Armenia     2     2
Aruba       1   1
Australia 52         52
Austria     71     71
Bahamas 23         23
Bahrain 27         27
Bangladesh       22   22
Barbados 7         7
Belarus 1         1
Belgium 12         12
Belize       5   5
Benin       1   1
Bermuda     103     103
Bolivia, Plurinational State Of       3   3
Botswana       3   3
Brazil 51         51
Brunei Darussalam       2   2
Bulgaria 4         4
Cambodia       2   2
Canada 92         92
Cayman Islands   813       813
Chile     26     26
China 3         3
Colombia 7         7
Cook Islands       36   36
Costa Rica 15         15
Croatia 1         1
Curacao 13         13
Cyprus 12         12
Czech Republic 3         3
Denmark 10         10
Djibouti       1   1
Dominica 1         1
Dominican Republic 2         2
Ecuador       4   4
Egypt       12   12
El Salvador       4   4
Finland 13         13
France 106         106
Georgia 2         2
Germany 65         65
Ghana       4   4
Gibraltar 1         1
Greece       12   12
Guatemala       10   10
Guernsey 98         98
Guyana 2         2
Haiti 1         1
Honduras 6         6
Hong Kong     77     77
Hungary 4         4
Iceland       1   1
India 1         1
Indonesia 9         9
Iraq     3     3
Ireland 37         37
Isle of Man 16         16
Israel 24         24
Italy 33         33
Jamaica 6         6
Japan     167     167
Jersey 92         92
Jordan       10   10
Kazakhstan       9   9
Kenya       11   11
Korea, Republic of 21         21
Kuwait 15         15
Latvia 4         4
Lebanon       18   18
Libya       2   2
Liechtenstein 11         11
Luxembourg 166         166
Macao       2   2
Malawi       1   1
Malaysia 29         29
Malta 19         19
Marshall Islands       3   3
Mauritius 16         16
Mexico 14         14
Monaco       1   1
Mongolia       3   3
Morocco       10   10
Mozambique       1   1
Namibia       4   4
Netherlands 62         62
New Zealand 12         12
Nicaragua     3     3
Nigeria       12   12
Norway 15         15
Oman       3   3
Pakistan       14   14
Panama 32         32
Papua New Guinea       1   1
Peru 8         8
Philippines       15   15
Poland 12         12
Portugal 14         14
Qatar 8         8
Romania 4         4
Russian Federation       42   42
Saint Kitts and Nevis 4         4
Saint Lucia 1         1
Saint Vincent and The Grenadines 2         2
San Marino     5     5
Saudi Arabia 1         1
Serbia 1         1
Seychelles 1         1
Sierra Leone       1   1
Singapore 17         17
Slovenia 3         3
South Africa 16         16
Spain 41         41
Sri Lanka       3   3
Sweden 20         20
Switzerland     157     157
Taiwan     41     41
Tajikistan       1   1
Tanzania, United Republic Of       1   1
Thailand 22         22
Trinidad and Tobago       7   7
Turkey 11         11
Uganda       1   1
Ukraine 3         3
United Arab Emirates 14         14
United Kingdom 290         290
United States         101 101
Uruguay       7   7
Venezuela, Bolivarian Republic Of       4   4
Viet Nam       21   21
Virgin Islands (British) 85         85
WEST BANK AND GAZA       1   1
Yemen       3   3
Zambia       1   1
Grand Total 1847 813 655 362 101 3778

 

Limited Branches and Affiliates Exceptions Under Regs

A FFI is, however, allowed to be a PFFI even if one or more of its branches cannot satisfy all of the requirements of an FFI-agreement under important exceptions to the general rule regarding “limited branch” and “limited FFI affiliates”.

An FFI is permitted to obtain “participating FFI” status if one or more of its branches are non-compliant under the “limited branch” exception. The limited branch exception applies to those FFIs that are in a jurisdiction that has applicable law that prohibits the FFI from reporting, closing, or transferring U.S. accounts, or withholding, closing, blocking, or transferring recalcitrant or nonparticipating FFI accounts. In such case, the limited branch is treated as a “nonparticipating FFI” even though it is an affiliated branch of the “participating FFI.” The other branches with “participating FFI” status must withhold on payments to the limited branch. The limited branch must not open U.S. accounts and must identify itself as a “nonparticipating FFI” to withholding agents.

The exception to the EAG requirements for “limited FFI” affiliates is similar to the regulatory scheme for limited branches. Under the relevant transition rule, a “participating FFI” may be permitted to have an affiliated FFI that is not compliant with FATCA until December 31, 2015 provided that such affiliates are separately identified as a nonparticipating FFI and the PFFI agrees to withhold on payments it makes to, or receives on behalf of, that branch or affiliate and agrees to report (or provide sufficient information to its U.S. withholding agents to allow them to report) payments made to these limited branches and affiliates as required on Forms 8966 or 1042/1042-S.

A Reporting Model IGA FFI may continue to treat branches and affiliates as compliant under the limited branch and limited FFI exceptions even after the expiration of the transitional rule, provided that the branch or affiliate is still unable to comply with FATCA due to restrictions under local law and the Reporting Model FFI continues to comply with its obligations under the IGA with respect to such limited branches or affiliates.

 

book cover

Read a detailed analysis of the EAG with many examples in the LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.

 

 

[1] 26 U.S. Code § 1471 – Withholdable payments to foreign financial institutions

(e) Affiliated groups (1) In general

The requirements of subsections (b) and (c)(1) shall apply—

(A) with respect to United States accounts maintained by the foreign financial institution, and

(B) except as otherwise provided by the Secretary, with respect to United States accounts maintained by each other foreign financial institution (other than any foreign financial institution which meets the requirements of subsection (b)) which is a member of the same expanded affiliated group as such foreign financial institution.

(2) Expanded affiliated group

For purposes of this section, the term “expanded affiliated group” means an affiliated group as defined in section 1504 (a), determined—

(A) by substituting “more than 50 percent” for “at least 80 percent” each place it appears, and

(B) without regard to paragraphs (2) and (3) of section 1504 (b).

A partnership or any other entity (other than a corporation) shall be treated as a member of an expanded affiliated group if such entity is controlled (within the meaning of section 954 (d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence).

 

26 U.S. Code § 1504 – Definitions

(a) Affiliated group defined

For purposes of this subtitle—

(1) In general

The term “affiliated group” means—

(A) 1 or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation, but only if—

(B)

(i) the common parent owns directly stock meeting the requirements of paragraph (2) in at least 1 of the other includible corporations, and

(ii) stock meeting the requirements of paragraph (2) in each of the includible corporations (except the common parent) is owned directly by 1 or more of the other includible corporations.

(2) 80-percent voting and value test

The ownership of stock of any corporation meets the requirements of this paragraph if it—

(A) possesses at least 80 percent of the total voting power of the stock of such corporation, and

(B) has a value equal to at least 80 percent of the total value of the stock of such corporation.

 

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July 1st FATCA FFI List Analysis by Country and by IGA

Posted by William Byrnes on July 1, 2014


free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

Haydon Perryman, FATCA Compliance expert of Strevus, and I are undertaking an analysis of this July 1st FATCA FFI list release by country and by IGA.  Haydon has put together the below hard work of the list based upon the excel formulae he created.  (Updated with comments as of 19:00 Washington, D.C. time).  Check out Haydon Perryman’s blog at http://haydonperryman.wordpress.com/

What I find surprising thus far is that I thought (as did many large firm attorneys) many, many more registrations would have pushed themselves through the keyhole.  I was thinking in the range of 100,000 to 110,000 would be registered for the July 1 FFI list.  Only 10,000 additional registrations was not even in my lowest estimates.  I wouldn’t call 88,000 FFI registrations a great success at this stage, considering that nearly 150 countries do not have an IGA and thus FATCA 30% withholding starts today.  While the IRS suggested a 500,000 potential FFI registration figure, many industry stakeholders suggest that 800,000 – 900,000 firms fall under the expansive definition of financial institution.

The 82,994 FFIs (approx. 95%) from the 98 IGA countries registration is due by December 31.  Only 4,318 FFI (5%) registered from the remaining 152 countries.  We do not know what FFIs may have registered between June 3rd and now because that will fall into the August list).  Still, based on the current July 1st figures, FATCA registration (indicative of compliance) in a best case scenario is running at less than 20%.   It may be as low as 10% FFI registration thus far based on the what industry stakeholders think is more likely the range.

Why is the Range for Potential FFI Registration so Expansive?

Given the broad definition of financial institution (explained below) that requires a FATCA GIIN for the W-8BEN-E or other appropriate W-8, such as W-8IMY,  the UK HMRC estimated that, even with its IGA and accompanying local regulations, 75,000 UK entities are impacted by FATCA.  Probably, though not clearly stated by the HMRC, these entities and firms need to register for a GIIN.  But only 6,994 have registered from the UK, and only 730 additional since the June 2nd list (of 6,264).  Granted the UK FFI has until October 25th pursuant to HMRC announcement (albeit January 1st under the FATCA regulations).  If the UK has 75,000 or even just half that entities requiring FFI registration, then extrapolated among other large and sophisticated financial service economies like Japan, China, Germany etc – clearly, more than 500,000 entities will need to inevitably register.   The question is: how many more?

What is the Definition of Financial Institution?

The definition of ‘financial institution’ is very broad.  Thus, entities and firms that may not traditionally (such as a banking enterprise or investment fund) be considered a financial institution are subject to FATCA registration and reporting – such as trust companies, certain insurance companies, holding companies, treasury centers.  Moreover, the industry, especially the trust industry, is experiencing some confusion over which entities must register as an FFI, and which do not need to register, or are instead an NFFE.

FFIs are primarily banking and financial institutions, as well as certain investment entities, which are defined by FATCA and separated into three broad categories:  (i) primarily traditional banks that accept deposits and perform related banking services in their ordinary course of business, (ii) entities  a substantial part of the business of which  involves  holding financial assets for others, and (iii) entities engaged in the business of investing, reinvesting, and trading in securities, partnership interests, commodities, derivatives, and other passive financial assets.

The first category of FFI describes traditional banks. This FFI is defined as a financial institution that accepts deposits in the ordinary course of a banking or similar business. An entity is engaged in a “banking or similar business” if the entity:

  1. accepts deposits or similar investments of funds;
  2. makes personal, mortgage, industrial, or other loans;
  3. provides credit extension;
  4. purchases, sells, discounts, or negotiates account receivables, installment obligations, notes, drafts, checks, bills of exchange, acceptances, or other evidences of indebtedness;
  5. issues letters of credit and negotiates drafts drawn on accounts;
  6. provides trust or fiduciary services;
  7. finances foreign exchange transactions; or
  8. enters into, purchases, or disposes of finance leases or leased assets.

The second category of FFI captures “asset holding” companies. This type of FFI holds financial assets for the account of others as a “substantial” portion of its business.  An entity is an asset holding company if more than 20 percent of its gross income is from holding financial assets and related financial services during a three-year period ending on December 31 of the year preceding that in which the determination is made (or the period of the entity’s existence, if shorter).

The final category of FFI captures “investment funds”, and is broadly defined.  Thus, this category includes certain securitization vehicles, certain pension funds, and can potentially include certain other private structures that hold investments such as trusts and underlying holding companies.  This category of FFI is primarily engaged in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest (including futures or forward contracts or options).  An investment entity is primarily engaged in one or more of the following activities:

  1. trading in money market instruments, foreign currency, foreign exchange, interest rates, index instruments, transferable securities, or commodity futures;
  2. managing individual or collective portfolios;
  3. investing, administering or managing funds, money, or financial assets on behalf of others; or
  4. functioning as a collective investment vehicle, mutual fund, exchange traded fund, private equity fund, hedge fund, venture capital fund, leveraged buyout fund, or any similar investment vehicle.

An entity is primarily engaged in these activities if more than 50% of its gross income is from such activities during a three-year period.

Example of an Investment Advisor.  A Fund Manager is an investment entity that organizes and manages various types of funds including Fund A. Fund A invests primarily in equities. An Investment Advisor (a foreign entity) is hired by the Fund Manager to advise and provide discretionary management of a portion of the financial assets held by Fund A. More than 50% of the Investment Advisor’s gross income was earned for the last three years from providing similar services. The Investment Advisor is an investment entity as described in this section and an FFI as well since it primarily conducts a business of managing financial assets on behalf of clients.

Example of a Trust managed by a Trust Company. On January 1, 2013, a Trust (a nongrantor foreign trust) was formed by X (an individual) for the benefit of his or her children. The Trustee (a Trust Company) was appointed by X to act as the Trustee.  A Trust Company is an FFI.  Under the terms of the Trust Instrument, the Trust Company manages the assets of the Trust as Trustee for the benefit of X’s children.  Because the Trust is managed by a FFI (the Trust Company), the Trust is an investment entity, and an FFI.

Trust compliance and FATCA expert Peter Cotorceanu (and Lexis author) has raised four interesting issues with the last example, being:

  • Is the “Managed By” test met if some but not all a trust managers are depository institutions, custodial institutions, specified insurance companies, or Type A IEs, e.g., a trust with a commercial trust company serving a co-trustee with an individual?
  • Is the “Managed By” test met if some but not all of a trust’s investments are managed by depository institutions, custodial institutions, specified insurance companies, or IEs, e.g.,  a trust with one account managed by a bank and other accounts managed by an individual?
  • How is a trust classified if it meets the “Managed By” test for only part of a year, e.g., because a commercial trust company is replaced by an individual as trustee, or a bank is replaced by an individual as asset manager?
  • Does a trust holding, its only asset the share of an underlying company (“UC”), meet the “Managed By” test if the UC’s assets are professionally managed but the trust is not (i.e., the trustee is an individual)?

FATCA IGA FACTS as of July 1st at World Cup Game time USA Match (4 pm Washington, D.C.)

IGAs: 98

Model 1: 85

Model 2: 13

Non-IGAs: 250 – 98 = 152 countries for withholding from July 1, 2014

Registered:  87,993 (July 1st) (an increase of approximately 10,000 from 77,353 of June 2nd) FFI/branches from 250 countries/jurisdictions

Jurisdiction July FFI # IGA Scenario Signed/Substance Date
Afghanistan 8 No IGA    
Albania 16 No IGA    
Algeria 9 Model 1A IGA Substance June 30, 2014
Andorra 35 No IGA    
Angola 10 No IGA    
Anguilla 120 No IGA    
Antigua and Barbuda 39 Model 1A IGA Substance June 03, 2014
Argentina 401 No IGA    
Armenia 34 Model 2 IGA Substance May 08, 2014
Aruba 16 No IGA    
Australia 2,073 Model 1A IGA Signed April 28, 2014
Austria 3,010 Model 2 IGA Signed April 29, 2014
Azerbaijan 34 Model 1A IGA Substance May 16, 2014
Bahamas 646 Model 1A IGA Substance April 17, 2014
Bahrain 165 Model 1A IGA Substance June 30, 2014
Bangladesh 81 No IGA    
Barbados 146 Model 1A IGA Substance May 27, 2014
Belarus 68 Model 1A IGA Substance June 06, 2014
Belgium 256 Model 1A IGA Signed April 23, 2014
Belize 135 No IGA    
Benin 8 No IGA    
Bermuda 1,579 Model 2 IGA Signed December 19, 2013
Bhutan 1 No IGA    
Bosnia and Herzegovina 23 No IGA    
Botswana 20 No IGA    
Brazil 2,362 Model 1A IGA Substance April 02, 2014
British Indian Ocean Territory 1 No IGA    
Brunei Darussalam 21 No IGA    
Bulgaria 96 Model 1A IGA Substance April 23, 2013
Burkina Faso 6 No IGA    
Burundi 3 No IGA    
Cambodia 82 No IGA    
Cameroon 10 No IGA    
Canada 2,566 Model 1A IGA Signed February 05, 2014
Cape Verde 6 Model 1A IGA Substance June 30, 2014
Cayman Islands 17,207 Model 1B IGA Signed November 29, 2013
Central African Republic 2 No IGA    
Chad 4 No IGA    
Chile 342 Model 2 IGA Signed March 05, 2014
China 213 Model 1A IGA Substance June 26, 2014
Christmas Island 1 No IGA    
Colombia 184 Model 1A IGA Substance April 23, 2014
Comoros 1 No IGA    
Congo 5 No IGA    
Cook Islands 87 No IGA    
Costa Rica 116 Model 1A IGA Signed November 26, 2013
Cote d’Ivoire 18 No IGA    
Croatia 67 Model 1A IGA Substance April 02, 2014
Curacao 189 Model 1A IGA Substance April 30, 2014
Cyprus 330 Model 1A IGA Substance April 22, 2014
Czech Republic 115 Model 1A IGA Substance April 02, 2014
Denmark 204 Model 1A IGA Signed November 19, 2012
Djibouti 2 No IGA    
Dominica 18 Model 1A IGA Substance June 19, 2014
Dominican Republic 75 Model 1A IGA Substance June 30, 2014
Ecuador 27 No IGA    
Egypt 109 No IGA    
El Salvador 41 No IGA    
Equatorial Guinea 1 No IGA    
Estonia 33 Model 1A IGA Signed April 11, 2014
Falkland Islands (Malvinas) 1 No IGA    
Fiji 5 No IGA    
Finland 482 Model 1A IGA Signed March 05, 2014
France 2,422 Model 1A IGA Signed November 14, 2013
French Polynesia 3 No IGA    
French Southern Territories 1 No IGA    
Gabon 4 No IGA    
Gambia 11 No IGA    
Georgia 26 Model 1A IGA Substance June 12, 2014
Germany 2,894 Model 1A IGA Signed May 31, 2013
Ghana 51 No IGA    
Gibraltar 116 Model 1A IGA Signed May 08, 2014
Greece 103 No IGA    
Greenland 1 Model 1A IGA Substance June 30, 2014
Grenada 33 Model 1A IGA Substance June 16, 2014
Guadeloupe 1 No IGA    
Guam 4 US Territory    
Guatemala 81 No IGA    
Guernsey 2,585 Model 1A IGA Signed December 13, 2013
Guinea 7 No IGA    
Guyana 7 Model 1A IGA Substance June 24, 2014
Haiti 13 Model 1A IGA Substance June 30, 2014
Honduras 50 Model 1A IGA Signed March 31, 2014
Hong Kong 2,008 Model 2 IGA Substance May 09, 2014
Hungary 115 Model 1A IGA Signed February 04, 2014
Iceland 12 No IGA    
India 321 Model 1A IGA Substance April 11, 2014
Indonesia 351 Model 1A IGA Substance May 04, 2014
Iraq 49 Model 2 IGA Substance June 30, 2014
Ireland 2,007 Model 1A IGA Signed January 23, 2013
Isle of Man 355 Model 1A IGA Signed December 13, 2013
Israel 352 Model 1A IGA Substance June 30, 2014
Italy 587 Model 1A IGA Signed January 10, 2014
Jamaica 42 Model 1A IGA Signed May 01, 2014
Japan 3,390 Model 2 IGA Signed June 11, 2013
Jersey 1,974 Model 1A IGA Signed December 13, 2013
Jordan 48 No IGA    
Kazakhstan 96 No IGA    
Kenya 54 No IGA    
Kuwait 84 Model 1A IGA Substance May 01, 2014
Kyrgyzstan 29 No IGA    
Lao People’s Democratic Republic 13 No IGA    
Latvia 50 Model 1A IGA Signed June 27, 2014
Lebanon 122 No IGA    
Lesotho 2 No IGA    
Liberia 29 No IGA    
Liechtenstein 291 Model 1A IGA Signed May 19, 2014
Lithuania 29 Model 1A IGA Substance April 02, 2014
Luxembourg 4,061 Model 1A IGA Signed March 28, 2014
Macao 64 No IGA    
Madagascar 7 No IGA    
Malawi 10 No IGA    
Malaysia 437 Model 1A IGA Substance June 30, 2014
Maldives 6 No IGA    
Mali 5 No IGA    
Malta 348 Model 1A IGA Signed December 16, 2013
Marshall Islands 80 No IGA    
Martinique 1 No IGA    
Mauritania 6 No IGA    
Mauritius 872 Model 1A IGA Signed December 27, 2013
Mexico 410 Model 1A IGA Signed April 09, 2014
Monaco 105 No IGA    
Mongolia 15 No IGA    
Montenegro 7 Model 1A IGA Substance June 30, 2014
Montserrat 12 No IGA    
Morocco 133 No IGA    
Mozambique 15 No IGA    
Myanmar 6 No IGA    
Namibia 26 No IGA    
Nepal 33 No IGA    
Netherlands 2,280 Model 1A IGA Signed December 18, 2013
New Caledonia 5 No IGA    
New Zealand 396 Model 1A IGA Signed June 12, 2014
Nicaragua 15 Model 2 IGA Substance June 30, 2014
Niger 4 No IGA    
Nigeria 76 No IGA    
Norway 349 Model 1A IGA Signed April 15, 2013
Oman 25 No IGA    
Pakistan 89 No IGA    
Panama 484 Model 1A IGA Substance May 01, 2014
Papua New Guinea 4 No IGA    
Paraguay 17 Model 2 IGA Substance June 06, 2014
Peru 172 Model 1A IGA Substance May 01, 2014
Philippines 178 No IGA    
Poland 180 Model 1A IGA Substance April 02, 2013
Portugal 287 Model 1A IGA Substance April 02, 2014
Puerto Rico 4 US Territory    
Qatar 52 Model 1A IGA Substance April 02, 2014
Reunion 1 No IGA    
Romania 114 Model 1A IGA Substance April 02, 2014
Russian Federation 729 No IGA    
Rwanda 9 No IGA    
Saint Kitts and Nevis 106 Model 1A IGA Substance June 04, 2014
Saint Lucia 66 Model 1A IGA Substance June 12, 2014
Saint Martin (French part) 3 No IGA    
Saint Pierre and Miquelon 1 No IGA    
Saint Vincent and The Grenadines 124 Model 1A IGA Substance June 02, 2014
Samoa 51 US Territory    
San Marino 15 Model 2 IGA Substance June 30, 2014
Saudi Arabia 21 Model 1A IGA Substance June 24, 2014
Senegal 10 No IGA    
Serbia 32 Model 1A IGA Substance June 30, 2014
Seychelles 43 Model 1A IGA Substance May 28, 2014
Sierra Leone 9 No IGA    
Singapore 1,072 Model 1A IGA Substance May 05, 2014
Sint Maarten (Dutch part) 17 No IGA    
Slovakia 63 Model 1A IGA Substance April 11, 2014
Slovenia 32 Model 1A IGA Signed June 02, 2014
Solomon Islands 3 No IGA    
South Africa 395 Model 1A IGA Signed June 09, 2014
South Sudan 5 No IGA    
Spain 1,227 Model 1A IGA Signed May 14, 2013
Sri Lanka 42 No IGA    
Suriname 9 No IGA    
Swaziland 5 No IGA    
Sweden 414 Model 1A IGA Substance April 24, 2014
Switzerland 4,279 Model 2 IGA Signed February 14, 2013
Taiwan 481 Model 2 IGA Substance June 23, 2014
Tajikistan 19 No IGA    
Thailand 823 Model 1A IGA Substance June 24, 2014
Timor-Leste 2 No IGA    
Togo 6 No IGA    
Tonga 2 No IGA    
Trinidad and Tobago 59 No IGA    
Tunisia 10 No IGA    
Turkey 210 Model 1A IGA Substance June 03, 2014
Turkmenistan 1 Model 1A IGA Substance June 03, 2014
Turks and Caicos Islands 35 Model 1A IGA Substance May 12, 2014
Uganda 19 No IGA    
Ukraine 187 Model 1A IGA Substance June 28, 2014
United Arab Emirates 204 Model 1A IGA Substance May 21, 2014
United Kingdom 6,994 Model 1A IGA Signed September 12, 2012
United States 620 US    
Uruguay 142 No IGA    
Uzbekistan 2 No IGA    
Vanuatu 5 No IGA    
Viet Nam 129 No IGA    
Virgin Islands (British) 2,373 Model 1B IGA Signed June 30, 2014
Wallis and Futuna 1 No IGA    
Yemen 18 No IGA    
Zambia 13 No IGA    
Zimbabwe 6 No IGA    
Other 32 No IGA   January 01, 1904
Korea, Republic of 448 Model 1A IGA Substance April 02, 2014
Bolivia, Plurinational State Of 31 No IGA    
Congo, Democratic Republic Of The 9 No IGA    
Macedonia, The Former Yugoslav Republic Of 18 No IGA    
Moldova, Republic Of 20 Model 2 IGA Substance June 30, 2014
Venezuela, Bolivarian Republic Of 49 No IGA    
Tanzania, United Republic Of 16 No IGA    
Libya 7 No IGA    
Bonaire, Sint Eustatius And Saba 12 No IGA    
Korea, Democratic People’s Republic Of 1 No IGA    
Virgin Islands (U.S.) 2 US Territory    
Guinea-Bissau 1 No IGA    
Kiribati 1 No IGA    
Sao Tome and Principe 1 No IGA    
WEST BANK AND GAZA 23 No IGA    
Grand Total         87,993
IRS Registered FFI List (Sum of Registrations) July ’14# County #
Model 1A IGA         48,175 85
Model 1B IGA         19,580 2
Model 2 IGA         15,239 13
US              620 1
US Territory                61 5 Note 1
No IGA           4,318 144 Note 2
Total         87,993 250 Notes 1, 2 & 3
Non IGA           4,318                 144
Non IGA% 5% 58%
IGA         82,994                   98
IGA% 94% 39%
US and US Territories              681                     6
1% 2%
There is only 1 jurisdiction with an IGA that has zero registrations: Kosovo, implying that registration is a lead indicator of an IGA being signed
 
Note 1
This does not include:
Baker Island, Howland Island, Jarvis Island, Johnston Atoll, Kingman Reef, Midway Islands, Navassa Island, Palmyra Atoll, Wake Island
Note 2
This does not include:
Akrotiri, Ashmore and Cartier Islands, Clipperton Island, Coral Sea Islands, Dhekelia, Jan Mayen, Paracel Islands, Spratly Islands, Svalbard
Note 3
WEST BANK AND GAZA is not on the ISO list provided by the IRS. However, the IRS have allowed use of ISO 3166-1 Code “275” for this territory on their list of approved FFIs.
FYI: The US Department of State does not recognize Palestine, much less Gaza and the West Bank.  But since the IRS does for purposes of FATCA, these are included for completeness.

book coverComplying with FATCA?

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf

 

Model 1 IGA – 34 (followed by number of registered FFIs as of July 1st at 1 pm Washington, D.C.)

  1. Australia (4-28-2014)
  2. Belgium (4-23-2014)
  3. British Virgin Islands (6-30-2014) <– moved from below list
  4. Canada (2-5-2014)
  5. Cayman Islands (11-29-2013)
  6. Costa Rica (11-26-2013)
  7. Denmark (11-19-2012)
  8. Estonia (4-11-2014)
  9. Finland (3-5-2014)
  10. France (11-14-2013)
  11. Germany (5-31-2013)
  12. Gibraltar (5-8-2014)
  13. Guernsey (12-13-2013)
  14. Hungary (2-4-2014)
  15. Honduras (3-31-2014)
  16. Ireland (1-23-2013)
  17. Isle of Man (12-13-2013)
  18. Israel (6-30-2014) <– moved from below list
  19. Italy (1-10-2014)
  20. Jamaica (5-1-2014)
  21. Jersey (12-13-2013)
  22. Latvia (6-27-2014):
  23. Liechtenstein (5-19-2014)
  24. Luxembourg (3-28-2014)
  25. Malta (12-16-2013)
  26. Mauritius (12-27-2013)
  27. Mexico (4-9-2014)
  28. Netherlands (12-18-2013)
  29. New Zealand (6-12-2014)
  30. Norway (4-15-2013)
  31. Slovenia (6-2-2014)
  32. South Africa (6-9-2014)
  33. Spain (5-14-2013)
  34. United Kingdom (9-12-2012)

Jurisdictions that have reached agreements in substance:

Model 1 IGA – 52 (followed by number of registered FFIs)

  1. Algeria (6-30-2014)  < – new entry
  2. Antigua and Barbuda (6-3-2014)
  3. Azerbaijan (5-16-2014)
  4. Bahamas (4-17-2014)
  5. Bahrain (6-30-2014) < – new entry
  6. Barbados (5-27-2014)
  7. Belarus (6-6-2014)
  8. Brazil (4-2-2014):
  9.  Bulgaria (4-23-2014)
  10. Cabo Verde (6-30-2014) <– new entry
  11. China (6-26-2014)  <– new entry
  12. Colombia (4-23-2014)
  13. Croatia (4-2-2014)
  14. Curaçao (4-30-2014)
  15. Czech Republic (4-2-2014)
  16. Cyprus (4-22-2014)
  17. Dominica (6-19-2014):
  18. Dominican Republic (6-30-2014) <– new entry
  19. Georgia (6-12-201)
  20. Greenland (6-29-2014) <– new entry
  21. Grenada (6-16-2014)
  22. Guyana (6-24-2014) <– new entry
  23. Haiti (6-30-2014) <– new entry
  24. India (4-11-2014)
  25. Indonesia (5-4-2014):
  26. Kosovo (4-2-2014)
  27. Kuwait (5-1-2014)
  28. Lithuania (4-2-2014)
  29. Malaysia (6-30-2014) <– new entry
  30. Montenegro (6-30-2014) <– new entry
  31. Panama (5-1-2014)
  32. Peru (5-1-2014):
  33. Poland (4-2-2014):
  34. Portugal (4-2-2014):
  35. Qatar (4-2-2014):
  36. Romania (4-2-2014):
  37. St. Kitts and Nevis (6-4-2014)
  38. St. Lucia (6-12-2014):
  39. St. Vincent and the Grenadines (6-2-2014)
  40. Saudi Arabia (6-24-2014):
  41. Serbia (6-30-2014)
  42. Seychelles (5-28-2014)
  43. Singapore (5-5-2014):
  44. Slovak Republic (4-11-2014)
  45. South Korea (4-2-2014)
  46. Sweden (4-24-2014)
  47. Thailand (6-24-2014):
  48. Turkey (6-3-2014)
  49. Turkmenistan (6-3-2014)
  50. Turks and Caicos Islands (5-12-2014):
  51. Ukraine (6-26-2014) < – new entry
  52. United Arab Emirates (5-23-2014)

Model 2 IGA – 5

  1. Austria (4-29-2014)
  2. Bermuda (12-19-2013)
  3. Chile (3-5-2014)
  4. Japan (6-11-2013)
  5. Switzerland (2-14-2013)

Jurisdictions that have reached agreements in substance:

Model 2 IGA – 8

  1. Armenia (5-8-2014)
  2. Hong Kong (5-9-2014)
  3. Iraq (6-30-2014) < – new entry
  4. Moldova (6-30-2014) < – new entry
  5. Nicaragua (6-30-2014
  6. Paraguay (6-6-2014):
  7. San Marino (6-30-2014) < – new entry
  8. Taiwan (6-23-2014)

 

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FATCA Corrections Released June 30th – Withholding on 160 Countries Begins July 1st

Posted by William Byrnes on June 30, 2014


free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

What FATCA Withholding Corrections Did the IRS Publish Today? (June 30th)*

Corrections for Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities: http://www.ofr.gov/(S(4m13pp0czfmzywjl2cfjdpwn))/OFRUpload/OFRData/2014-15465_PI.pdf

Corrections for Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment: http://www.ofr.gov/(S(4m13pp0czfmzywjl2cfjdpwn))/OFRUpload/OFRData/2014-15466_PI.pdf

“As published, the final and temporary regulations contain a number of items that need to be corrected or clarified. Several citations and cross references are corrected.  The correcting amendments also include the addition, deletion, or modification of regulatory language to clarify the relevant provisions to meet their intended purposes or for consistency with other related provisions of these regulations. The addition of final regulatory language only includes language that was inadvertently removed in the final and temporary regulations.”

* Should out to Haydon Perryman for spotting this release (and alerting me) because Treasury did not send out an alert today on it.  Check out his blog: http://haydonperryman.wordpress.com/

Are All Systems Still Go for 30% FATCA Withholding starting tomorrow (July 1st)

Yes, FATCA goes “live” on Tuesday!  30% withholding on all withholdable payments to nonparticipating FFIs in the 160 non-IGA countries/jurisdictions as of July 1st.

What additional FFIs will be included on the July 1st list to be published tomorrow? 

FFIs that registered by June 3rd.  The IRS states the following on its FATCA Registration Portal: “the IRS believes it can ensure registering FFIs that their GIINs will be included on the July 1 IRS FFI List if their registrations are finalized by June 3, 2014.”

(See Notice 2014-17, page 6: “FFIs that finalize their registrations after … June 3 may still be included on the … July 1 IRS FFI List; however, the IRS cannot provide assurance that this will be the case.”)

Most commentators expect a rush of over 300,000 FFI registrations by the end of 2014.  Some predict more than a half million entities must still register, based on the UK’s HMRC estimate that 75,000 entities are impacted by FATCA within the United Kingdom (where less than 6,300 are currently registered on the GIIN list). Withholding on IGA jurisdiction non-compliant FFIs only begins January 1st.

What about FFIs that registered on June 30th?

The IRS has allowed a 90 day safeguard for FFIs when a GIIN has been applied for but not yet received.

§1.1471-3(e)(3) Participating FFIs and registered deemed-compliant FFIs—(i) In general. … A payee whose registration with the IRS as a participating FFI or a registered deemed-compliant FFI is in process but has not yet received a GIIN may provide a withholding agent with a Form W-8 claiming the chapter 4 status it applied for and writing “applied for” in the box for the GIIN. In such case, the FFI will have 90 calendar days from the date of its claim to provide the withholding agent with its GIIN and the withholding agent will have 90 calendar days from the date it receives the GIIN to verify the accuracy of the GIIN against the published IRS FFI list before it has reason to know that the payee is not a participating FFI or registered deemed-compliant FFI. … (emphasis added).

Follow this highlighted link to my previous analysis for completing the W-8BEN-E

When Must FFIs in IGA countries Register? 

Financial institutions (FFIs) in the 90 IGA countries have an extension to register with the IRS in order to obtain a GIIN and thus appear on the IRS’ FATCA compliant list.  FATCA 30% withholding for FFIs in these Model 1 IGA countries and jurisdictions only begins January 1, 2015.

See Reg. § 1.1471-3(d)(4)(iv)(A): § 1.1471-3(d)(4)(iv) Exceptions for payments to reporting Model 1 FFIs.— (A) For payments made prior to January 1, 2015, a withholding agent may treat the payee as a reporting Model 1 FFI if it receives a withholding certificate from the payee indicating that the payee is a reporting Model 1 FFI and the country in which the payee is a reporting Model 1 FFI, regardless of whether the certificate contains a GIIN for the payee.

In its January 6, 2014 Announcement 2014-1 (IRB 2014-2), the IRS stated:

Thus, while reporting Model 1 FIs will be able to register and obtain GIINs on or after January 1, 2014, they will not need to register or obtain GIINs until on or about December 22, 2014, to ensure inclusion on the IRS FFI list by January 1, 2015. (emphasis added)

However, at least one IGA country is suggesting an earlier (perhaps more prudent) date than December 22, 2014 for GIIN registration in order to be included on the IRS’ last 2014 FATCA compliant list.  The United Kingdom’s Law Society and Institute of Chartered Accountants in May 2014 published combined guidance to members stating:

To ensure that the registration has been processed in time for inclusion on that list the last practical date for registration is 25 October 2014.

FATCA IGA FACTS as of June 30th at 9pm Washington, D.C.

IGAs: 90

Model 1: 80

Model 2: 10

Non-IGAs: 250 – 90 = 160 countries for withholding as of June 30, 2014

Registered: 77,353 FFI/branches from 205 countries/jurisdictions*

* Haydon Perryman of Strevus and I will in the morning, as quickly as possible, undertake a count and analysis of the July 1st FFI list release.  Hopefully Treasury will release it well ahead of the USA v Belgium World Cup semi-finals game at 4pm Washington, D.C time.  Feel free to email me at williambyrnes@gmail.com if you notice any anomalies or have comments to be included in our analysis.

Model 1 IGA – 32 (followed by number of registered FFIs as of June 30th)

  1. Australia (4-28-2014): 1,865
  2. Belgium (4-23-2014): 250
  3. Canada (2-5-2014): 2,265
  4. Cayman Islands (11-29-2013): 14,837
  5. Costa Rica (11-26-2013): 123
  6. Denmark (11-19-2012): 187
  7. Estonia (4-11-2014): 27
  8. Finland (3-5-2014): 467
  9. France (11-14-2013): 2,291
  10. Germany (5-31-2013): 2,555
  11. Gibraltar (5-8-2014): 97
  12. Guernsey (12-13-2013): 2,396
  13. Hungary (2-4-2014): 102
  14. Honduras (3-31-2014): 48
  15. Ireland (1-23-2013): 1,757
  16. Isle of Man (12-13-2013): 313
  17. Italy (1-10-2014): 457
  18. Jamaica (5-1-2014): 42
  19. Jersey (12-13-2013): 1,619
  20. Latvia (6-27-2014): 41 <– moved from below list
  21. Liechtenstein (5-19-2014): 240
  22. Luxembourg (3-28-2014): 3,561
  23. Malta (12-16-2013): 236
  24. Mauritius (12-27-2013): 728
  25. Mexico (4-9-2014): 419
  26. Netherlands (12-18-2013): 2,054
  27. New Zealand (6-12-2014) 335
  28. Norway (4-15-2013): 313
  29. Slovenia (6-2-2014): 21
  30. South Africa (6-9-2014): 318  
  31. Spain (5-14-2013): 1,188
  32. United Kingdom (9-12-2012): 6,264

Model 1 IGA – 48 (followed by number of registered FFIs)

  1. Algeria (6-30-2014)  < – new entry
  2. Antigua and Barbuda (6-3-2014): 36
  3. Azerbaijan (5-16-2014): 17
  4. Bahamas (4-17-2014): 611
  5. Barbados (5-27-2014): 124
  6. Belarus (6-6-2014): 65
  7. Brazil (4-2-2014): 2,259
  8. British Virgin Islands (4-2-2014): 1,838
  9. Bulgaria (4-23-2014): 73
  10. China (6-26-2014) 212 <– new entry
  11. Colombia (4-23-2014): 173
  12. Croatia (4-2-2014): 51
  13. Curaçao (4-30-2014): 174
  14. Czech Republic (4-2-2014): 93
  15. Cyprus (4-22-2014): 280
  16. Dominica (6-19-2014): 17
  17. Dominican Republic (6-30-2014): 68 <– new entry
  18. Georgia (6-12-201): 24
  19. Greenland (6-29-2014): 1 <– new entry
  20. Grenada (6-16-2014): 32
  21. Guyana (6-24-2014) <– new entry
  22. India (4-11-2014): 247
  23. Indonesia (5-4-2014): 308
  24. Israel (4-28-2014): 322
  25. Kosovo (4-2-2014) – nil
  26. Kuwait (5-1-2014): 78
  27. Lithuania (4-2-2014): 22
  28. Panama (5-1-2014): 451
  29. Peru (5-1-2014): 165
  30. Poland (4-2-2014): 165
  31. Portugal (4-2-2014): 256
  32. Qatar (4-2-2014): 47
  33. Romania (4-2-2014): 110
  34. St. Kitts and Nevis (6-4-2014): 71
  35. St. Lucia (6-12-2014): 61
  36. St. Vincent and the Grenadines (6-2-2014): 105
  37. Saudi Arabia (6-24-2014): 18
  38. Seychelles (5-28-2014): 38
  39. Singapore (5-5-2014): 784
  40. Slovak Republic (4-11-2014): 55
  41. South Korea (4-2-2014): 397
  42. Sweden (4-24-2014): 313
  43. Thailand (6-24-2014): 768
  44. Turkey (6-3-2014): 66
  45. Turkmenistan (6-3-2014): 1  
  46. Turks and Caicos Islands (5-12-2014): 28
  47. Ukraine (6-26-2014): 106  < – new entry
  48. United Arab Emirates (5-23-2014): 136

Model 2 IGA – 5

  1. Austria (4-29-2014): 2,979
  2. Bermuda (12-19-2013): 1,243
  3. Chile (3-5-2014): 325
  4. Japan (6-11-2013): 3,252
  5. Switzerland (2-14-2013): 4,041

Jurisdictions that have reached agreements in substance:

Model 2 IGA – 5

  1. Armenia (5-8-2014): 28
  2. Hong Kong (5-9-2014): 1,540
  3. Moldova (6-30-2014):  < – new entry
  4. Paraguay (6-6-2014): 17 
  5. Taiwan (6-23-2014): 409

 

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CDOT – Is UK Version of FATCA, FATCA on Steroids?

Posted by William Byrnes on June 26, 2014


It is also worth pointing out that of the 77,353 entities on the June 1st 2014 list, 37% are from the UK and her Crown Dependencies and Overseas Territories, most notably the Cayman Islands.One wonders if, were if not for CDOT, the 77,353 might not be considerably smaller.

via CDOT – Is UK Version of FATCA, FATCA on Steroids?.

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Analysis of new 2014 FATCA W-8BEN-E Instructions

Posted by William Byrnes on June 25, 2014


free FATCA chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

On June 25, 2014 the IRS released the W-8 BEN-E instructionsRead William Byrnes’ previous April 2 analysis of the W-8BEN-E here.  Read William Byrnes’ analysis of the W-8IMY instructions here.  For analysis of the requirements of the 31 FATCA entity classifications, see William Byrnes’ previous articles:  https://profwilliambyrnes.com/category/fatca/

Analysis of W-8BEN-E Instructions …

Who Must Provide W-8BEN-E?

A foreign entity must submit a Form W-8BEN-E to the withholding agent if it will receive a FATCA withholdable payment, receive a payment subject to chapter 3 withholding, or if it maintains an account with an FFI.

All Beneficial Owners

Form W-8 BEN-E must be provided by ALL the entities that are beneficial owners of a payment, or of another entity that is the beneficial owner.  If the income or account is jointly owned by more than one person, then the income or account will be treated by the withholding agent as owned by a foreign beneficial owner only if Forms W-8BEN or W-8BEN-E are provided by EVERY owner of the account.

Treatment as US Account

If the withholding agent or financial institution receives a Form W-9 from any of the joint owners, then the payment must be treated as made to a U.S. person and the account treated as a U.S. account.  An account will be treated as a U.S. account for FATCA by an FFI if any of the account holders is a specified U.S. person or a U.S.-owned foreign entity (unless the account is otherwise excepted from U.S. account status for FATCA purposes).

Hybrids

Hybrid Entity: A hybrid entity should give Form W-8BEN-E on its own behalf to a withholding agent only for income for which it is claiming a reduced rate of withholding under an income tax treaty or to document its chapter 4 status for purposes of maintaining an account with an FFI requesting this form (when it is not receiving withholdable payments or payments subject to chapter 3 withholding).

Reverse Hybrid: A reverse hybrid entity should give Form W-8BEN-E on its own behalf to a withholding agent only for income for which no treaty benefit is being claimed or to establish its status for chapter 4 purposes (when required).

Who Should Not Use Form W-8BEN-E?

US Person: If the filer is a US person (including US citizens, resident aliens, and entities treated as US persons, such as a corporation organized under the law of a state), then submit Form W-9, Request for Taxpayer Identification Number and Certification.

Foreign Insurance Company: A foreign insurance company that has made an election under section 953(d) to be treated as a U.S. person should submit Form W-9 to certify its “U.S. status” even if it is an FFI for FATCA purposes.  Certain foreign insurance companies issuing annuities or cash value insurance contracts that elect to be treated as a U.S. person for federal tax purposes but are not licensed to do business in the United States are treated as FFIs for purposes of chapter 4. For purposes of providing a withholding agent with documentation for both chapter 3 and chapter 4 purposes, however, such an insurance company is permitted to use Form W-9 to certify its status as a U.S. person.

NRA: A nonresident alien individual must submit Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).

Disregarded: A U.S. person that is a single owner of a disregarded entity, and that is not also a hybrid entity claiming treaty benefits, should provide Form W-9.  A foreign branch of a U.S. financial institution (other than a branch that operates as a qualified intermediary) that is treated as an FFI under an applicable IGA is permitted to use Form W-9 to certify its status as a U.S. person for chapter 3 and chapter 4 purposes.

But if the single owner is not a U.S. person,is not a branch of an FFI claiming FATCA status, and is not a hybrid entity claiming treaty benefits, it should provide either Form W-8BEN or Form W-8BEN-E as appropriate.

Intermediary: Form W-8IMY is submitted generally by a payment recipient with non-beneficial owner status, i.e. an intermediary.  Such intermediary can be a U.S. branch, a qualified intermediary, a non-qualified intermediary, foreign partnership, foreign grantor or a foreign simple trust.  Read my analysis of W-8IMY and its instructions in my June 24th article.  An entity treated as a flow-through entity should generally provide Form W-8IMY for chapter 3 or chapter 4 purposes.

Expiration of Form W-8BEN-E.

Generally, a Form W-8BEN-E will remain valid for purposes of both chapters 3 and 4 for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect.  For example, a Form W-8BEN signed on September 30, 2014 remains valid through December 31, 2017.  However, under certain conditions a Form W-8BEN-E will remain in effect indefinitely until a change of circumstances occurs.

Change in circumstances.

If a change in circumstances makes any information on the Form W-8BEN-E incorrect for purposes of either chapter 3 or chapter 4, then the submitting person must notify the withholding agent or financial institution maintaining the account within 30 days of the change in circumstances and you must file a new Form W-8BEN-E (or other appropriate form as applicable).

Certification

Part XXIX requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf.  This part of the final form also contains the following language that does not appear in the current form: “I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect.”

Which of the 30 Parts of the W-8BEN-E to Complete?

The W-8BEN-E form has thirty parts, whereas the former dual-purpose W8BEN in use since 2006 has just four parts.  The new 2014 Form W-8BEN-E includes the FATCA and QI entity classification reporting requirements.

All filers of the new W-8BEN-E must complete Parts I and XXIX. The FATCA classification indicated determines which one of the Parts IV through XXVIII must be completed.

Part I – Identification of Beneficial Owner

Part I of the W-8BEN-E requires general information, the QI status, and the FATCA classification of the filer.

Question 1. A disregarded entity or branch enters the legal name of the entity that owns the disregarded entity (looking through multiple disregarded entities if applicable) or maintains the branch.

Question 2. A corporation must enter its country of incorporation.  Any other type of entity must instead enter the country under whose laws it is created, organized, or governed.

Question 3. A disregarded entity receiving a payment should only enter its name on line 3 if it is receiving a withholdable payment or hold an account with an FFI and

  1. has registered with the IRS and been assigned a GIIN associated with the legal name of the disregarded entity;
  2. is a reporting Model 1 FFI or reporting Model 2 FFI; and
  3. is not a hybrid entity using this form to claim treaty benefits.

If not required to provide the legal name, then a disregarded entity receiving a payment or maintaining an account may instead enter its name on line 10.

Question 4 requests the QI status. If the filer is a disregarded entity, partnership, simple trust, or grantor trust, then the filer must complete Part III if the entity is claiming benefits under a U.S. tax treaty.

Question 5 requests the FATCA classification of the entity.  W-8BEN-E currently lists 31 FATCA classifications of which the entity must check only one box unless otherwise indicated. Completion of the W-8BEN-E other parts depend upon the selection of the FATCA classification.

  1. Nonparticipating FFI (including a limited FFI or an FFI related to a Reporting IGA FFI other than a registered deemed-compliant FFI or participating FFI).
  2. Participating FFI.
  3. Reporting Model 1 FFI.
  4. Reporting Model 2 FFI.
  5. Registered deemed-compliant FFI (other than a reporting Model 1 FFI or sponsored FFI that has not obtained a GIIN).
  6. Sponsored FFI that has not obtained a GIIN. Complete Part IV.
  7. Certified deemed-compliant nonregistering local bank. Complete Part V.
  8. Certified deemed-compliant FFI with only low-value accounts. Complete Part VI.
  9. Certified deemed-compliant sponsored, closely held investment vehicle. Complete Part VII.
  10. Certified deemed-compliant limited life debt investment entity. Complete Part VIII.
  11. Certified deemed-compliant investment advisors and investment managers. Complete Part IX.
  12. Owner-documented FFI. Complete Part X.
  13. Restricted distributor. Complete Part XI.
  14. Nonreporting IGA FFI (including an FFI treated as a registered deemed-compliant FFI under an applicable Model 2 IGA). Complete Part XII.
  15. Foreign government, government of a U.S. possession, or foreign central bank of issue. Complete Part XIII.
  16. International organization. Complete Part XIV.
  17. Exempt retirement plans. Complete Part XV.
  18. Entity wholly owned by exempt beneficial owners. Complete Part XVI.
  19. Territory financial institution. Complete Part XVII.
  20. Nonfinancial group entity. Complete Part XVIII.
  21. Excepted nonfinancial start-up company. Complete Part XIX.
  22. Excepted nonfinancial entity in liquidation or bankruptcy. Complete Part XX.
  23. 501(c) organization. Complete Part XXI.
  24. Nonprofit organization. Complete Part XXII.
  25. Publicly traded NFFE or NFFE affiliate of a publicly traded corporation. Complete Part XXIII.
  26. Excepted territory NFFE. Complete Part XXIV.
  27. Active NFFE. Complete Part XXV.
  28. Passive NFFE. Complete Part XXVI as well as Part XXX if substantial U.S. owners*.
  29. Excepted inter-affiliate FFI. Complete Part XXVII.
  30. Direct reporting NFFE.
  31. Sponsored direct reporting NFFE. Complete Part XXVIII

*For a Passive NFFE, a specified U.S. person is a substantial U.S. owner if the person has more than a 10 percent beneficial interest in the entity.

FFIs Covered by an IGA and Related Entities

A reporting IGA FFI resident in, or established under the laws of, a jurisdiction covered by a Model 1 IGA should check “Reporting Model 1 FFI.” A reporting FFI resident in, or established under the laws of, a jurisdiction covered by a Model 2 IGA should check “Reporting Model 2 FFI.”

If the FFI is treated as a registered deemed-compliant FFI under an applicable IGA, it should check “Nonreporting IGA FFI” rather than “registered deemed-compliant FFI” and provide its GIIN in Part XII, line 26.

An FFI that is related to a reporting IGA FFI and that is treated as a nonparticipating FFI in its country of residence should check nonparticipating FFI in line 5. An FFI that is related to a reporting IGA FFI and that is a participating FFI, deemed-compliant FFI, or exempt beneficial owner under the U.S. Treasury regulations or an applicable IGA should check the appropriate box for its chapter 4 status.

Requirement to Provide a GIIN

If the entity is in the process of registering with the IRS as a participating FFI, registered deemed-compliant FFI, reporting Model 1 FFI, reporting Model 2 FFI, direct reporting NFFE, or sponsored direct reporting NFFE, but has not received a GIIN, it may complete this line by writing “applied for.” However, the person requesting this form must receive and verify the GIIN within 90 days.

For payments made prior to January 1, 2015, a Form W-8BEN-E provided by a reporting Model 1 FFI need not contain a GIIN. For payments made prior to January 1, 2016, a sponsored direct reporting NFFE or sponsored FFI that has not obtained a GIIN must provide the GIIN of its sponsoring entity.

501(c) Organization

Only foreign entities that are tax-exempt under section 501 should check the 501(c) organization “Tax-exempt organization” box. Such organizations should use Form W-8BEN-E only if they are claiming a reduced rate of withholding under an income tax treaty or a code exception other than section 501. If claiming an exemption from withholding under code section 501, then it must submit Form W-8EXP to document the exemption and chapter 4 status.

Non-Profit Organizations Covered by an IGA

A non-profit entity that is established and maintained in a jurisdiction that is treated as having in effect a Model 1 IGA or Model 2 IGA, and that meets the definition of Active NFFE under Annex I of the applicable IGA, should not check a box for its status on line 5.

Completion of Parts IV through XXVIII

An entity should complete only one part of Parts IV through XXVIII certifying to the chapter 4 status. But an entity that selects nonparticipating FFI, participating FFI, registered deemed-compliant FFI, reporting Model 1 FFI, reporting Model 2 FFI, or direct reporting NFFE (other than a sponsored direct reporting NFFE) is not required to complete any of the certifications in Parts IV through XXVIII.

Part IV Sponsored FFI That Has Not Obtained a GIIN
Part V Certified Deemed-Compliant Nonregistering Local Bank
Part VI Certified Deemed-Compliant FFI with Only Low-Value Accounts
Part VII Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
Part VIII Certified Deemed-Compliant Limited Life Debt Investment Entity
Part IX Certified Deemed-Compliant Investment Advisors and Investment Managers
Part X Owner-Documented FFI
Part XI Restricted Distributor
Part XII Nonreporting IGA FFI
Part XIII Foreign Government, Government of a U.S. Possession, or Foreign Central Bank of Issue
Part XIV International Organization
Part XV Exempt Retirement Plans
Part XVI Entity Wholly Owned by Exempt Beneficial Owners
Part XVII Territory Financial Institution
Part XVIII Excepted Nonfinancial Group Entity
Part XIX Excepted Nonfinancial Start-Up Company
Part XX Excepted Nonfinancial Entity in Liquidation or Bankruptcy
Part XXI 501(c) Organization
Part XXII Non-Profit Organization
Part XXIII Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
Part XXIV Excepted Territory NFFE
Part XXV Active NFFE
Part XXVI Passive NFFE
Part XXVII Excepted Inter-Affiliate FFI
Part XXVIII Sponsored Direct Reporting NFFE
Part XXIX Certification
Part XXX Substantial U.S. Owners of Passive NFFE

Part X – Owner-Documented FFI

Line 24a. An owner-documented FFI must check the box to certify that it meets all of the requirements for this status and is providing this form to a U.S. financial institution, participating FFI, reporting Model 1 FFI, or reporting Model 2 FFI that agrees to act as a designated withholding agent with respect to the FFI identified on line 1. Then select either 24b or 24c.

Line 24b. Check this box to certify that the documentation set forth in the certifications has been provided (or will be provided), including the owner reporting statement described in this line 24b, or

Line 24c. Check this box to certify that the auditor’s letter has been provided (or will be provided).

Entities Providing Certifications Under an Applicable IGA

In lieu of the certifications contained in Parts IV through XXVIII of Form W-8BEN-E, a reporting Model 1 FFI or reporting Model 2 FFI in certain cases may request alternate certifications to document its account holders pursuant to an applicable IGA or it may otherwise provide an alternate certification to a withholding agent.

A withholding agent that is an FFI may provide a chapter 4 status certification other than as shown in Parts IX through XXVIII in order to satisfy its due diligence requirements under an applicable IGA. In such a case, attach that alternative certification to this Form W-8BEN-E in lieu of completing a certification otherwise required in Parts IV through XXVIII provided that

1) the certification accurately reflects the chapter 4 status or under an applicable IGA; and

2) the withholding agent provides a written statement that it has provided the certification to meet its due diligence requirements as a participating FFI or registered deemed-compliant FFI under an applicable IGA.

An applicable IGA certification may be provided with the W-8BEN-E if determining chapter 4 status under the definitions provided in an applicable IGA and that certification identifies the jurisdiction that is treated as having an IGA in effect and describes the status as an NFFE or FFI in accordance with the applicable IGA.

However, if under an applicable IGA the entity’s status is determined to be an NFFE, it must still determine if it is an excepted NFFE under the FATCA Regulations. Additionally, the entity must comply with the conditions of its status under the law of the IGA jurisdiction.

book coverLexis Guide to FATCA Compliance – 2015 Edition 

1,200 pages of analysis of the compliance challenges, over 54 chapters by 70 FATCA contributing experts from over 30 countries.  Besides in-depth, practical analysis, the 2015 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers.   The Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments.  No filler of forms and regs – it’s all beef !  See Lexis’ order site and request a copy of the forthcoming 2015 edition – http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327

A free download of the first of the 34 chapters is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671

<— Subscribe by email on the left menu to the FATCA Updates on this blog:  https://profwilliambyrnes.com/category/fatca/

If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

  • Chapter 1 Background and Current Status of FATCA
  • Chapter 1A The International Financial System and FATCA
  • Chapter 2 Practical Considerations for Developing a FATCA Compliance Program
  • Chapter 2A FATCA Internal Policy
  • Chapter 3 FATCA Compliance and Integration of Information Technology
  • Chapter 4 Financial Institution Account Remediation
  • Chapter 4A FATCA Customer Outreach
  • Chapter 5 FBAR and Form 8938 Reporting and List of International Taxpayer IRS Forms
  • Chapter 6 Determining U.S. Ownership of Foreign Entities
  • Chapter 7 Foreign Financial Institutions
  • Chapter 7A Account reporting under FATCA
  • Chapter 8 Non-Financial Foreign Entities
  • Chapter 9 FATCA and the Offshore Trust Industry
  • Chapter 10 FATCA and the Insurance Industry
  • Chapter 11 Withholding and Qualified Intermediary
  • Chapter 12 FATCA Withholding Compliance
  • Chapter 13 “Withholdable” Payments
  • Chapter 13A Reporting Payments
  • Chapter 14 Determining and Documenting the Payee
  • Chapter 14A W8 Equivalents
  • Chapter 15 Framework of Intergovernmental Agreements
  • Chapter 16 Analysis of Current Intergovernmental Agreements
  • Chapter 17 European Union Cross Border Information Reporting
  • Chapter 18 The OECD Role in Exchange of Information: The Trace Project, FATCA, and Beyond
  • Chapter 19 Germany
  • Chapter 20 Ireland
  • Chapter 21 Japan
  • Chapter 22 Mexico
  • Chapter 23 Switzerland
  • Chapter 24 United Kingdom
  • Chapter 25 Brazil
  • Chapter 26 British Virgin Islands
  • Chapter 27 Canada
  • Chapter 28 Spain
  • Chapter 29 China
  • Chapter 30 Netherlands
  • Chapter 31 Luxembourg
  • Chapter 32 Russia
  • Chapter 33 Turkey
  • Chapter 34 India
  • Chapter 35 Argentina
  • Chapter 36 Aruba
  • Chapter 37 Australia
  • Chapter 38 Bermuda
  • Chapter 39 Colombia
  • Chapter 40 Cyprus
  • Chapter 41 Hong Kong
  • Chapter 42 Macau
  • Chapter 43 Portugal
  • Chapter 44 South Africa
  • Chapter 45 France
  • Chapter 46 Gibraltar
  • Chapter 47 Guernsey
  • Chapter 48 Italy

Posted in FATCA, W-8BEN-E | Tagged: , , , , , , , | 3 Comments »

5 new IGAs with 3 business days to go until 30% FATCA withholding on remaining 167 countries begins

Posted by William Byrnes on June 25, 2014


(Updated as of 19:00 EDT June 25, 2014, FFI #s updated June 26 with Haydon Perryman, Director of Compliance Solutions, Strevus)

FATCA FACTS

IGAs: 83 (72,034 FFI/branches)

Model 1: 74 (57,492 FFI/branches)

Model 2: 9 (13,834 FFI/branches)

Non-IGAs: 250 – 83 = 167 (5,212 FFI/branches)

Registered: 77,353 FFI/branches from 205 countries/jurisdictions

Approximately 25% (19,046) of the currently 77,353 registered FFIs are impacted by the FFI agreement changes, including FFIs registrations from the current nine Model 2 countries/jurisdictions and the FFI registrations from the 123 countries/jurisdictions without an IGA.

77,353 financial institutions and their branches registered from 205 countries and jurisdictions, of a total of 250 countries and jurisdictions recognized by the USA.  45 countries / jurisdictions do not yet have any FFI registrations. One of these 45 countries, Kosovo, has an IGA.

Of the total FFIs registered, 72,141 FFIs (93%) registered from the 83 countries/jurisdictions that as of June 25th (at 19:00 EDT) have an IGA.  57,492 FFIs registered from Model I IGA jurisdictions probably most as a category of a Model 1 Deemed Compliant FFI or as a branch.  13,834 (18%) of FFIs registered as Model 2 reporting FFIs or branches.  These 13,834 Model 2 FFI registrations are impacted by the FFI Agreement changes of June 24, 2014.

Non IGA Registrations (Participating FFI and other)

The 5,212 FFIs registered either as Participating FFIs or branches from the remaining 123 countries/jurisdictions (without an IGA) currently are also impacted (note that while there are 83 IGAs as of today, no FFI registered from Kosovo as of the June 2nd GIIN list, thus it is 205 subtracting 82 IGAs).

30% FATCA Withholding Begins July 1st

Meanwhile, 30% withholding on all withholdable payments to nonparticipating FFIs in the 167 non-IGA countries/jurisdictions begins three business days from today, on July 1st. Most commentators expect a rush of over 300,000 FFI registrations by the end of 2014.  Some predict more than a half million entities must still register, based on the UK’s HMRC estimate that 75,000 entities are impacted by FATCA within the United Kingdom (where less than 6,300 are currently registered on the GIIN list). Withholding on IGA jurisdiction non-compliant FFIs only begins January 1st.

Model 2 IGAs – 9 (13,834 FFI Registered)

  1. Armenia (5-8-2014): 28
  2. Austria (4-29-2014): 2,979
  3. Bermuda (12-19-2013): 1,243
  4. Chile (3-5-2014): 325
  5. Hong Kong (5-9-2014): 1.540
  6. Japan (6-11-2013): 3,252
  7. Paraguay (6-6-2014): 17
  8. Switzerland (2-14-2013): 4,041
  9. Taiwan: 409

Below is a selection of the 77,353 registered from 119 of the total 205 countries and jurisdictions on the June 2nd GIIN list.

  1. Afghanistan: 7
  2. Andorra: 34
  3. Anguilla: 71
  4. Antigua & Barbuda: 36
  5. Argentina: 270
  6. Armenia: 28 <– IGA
  7. Aruba: 14
  8. Australia: 1,865 <– IGA
  9. Austria: 2,979
  10. Azerbaijan: 17 <– IGA
  11. Bahamas: 611  <– IGA
  12. Barbados: 124  <– IGA
  13. Belgium: 250  <– IGA
  14. Belarus: 65
  15. Belize: 123
  16. Bermuda: 1,243
  17. Brazil: 2,259  <– IGA
  18. Bulgaria: 73
  19. BVI: 1,838  <– IGA
  20. Canada: 2,265  <– IGA
  21. Cayman Islands: 14,837  <– IGA
  22. China: 212
  23. Christmas Island: 1
  24. Colombia: 173  <– IGA
  25. Comoros Is.: 1
  26. Costa Rica: 123  <– IGA
  27. Cook Is.: 73
  28. Croatia: 51  <– IGA
  29. Curacao: 174  <– IGA
  30. Cyprus: 280  <– IGA
  31. Czech Republic: 93  <– IGA
  32. Denmark: 187  <– IGA
  33. Djibouti: 1
  34. Dominica: 17 <– IGA
  35. Dominican Republic: 68
  36. Ecuador: 22
  37. Egypt: 63
  38. Equatorial Guinea: 1
  39. Estonia: 27  <– IGA
  40. Falkland Islands: 1
  41. Finland: 467  <– IGA
  42. France: 2,290  <– IGA
  43. French Southern Territories: 1
  44. Georgia: 24  <– IGA
  45. Germany: 2,555  <– IGA
  46. Gibraltar: 97  <– IGA
  47. Greece: 92
  48. Greenland: 1
  49. Grenada: 32
  50. Guadeloupe: 1
  51. Guam: 3
  52. Guatemala: 76
  53. Guernsey: 2,396  <– IGA
  54. Honduras: 48  <– IGA
  55. Hong Kong: 1,540 <– IGA
  56. Hungary: 102  <– IGA
  57. Iceland: 5
  58. India: 247  <– IGA
  59. Indonesia: 308 <– IGA
  60. Ireland: 1,757  <– IGA
  61. Isle of Man: 313  <– IGA
  62. Israel: 322 <– IGA
  63. Italy: 457  <– IGA
  64. Jamaica: 42 <– IGA
  65. Japan: 3,252  <– IGA
  66. Jersey: 1,619  <– IGA
  67. North Korea: 4
  68. South Korea: 397
  69. Kuwait: 78
  70. Latvia: 41
  71. Lichtenstein: 240  <– IGA
  72. Lithuania: 22 <– IGA
  73. Luxembourg: 3,561 <– IGA
  74. Macao: 37
  75. Malta: 236  <– IGA
  76. Mauritius: 728  <– IGA
  77. Mexico: 419  <– IGA
  78. Monaco: 99
  79. Netherlands: 2,054  <– IGA
  80. New Zealand: 335  <– IGA
  81. Norway: 313  <– IGA
  82. Other: 23
  83. Panama: 451  <– IGA
  84. Paraguay: 17   <– IGA
  85. Peru: 165  <– IGA
  86. Poland: 165  <– IGA
  87. Portugal: 256  <– IGA
  88. Qatar: 47  <– IGA
  89. Romania: 110 <– IGA
  90. Russia: 515
  91. Saint Pierre & Miquelon: 1
  92. San Marino: 15
  93. Saudi Arabia: 18 <–IGA
  94. Seychelles: 38  <– IGA
  95. Singapore: 784  <– IGA
  96. South Africa: 318  <– IGA
  97. Spain: 1,188  <– IGA
  98. Slovakia: 55  <– IGA
  99. Slovenia:  21  <– IGA
  100. St Kitts & Nevis: 71 <– IGA
  101. St Lucia: 61  <– IGA
  102. St. Vincent and the Grenadines: 105  <– IGA
  103. Sweden: 313  <– IGA
  104. Switzerland: 4,041  <– IGA
  105. Taiwan: 409 <- IGA
  106. Thailand: 768 <-IGA
  107. Timor-Leste: 1
  108. Togo: 4
  109. Tonga: 1
  110. Turkey: 66  <– IGA
  111. Turkmenistan: 1   <-– IGA
  112. Turks & Caicos: 28  <– IGA
  113. Ukraine: 106
  114. United Arab Emirates: 136  <– IGA
  115. United Kingdom: 6,264  <– IGA
  116. USA: 563
  117. Uruguay: 132
  118. Venezuela: 30
  119. Wallis & Fortuna: 1

FFI Registration Among Model 1 IGAs and the Rest

Of a possible 250 countries and jurisdictions recognized by the US State Department and IRS (not including the 14 US dependencies for which FATCA withholding does not apply), 45 do not yet have an FFI registration.  But of the 205 countries and jurisdictions with FFI registrations, 20% of the total registered FFIs are Cayman Islands firms (14,837) (see my article of June 8). 

There is not one reliable number of how many financial entities in the world qualify as a financial institution requiring FATCA registration.  The list of FFIs requiring registration includes, by example, trusts companies, certain trusts, life insurance companies, investment funds, banks.  The IRS has said that “At this time, the full FFI list is expected to be less than 500,000 records.”

Some financial pundits are estimating as many as twice this figure.  Yet it seems that the categories of ‘certified deemed compliant’ FFIs and exempt FFIs should soak up a number of small, local FFIs.  Yet,  the UK Revenue HMRC estimates 75,000 of its FFIs are impacted by FATCA (http://www.hmrc.gov.uk/fatca/itc-regs-2013.pdf – page 4) (down from 300,000 prior to the UK-USA IGA).   If the UK, as one albeit important financial center, requires anything close to 75,000 FFI registrations, then the IRS figure of 500,000 FFI registrations is far too low.  Note that the ‘500,000’ FFI figure, if it excludes the corresponding branch registrations in other jurisdictions, and if it excludes the five classifications of “Certified Deemed Compliant”, seems more realistic.

BRIC Registration

Brazil leads the BRIC countries with 2,258 FFI registered, followed by Russia (515), India (247) with China only having 212.

NAFTA Registrations

2,265 FFIs registered from Canada and Mexico at 419.

Major OECD Countries Registrations

The United Kingdom (6,264) Revenue has recently announced that it will not adopt the IRS issued six-month extension (until December 31, 2014) for entity accounts (see my articles of May 5th and 2nd).  Thus, from July 1st, UK FFIs must document all personal and entity accounts under the requirements for “new” accounts as opposed as to “pre-existing” account due diligence procedures.

Australia (1,865), France (2,291), Germany (2,255), Ireland (1,757) and Netherlands (2,054).

European Financial Centers Registrations

Switzerland (4,041), Luxembourg (3,561), Austria (2,979), Lichtenstein (240).  Guernsey (2,396), Jersey (1,619), Isle of Man (313) and Gibraltar (97).

Caribbean Financial Centers Registrations

BVI (1,838), Bahamas (611), Bermuda (1,243) and Panama (451).

State of Palestine Registrations

23 FFIs registered with the IRS, listed as from the State of Palestine.  Primarily MENA banks and a branch of HSBC Middle East Bank.  See June 8th article  about this contentious issue.

North Korean Registrations

While North Korean remains a sanctioned country by OFAC (see http://www.treasury.gov/resource-center/sanctions/Programs/pages/nkorea.aspx) with a FINCEN AML update available at http://www.fincen.gov/statutes_regs/guidance/pdf/FIN-2013-A005.pdf, it had 4 FFI branches register.

“Other” Registrations

23 financial firms listed “other” as the country / jurisdiction.  By example, Harneys Nevis by example should probably register under Nevis (or where it is incorporated, if not Nevis)?  Why is the Austrian insurance group, Sigal Life UNIQA group Austria,  registered under “Other”?  Perhaps the July 1st list will have movement from “Other” to actual countries?

Interesting Research on the UK FFI List (by the subscriber “Edelweiss” in the comments on this blog)

Edelweiss has posted his research on the UK’s 6.264 registered FFIs (under comments to another one of this blog’s articles).  I think his research bears repeating in this article.  By example, he reviewed the list by GIIN and determined that about 1% of the global sign-ups of the June 2nd GIIN list are affiliated with AXA SA, the French financial services firm.

He then compares the 6,264 entities registered from the UK with the HMRC estimate (pg. 4) of 75,000 impacted FFIs (down from 300,000 prior to the IGA), finding that less than 10% of UK FFIs registered for the June GIIN list.  Either the HMRC estimated horribly wrong, or most UK FFIs are still undertaking initial FATCA preparation (relying on the October 25th registration deadline imposed by HRMC instead).

  • The UK list is dominated by fund management firms and their various funds, private equity and the plethora of feeder funds investment trusts and quite a few trusts. Bridgepoint, a small UK private equity firm, has 72 entities (globally), while 3i, a similarly small UK private equity firm, has 45 entities (globally).
  • There are quite a few entities that appear to have names suggesting they are part of a private equity holding company structure.
  • Globally, he found 26 mentions of “Bidco”, 157 of “Holdco”, 37 “Midco”, 44 “Topco”, 144 “Acquisition”, 156 “Mezzanine”.
  • He found 321 instances of “LLP” and “265″ instances of partnership
  • Finally, he found 16 “deceased” and 33 “will trust”

Model 1 IGA – 31 (followed by number of registered FFIs/branches)

  1. Australia (4-28-2014): 1,865
  2. Belgium (4-23-2014): 250
  3. Canada (2-5-2014): 2,265
  4. Cayman Islands (11-29-2013): 14,837
  5. Costa Rica (11-26-2013): 123
  6. Denmark (11-19-2012): 187
  7. Estonia (4-11-2014): 27
  8. Finland (3-5-2014): 467
  9. France (11-14-2013): 2,291
  10. Germany (5-31-2013): 2,555
  11. Gibraltar (5-8-2014): 97
  12. Guernsey (12-13-2013): 2,396
  13. Hungary (2-4-2014): 102
  14. Honduras (3-31-2014): 48
  15. Ireland (1-23-2013): 1,757
  16. Isle of Man (12-13-2013): 313
  17. Italy (1-10-2014): 457
  18. Jamaica (5-1-2014): 42
  19. Jersey (12-13-2013): 1,619
  20. Liechtenstein (5-19-2014): 240
  21. Luxembourg (3-28-2014): 3,561
  22. Malta (12-16-2013): 236
  23. Mauritius (12-27-2013): 728
  24. Mexico (4-9-2014): 419
  25. Netherlands (12-18-2013): 2,054
  26. New Zealand (6-12-2014) 335
  27. Norway (4-15-2013): 313
  28. Slovenia (6-2-2014): 21
  29. South Africa (6-9-2014): 318  
  30. Spain (5-14-2013): 1,188
  31. United Kingdom (9-12-2012): 6,264

Model 2 IGA – 5

  1. Austria (4-29-2014): 2,979
  2. Bermuda (12-19-2013): 1,243
  3. Chile (3-5-2014): 325
  4. Japan (6-11-2013): 3,252
  5. Switzerland (2-14-2013): 4,041

Jurisdictions that have reached agreements in substance:

Model 1 IGA – 43 (followed by number of registered FFIs)

  1. Antigua and Barbuda (6-3-2014): 36
  2. Azerbaijan (5-16-2014): 17
  3. Bahamas (4-17-2014): 611
  4. Barbados (5-27-2014): 124
  5. Belarus (6-6-2014): 65
  6. Brazil (4-2-2014): 2,259
  7. British Virgin Islands (4-2-2014): 1,838
  8. Bulgaria (4-23-2014): 73
  9. Colombia (4-23-2014): 173
  10. Croatia (4-2-2014): 51
  11. Curaçao (4-30-2014): 174
  12. Czech Republic (4-2-2014): 93
  13. Cyprus (4-22-2014): 280
  14. Dominica (6-19-2014): 17 < – new entry
  15. Georgia (6-12-201): 25
  16. Grenada (6-16-2014): 32 < – new entry
  17. India (4-11-2014): 247
  18. Indonesia (5-4-2014): 308
  19. Israel (4-28-2014): 322
  20. Kosovo (4-2-2014) – nil
  21. Kuwait (5-1-2014): 78
  22. Latvia (4-2-2014): 41
  23. Lithuania (4-2-2014): 22
  24. Panama (5-1-2014): 451
  25. Peru (5-1-2014): 165
  26. Poland (4-2-2014): 165
  27. Portugal (4-2-2014): 256
  28. Qatar (4-2-2014): 47
  29. Romania (4-2-2014): 110
  30. St. Kitts and Nevis (6-4-2014): 71
  31. St. Lucia (6-12-2014): 61
  32. St. Vincent and the Grenadines (6-2-2014): 105
  33. Saudi Arabia (6-24-2014): 18 < – new entry
  34. Seychelles (5-28-2014): 38
  35. Singapore (5-5-2014): 784
  36. Slovak Republic (4-11-2014): 55
  37. South Korea (4-2-2014): 397
  38. Sweden (4-24-2014): 313
  39. Thailand (6-24-2014): 768 < – new entry
  40. Turkey (6-3-2014): 66
  41. Turkmenistan (6-3-2014): 1  
  42. Turks and Caicos Islands (5-12-2014): 28
  43. United Arab Emirates (5-23-2014): 136

Model 2 IGA – 4

  1. Armenia (5-8-2014): 28
  2. Hong Kong (5-9-2014): 1.540
  3. Paraguay (6-6-2014): 18  
  4. Taiwan (6-23-2014): 409 < – new entry

Practical Compliance Guide for FATCA

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.

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FFI Agreements Amended by IRS One Week Before Withholding Starts

Posted by William Byrnes on June 24, 2014


On June 24, 2014 the IRS released an updated version of the FATCA FFI Agreement for Participating FFI and Reporting Model 2 FFI, just one week before FATCA withholding begins July 1st.   The previous FFI agreement version was released January 13th as Revenue Procedure 2014-13 (see my article link).

The IRS has updated the FFI agreement make it consistent with the coordination temporary regulations under chapter 4 of the Code, chapters 3 and 61 of the Code, and section 3406, which were released on February 20, 2014. (link to my article on these US Withholding and Documentation Rules changes).

This revenue procedure also provides guidance to FFIs and branches of FFIs treated as reporting financial institutions under an applicable Model 2 intergovernmental agreement (IGA) (reporting 2 Model 2 FFIs) on complying with the terms of the FFI agreement, as modified by the Model 2 IGA. The FFI agreement does not apply to a reporting Model 1 FFI, or any branch of such an FFI, unless the reporting Model 1 FFI has registered a branch located outside of a Model 1 IGA jurisdiction so that such branch may be treated as a participating FFI or reporting Model 2 FFI. In such a case, the terms of the applicable FFI agreement apply to the operations of such branch.

A reporting Model 2 FFI should apply the FFI agreement by substituting the term “reporting Model 2 FFI” for “participating FFI” throughout the FFI agreement, except in cases where the FFI agreement explicitly refers to a reporting Model 2 FFI.  The FFI agreement in section 5 of this revenue procedure shall apply to an FFI that has submitted a FATCA registration with the IRS to be treated as a participating FFI (including a reporting Model 2 FFI) and that has received a global intermediary identification number (GIIN), regardless of whether the FFI receives a GIIN before or after the effective date of this revenue procedure.

How Many FFIS are Impacted by this Change? 

About 26% (19,960) of the registered FFIs are impacted by the FFI agreement changes, in addition to any new registrations from the current 9 Model 2 countries/jurisdictions and 171 countries/jurisdictions without an IGA.

77,353 financial institutions and their branches registered from 205 countries and jurisdictions, of a total of 250 countries and jurisdictions recognized by the USA.

Of this total registered, 71,219  FFIs (92%) registered from the 79 countries and jurisdictions that as of June 23rd have an IGA.  57,393 FFIs registered from Model I IGA jurisdictions probably either as a category of a Model 1 Deemed Compliant FFI or as a branch.  However, 13,826 of these registered as Model 2 reporting FFIs or branches.  At least these 13,826 are impacted by the FFI Agreement changes.

Model 2 IGAs – 9 (13,826 FFI Registered)

  1. Armenia (5-8-2014): 27
  2. Austria (4-29-2014): 2,978
  3. Bermuda (12-19-2013): 1,242
  4. Chile (3-5-2014): 324
  5. Hong Kong (5-9-2014): 1.539
  6. Japan (6-11-2013): 3,251
  7. Paraguay (6-6-2014): 17
  8. Switzerland (2-14-2013): 4,040
  9. Taiwan: 408

Non IGA Registrations (Participating FFI and other)

Only 6,134 FFIs registered from the remaining non-IGA countries / jurisdictions either as Participating FFIs or branches.   These 6,134 are also impacted by the FFI agreement changes.

45 countries and jurisdictions did not have a single FFI or branch registration on the GIIN List.  Presumably, FFIs and / or branches from these countries, such as Kosovo, will find their way unto the July 1st GIIN list.

Meanwhile, 30% withholding on all withholdable payments to nonparticipating FFIs in the 171 non-IGA countries begins next week on July 1.  Most commentators expect a rush of over 300,000 FFI registrations by the end of 2014.  Some predict more than a half million entities must still register, based on the UK’s HMRC estimate that 75,000 entities are impacted by FATCA within the United Kingdom (where less than 6,300 are currently registered on the GIIN list).

Updates to FFI Agreement

Definitions

Several definitions in section 2 of the FFI agreement are updated. For example, the terms chapter 4 withholding rate pool (including the U.S. payee pool) and chapter 4 reporting pool have been redefined and are further clarified.

Incorporating Six Month Extension for Entities

Section 3.02 of the FFI agreement is revised to incorporate the allowance for treating an obligation held by an entity that is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015 as a preexisting obligation for purposes of applying the due diligence procedures under chapter 4 and the regulations thereunder, except that an FFI may not apply the documentation exception.

Back Up Withholding in Certain Situations

Sections 4.01(D), 4.02(B), 6.05(A)(2), 6.07, and 9.02(B) of the FFI agreement are also updated to reflect that a participating FFI may elect to backup withhold under section 3406 rather than to withhold under chapter 4 on a withholdable payment that is a reportable payment made to certain U.S. non-exempt recipients only if the participating FFI complies with the information reporting rules under chapter 61 with respect to payments made to such account holders.

Depositing Withheld Tax

In addition, section 5.02 of the FFI agreement (regarding tax withheld and set aside in escrow with respect to withholdable payments to certain dormant accounts) is revised to conform to the temporary chapter 4 regulations for when the tax must be deposited.

Lead FFI Responsibility

Section 11.02(B) of the FFI agreement is revised to clarify that the responsibilities of a lead FI are only with respect to members of the FFI group that have designated the participating FFI to act as lead FI on their behalf. Additionally, if an FFI group has a consolidated compliance program, the participating FFI that is also the compliance FI for the members of the FFI group that are included in such compliance program must act as the lead FI for each such member of the FFI group.

PFFI Reporting NFFE Account Holder as a U.S. Account

Section 9.02(B) of the FFI agreement also is revised to allow a participating FFI that receives a withholdable payment that is allocable to an account holder of the FFI that is a passive NFFE with one or more substantial U.S. owner(s) (or, in the case of a reporting Model 2 FFI, with one or more controlling persons as defined under the applicable IGA) to certify on a withholding statement provided to the withholding agent that the FFI is reporting the account holder as a U.S. account under the terms of the FFI agreement.

When finalizing the temporary chapter 4 regulations, the Treasury Department and the IRS intend to amend the regulations to allow a withholding agent to rely on such a certification provided by a participating FFI, reporting Model 2 FFI, or reporting Model 1 FFI, which, absent a reason to know that the certificate is incorrect or unreliable, would relieve the withholding agent of its obligation to obtain and report information about a passive NFFE with substantial U.S. owners under section 1472. This amendment is intended to eliminate duplicative reporting of substantial U.S. owners (or controlling persons) of passive NFFEs required under section 1472 as well as under the U.S. account reporting requirements of a participating FFI, reporting Model 2 FFI, or reporting Model 1 FFI under chapter 4 or an applicable IGA.

Portional Allocation of Withholdable Payments

Section 9.02(B) is also revised to provide that a participating FFI may allocate a portion of a withholdable payment to a group of documented account holders (other than nonqualified intermediaries or flow-through entities) for whom withholding and reporting is not required under chapter 3, 4, or 61. For example, a participating FFI may allocate a payment of bank deposit interest to a pool of documented foreign account holders rather than providing specific information and a valid withholding certificate or other appropriate documentation for each such payee. The Treasury Department and the IRS intend to amend the regulations to incorporate this change when the temporary chapter 4 regulations are finalized.

FFI Agreement Sections

Section 1. Purpose And Scope
Section 2. Definitions
Section 3. Due Diligence Requirements For Documentation And Identification Of Account Holders And Nonparticipating FFI Payees
Section 4. Withholding Requirements
Section 5. Deposit Requirements
Section 6. Information Reporting And Tax Return Obligations
Section 7. Legal Prohibitions On Reporting U.S. Accounts And On Withholding
Section 8. Compliance Procedures
Section 9. Participating FFI Withholding Certificate
Section 10. Adjustments For Overwithholding And Underwithholding And Refunds
Section 11. FFI Group
Section 12. Expiration, Modification, Termination, Default, And Renewal Of This Agreement
Section 13. Miscellaneous Provisions

book coverPractical Compliance Aspects of FATCA and GATCA

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf

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How Many Countries and Jurisdictions May Have “Foreign” Financial Institutions That May Need to Register for FATCA?

Posted by William Byrnes on June 17, 2014


As mentioned in the June 8th article, the USA recognizes 196 independent states in the world (the IRS recognizes the State of Palestine according to the FATCA GIIN list, otherwise the State Department only recognizes 195), 67 dependencies of states, and has contacts with Taiwan.  But 14 of the dependencies are administered by the United States.  So with Taiwan and Palestine counted, but exempting the US dependent Islands, 54 jurisdictions have financial institutions that are subject to FATCA registration.  Thus, the total is 250.

I list below all the countries and jurisdictions recognized by the US State Department (but for Palestine which is not on the US State Department list).

STATES

Short-form name Long-form name
Afghanistan *+ Islamic Republic of Afghanistan
Albania *+ Republic of Albania
Algeria *+ People’s Democratic Republic of Algeria
Andorra *+ Principality of Andorra
Angola *+ Republic of Angola
Antigua and
Barbuda *+
Antiqua and Barbuda
Argentina *+ Argentine Republic
Armenia *+ Republic of Armenia
Australia *+ Commonwealth of Australia
Austria *+ Republic of Austria
Azerbaijan *+ Republic of Azerbaijan
Bahamas, The *+ Commonwealth
of The Bahamas
Bahrain *+ Kingdom of Bahrain
Bangladesh *+ People’s Republic
of Bangladesh
Barbados *+ Barbados
Belarus *+ Republic of Belarus
Belgium *+ Kingdom of Belgium
Belize *+ Belize
Benin *+ Republic of Benin
Bhutan + Kingdom of Bhutan
Bolivia *+ Plurinational State of Bolivia
Bosnia and
Herzegovina *+
Bosnia and Herzegovina
Botswana *+ Republic of Botswana
Brazil *+ Federative Republic of Brazil
Brunei *+ Brunei Darussalam
Bulgaria *+ Republic of Bulgaria
Burkina Faso *+ Burkina Faso
Burma *+ Union of Burma
Burundi *+ Republic of Burundi
Cabo Verde *+ ! Republic of Cabo Verde
Cambodia *+ Kingdom of Cambodia
Cameroon *+ Republic of Cameroon
Canada *+ Canada
Central
African Republic *+
Central African Republic
Chad *+ Republic of Chad
Chile *+ Republic of Chile
China *+ (see note 3) People’s Republic of China
Colombia *+ Republic of Colombia
Comoros *+ Union of the Comoros
Congo (Brazzaville) *+
(see note 4)
Republic of the Congo
Congo (Kinshasa) *+
(see note 4)
Democratic Republic
of the Congo
Costa Rica *+ Republic of Costa Rica
Côte d’Ivoire *+ Republic of Côte d’Ivoire
Croatia *+ Republic of Croatia
Cuba + Republic of Cuba
Cyprus *+ Republic of Cyprus
Czech Republic *+ Czech Republic
Denmark *+ Kingdom of Denmark
Djibouti *+ Republic of Djibouti
Dominica *+ Commonwealth of Dominica
Dominican Republic *+ Dominican Republic
Ecuador *+ Republic of Ecuador
Egypt *+ Arab Republic of Egypt
El Salvador *+ Republic of El Salvador
Equatorial Guinea *+ Republic of Equatorial Guinea
Eritrea *+ State of Eritrea
Estonia *+ Republic of Estonia
Ethiopia *+ Federal Democratic
Republic of Ethiopia
Fiji *+ Republic of Fiji
Finland *+ Republic of Finland
France *+ French Republic
Gabon *+ Gabonese Republic
Gambia, The *+ Republic of The Gambia
Georgia *+ Georgia
Germany *+ Federal Republic of Germany
Ghana *+ Republic of Ghana
Greece *+ Hellenic Republic
Grenada *+ Grenada
Guatemala *+ Republic of Guatemala
Guinea *+ Republic of Guinea
Guinea-Bissau *+ Republic of Guinea-Bissau
Guyana *+ Co-operative Republic of Guyana
Haiti *+ Republic of Haiti
Holy See * Holy See
Honduras *+ Republic of Honduras
Hungary *+ Hungary
Iceland *+ Republic of Iceland
India *+ Republic of India
Indonesia *+ Republic of Indonesia
Iran + Islamic Republic of Iran
Iraq *+ Republic of Iraq
Ireland *+ Ireland
Israel *+ State of Israel
Italy *+ Italian Republic
Jamaica *+ Jamaica
Japan *+ Japan
Jordan *+ Hashemite
Kingdom of Jordan
Kazakhstan *+ Republic of Kazakhstan
Kenya *+ Republic of Kenya
Kiribati *+ Republic of Kiribati
Korea, North + Democratic People’s Republic of Korea
Korea, South *+ Republic of Korea
Kosovo * Republic of Kosovo
Kuwait *+ State of Kuwait
Kyrgyzstan *+ Kyrgyz Republic
Laos *+ Lao People’s
Democratic Republic
Latvia *+ Republic of Latvia
Lebanon *+ Lebanese Republic
Lesotho *+ Kingdom of Lesotho
Liberia *+ Republic of Liberia
Libya *+ Libya
Liechtenstein *+ Principality of Liechtenstein
Lithuania *+ Republic of Lithuania
Luxembourg *+ Grand Duchy of Luxembourg
Macedonia *+ Republic of Macedonia
Madagascar *+ Republic of Madagascar
Malawi *+ Republic of Malawi
Malaysia *+ Malaysia
Maldives *+ Republic of Maldives
Mali *+ Republic of Mali
Malta *+ Republic of Malta
Marshall Islands *+ Republic of the
Marshall Islands
Mauritania *+ Islamic Republic
of Mauritania
Mauritius *+ Republic of Mauritius
Mexico *+ United Mexican States
Micronesia,
Federated States of *+
Federated States
of Micronesia
Moldova *+ Republic of Moldova
Monaco *+ Principality of Monaco
Mongolia *+ Mongolia
Montenegro *+ Montenegro
Morocco *+ Kingdom of Morocco
Mozambique *+ Republic of Mozambique
Namibia *+ Republic of Namibia
Nauru *+ Republic of Nauru
Nepal *+ Federal Democratic Republic of Nepal
Netherlands *+ Kingdom of the Netherlands
New Zealand *+ New Zealand
Nicaragua *+ Republic of Nicaragua
Niger *+ Republic of Niger
Nigeria *+ Federal Republic of Nigeria
Norway *+ Kingdom of Norway
Oman *+ Sultanate of Oman
Pakistan *+ Islamic Republic of Pakistan
Palau *+ Republic of Palau
Panama *+ Republic of Panama
Papua New Guinea *+ Independent State
of Papua New Guinea
Paraguay *+ Republic of Paraguay
Peru *+ Republic of Peru
Philippines *+ Republic of the Philippines
Poland *+ Republic of Poland
Portugal *+ Portuguese Republic
Qatar *+ State of Qatar
Romania *+ Romania
Russia *+ Russian Federation
Rwanda *+ Republic of Rwanda
Saint Kitts and Nevis *+ Federation of Saint
Kitts and Nevis
Saint Lucia *+ Saint Lucia
Saint Vincent and
the Grenadines *+
Saint Vincent and the Grenadines
Samoa *+ Independent State of Samoa
San Marino *+ Republic of San Marino
Sao Tome and Principe *+ Democratic Republic of
Sao Tome and Principe
Saudi Arabia *+ Kingdom of Saudi Arabia
Senegal *+ Republic of Senegal
Serbia *+ Republic of Serbia
Seychelles *+ Republic of Seychelles
Sierra Leone *+ Republic of Sierra Leone
Singapore *+ Republic of Singapore
Slovakia *+ Slovak Republic
Slovenia *+ Republic of Slovenia
Solomon Islands *+ Solomon Islands
Somalia *+ ! Federal Republic of Somalia
South Africa *+ Republic of South Africa
South Sudan *+ Republic of South Sudan
Spain *+ Kingdom of Spain
Sri Lanka *+ Democratic Socialist
Republic of Sri Lanka
Sudan *+ Republic of the Sudan
Suriname *+ Republic of Suriname
Swaziland *+ Kingdom of Swaziland
Sweden *+ Kingdom of Sweden
Switzerland *+ Swiss Confederation
Syria *+ Syrian Arab Republic
Tajikistan *+ Republic of Tajikistan
Tanzania *+ United Republic of Tanzania
Thailand *+ Kingdom of Thailand
Timor-Leste *+ Democratic Republic of Timor-Leste
Togo *+ Togolese Republic
Tonga *+ Kingdom of Tonga
Trinidad and Tobago *+ Republic of
Trinidad and Tobago
Tunisia *+ Tunisian Republic
Turkey *+ Republic of Turkey
Turkmenistan *+ Turkmenistan
Tuvalu *+ Tuvalu
Uganda *+ Republic of Uganda
Ukraine *+ Ukraine
United Arab Emirates *+ United Arab Emirates
United Kingdom *+ United Kingdom of Great Britain and Northern Ireland
United States + United States of America
Uruguay *+ Oriental Republic of Uruguay
Uzbekistan *+ Republic of Uzbekistan
Vanuatu *+ Republic of Vanuatu
Venezuela *+ Bolivarian Republic of Venezuela
Vietnam *+ Socialist Republic of Vietnam
Yemen *+ Republic of Yemen
Zambia *+ Republic of Zambia
Zimbabwe *+ Republic of Zimbabwe

OTHER

Short-form name Long-form name
Taiwan (see note 6) (no long-form name)

 

 

Short-form name Long-form name Sovereignty Administrative Center
Akrotiri (see note 15) Akrotiri United Kingdom Episkopi (see note 16)
American Samoa Territory of
American Samoa
United States Pago Pago
Anguilla Anguilla United Kingdom The Valley
Antarctica (no long-form name) None
(see note 2)
None
Aruba (no long-form name) Netherlands Oranjestad
Ashmore and Cartier Islands Territory of Ashmore
and Cartier Islands
Australia Administered
from Canberra
Baker Island (no long-form name) United States Administered from Washington, D.C.
Bermuda Bermuda United Kingdom Hamilton
Bouvet Island (no long-form name) Norway Admin. from Oslo
British Indian
Ocean Territory
(see note 3)
British Indian
Ocean Territory
United Kingdom None
Cayman Islands Cayman Islands United Kingdom George Town
Christmas Island Territory of
Christmas Island
Australia The Settlement
(Flying Fish Cove)
Clipperton Island (no long-form name) France Administered from Paris
Cocos
(Keeling) Islands
Territory of Cocos (Keeling) Islands Australia West Island
Cook Islands (no long-form name) New Zealand Avarua
Coral Sea Islands Coral Sea
Islands Territory
Australia Administered
from Canberra
Curaçao
(see note 11)
(no long-form name) Netherlands Willemstad
Dhekelia (see note 15) Dhekelia United Kingdom Episkopi (see note 16)
Falkland Islands (Islas Malvinas) Falkland Islands (Islas Malvinas) United
Kingdom
(see note 4)
Stanley
Faroe Islands (no long-form name) Denmark Tórshavn
French Guiana
(see note 5)
French Polynesia (no long-form name) France Papeete
French
Southern and
Antarctic Lands
(see note 6)
(no long-form name) France Administered
from Paris
Gibraltar Gibraltar United Kingdom Gibraltar
Greenland (no long-form name) Denmark Nuuk (Godthåb)
Guadeloupe
(see note 5)
Guam Territory of Guam United States Hagatna
Guernsey
(see note 7)
Bailiwick of Guernsey British Crown Dependency Saint Peter Port
Heard Island and McDonald Islands Territory of
Heard Island
and McDonald Islands
Australia Administered
from Canberra
Hong Kong Hong Kong Special Administrative Region China
(see note 8)
None
Howland Island (no long-form name) United States Administered from Washington, D.C.
Isle of Man (no long-form name) British
Crown Dependency
Douglas
Jan Mayen (no long-form name) Norway Administered
from Oslo
(see note 9)
Jarvis Island (no long-form name) United States Administered from Washington, D.C.
Jersey Bailiwick of Jersey British Crown Dependency Saint Helier
Johnston Atoll (no long-form name) United States Administered from Washington, D.C.
Kingman Reef (no long-form name) United States Administered from Washington, D.C.
Macau Macau Special Administrative Region China
(see note 10)
Macau
Martinique
(see note 5)
! Mayotte
(see note 5)
Midway Islands (no long-form name) United States Administered from Washington, D.C.
Montserrat Montserrat United Kingdom Plymouth
Navassa Island (no long-form name) United States Administered from Washington, D.C.
New Caledonia (no long-form name) France Nouméa
Niue (no long-form name) New Zealand Alofi
Norfolk Island Territory of
Norfolk Island
Australia Kingston
Northern
Mariana Islands
Commonwealth
of the Northern
Mariana Islands
United States Saipan
Palmyra Atoll (no long-form name) United States Administered from Washington, D.C.
Paracel Islands (no long-form name) undetermined(see note 12) None
Pitcairn Islands Pitcairn,
Henderson, Ducie,
and Oeno Islands
United Kingdom Adamstown
Puerto Rico Commonwealth
of Puerto Rico
United States San Juan
Reunion
(see note 5)
Saint Barthelemy Saint Barthelemy France Gustavia
Saint Helena
(see note 13)
Saint Helena, Ascension, and Tristan da Cunha United Kingdom Jamestown
Saint Martin
(see note 17)
Saint Martin France Marigot
Saint Pierre and Miquelon Territorial
Collectivity of Saint
Pierre and Miquelon
France Saint-Pierre
Sint Maarten
(see note 11)
(no long-form name) Netherlands Philipsburg
South Georgia
and the South Sandwich Islands
South Georgia and the South Sandwich Islands United
Kingdom
(see note 4)
None
Spratly Islands (no long-form name) undetermined(see note 14) None
Svalbard (no long-form name) Norway Longyearbyen
Tokelau (no long-form name) New Zealand None
Turks and
Caicos Islands
Turks and Caicos Islands United Kingdom Grand Turk
Virgin Islands, British Virgin Islands, British United Kingdom Road Town
Virgin Islands, U.S. United States
Virgin Islands
United States Charlotte Amalie
Wake Island (no long-form name) United States Administered from Washington, D.C.
Wallis and Futuna (no long-form name) France Matâ’utu
Western Sahara (no long-form name) To be determined None

 

book coverPractical Compliance Aspects of FATCA and GATCA

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf

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Updated FATCA GIIN List of FFI Registrations by Country and IGA

Posted by William Byrnes on June 16, 2014


Below is a selection of the 77,353 registered from 115 of the total 205 countries and jurisdictions on the June 2nd list. Of the total registered as of June, 70,811 FFIs (91.5%) registered from the 78 countries and jurisdictions that as of June 15th have an IGA.  Thus, these 70,811 probably registered either as Deemed Compliant FFIs or as branches by the initial May 5th extended deadline.

Only 6,542 FFIs registered from the remaining 172 countries and jurisdictions either as Participating FFIs or branches.  Withholding agents are finalizing systems to begin 30% withholding on the Non-Participating FFIs within these 172 non-IGA countries.  Withholding on IGA jurisdiction non-compliant FFIs only begins January 1st.

  1. Afghanistan: 7
  2. Andorra: 33
  3. Anguilla: 70
  4. Antigua & Barbuda: 35
  5. Argentina: 269
  6. Armenia: 27 <– IGA
  7. Aruba: 13
  8. Australia: 1,864 <– IGA
  9. Austria: 2,978
  10. Azerbaijan: 16 <– IGA
  11. Bahamas: 610  <– IGA
  12. Barbados: 123  <– IGA
  13. Belgium: 249  <– IGA
  14. Belarus: 64
  15. Belize: 122
  16. Bermuda: 1,242
  17. Brazil: 2,258  <– IGA
  18. Bulgaria: 72
  19. BVI: 1,837  <– IGA
  20. Canada: 2,264  <– IGA
  21. Cayman Islands: 14,836  <– IGA
  22. China: 211
  23. Christmas Island: 1
  24. Colombia: 172  <– IGA
  25. Comoros Is.: 1
  26. Costa Rica: 122  <– IGA
  27. Cook Is.: 72
  28. Croatia: 50  <– IGA
  29. Curacao: 173  <– IGA
  30. Cyprus: 279  <– IGA
  31. Czech Republic: 92  <– IGA
  32. Denmark: 186  <– IGA
  33. Djibouti: 1
  34. Dominica: 17
  35. Dominican Republic: 67
  36. Ecuador: 22
  37. Egypt: 62
  38. Equatorial Guinea: 1
  39. Estonia: 26  <– IGA
  40. Falkland Islands: 1
  41. Finland: 466  <– IGA
  42. France: 2,290  <– IGA
  43. French Southern Territories: 1
  44. Georgia: 24  <– IGA
  45. Germany: 2,554  <– IGA
  46. Gibraltar: 96  <– IGA
  47. Greece: 91
  48. Greenland: 1
  49. Grenada: 31
  50. Guadeloupe: 1
  51. Guam: 3
  52. Guatemala: 75
  53. Guernsey: 2,395  <– IGA
  54. Honduras: 47  <– IGA
  55. Hong Kong: 1,539 <– IGA
  56. Hungary: 101  <– IGA
  57. Iceland: 5
  58. India: 246  <– IGA
  59. Indonesia: 307 <– IGA
  60. Ireland: 1,756  <– IGA
  61. Isle of Man: 312  <– IGA
  62. Israel: 321 <– IGA
  63. Italy: 456  <– IGA
  64. Jamaica: 41  <– IGA
  65. Japan: 3,251  <– IGA
  66. Jersey: 1,618  <– IGA
  67. North Korea: 4
  68. South Korea: 396
  69. Kuwait: 77
  70. Latvia: 40
  71. Lichtenstein: 239  <– IGA
  72. Lithuania: 21 ß IGA
  73. Luxembourg: 3,560 ß IGA
  74. Macao: 36
  75. Malta: 235  <– IGA
  76. Mauritius: 727  <– IGA
  77. Mexico: 418  <– IGA
  78. Monaco: 98
  79. Netherlands: 2,053  <– IGA
  80. New Zealand: 334  <– IGA
  81. Norway: 312  <– IGA
  82. Other: 22
  83. Panama: 450  <– IGA
  84. Paraguay: 17   <– IGA
  85. Peru: 164  <– IGA
  86. Poland: 164  <– IGA
  87. Portugal: 255  <– IGA
  88. Qatar: 46  <– IGA
  89. Romania: 109 <– IGA
  90. Russia: 514
  91. Saint Pierre & Miquelon: 1
  92. San Marino: 14
  93. Saudi Arabia: 17
  94. Seychelles: 37  <– IGA
  95. Singapore: 783  <– IGA
  96. South Africa: 317  <– IGA
  97. Spain: 1,187  <– IGA
  98. Slovakia: 54  <– IGA
  99. Slovenia:  20  <– IGA
  100. St Kitts & Nevis: 70 <– IGA
  101. St Lucia: 60  <– IGA
  102. St. Vincent and the Grenadines: 104  <– IGA
  103. Sweden: 312  <– IGA
  104. Switzerland: 4,040  <– IGA
  105. Taiwan: 408
  106. Turkey: 65  <– IGA
  107. Turkmenistan: 1   <-– IGA
  108. Turks & Caicos: 27  <– IGA
  109. Ukraine: 105
  110. United Arab Emirates: 135  <– IGA
  111. United Kingdom: 6,263  <– IGA
  112. USA: 562
  113. Uruguay: 131
  114. Venezuela: 29
  115. Wallis & Fortuna: 1

FFI Registration Among Model 1 IGAs and the Rest

Of a possible 250 countries and jurisdictions recognized by the US State Department and IRS (not including the 14 US dependencies for which FATCA withholding does not apply), 45 do not yet have an FFI registration.  But of the 205 countries and jurisdictions with FFI registrations, 20% of the total registered FFIs are Cayman Islands firms (14,836) (see my article of June 8). 

There is not one reliable number of how many financial entities in the world qualify as a financial institution requiring FATCA registration.  The list of FFIs requiring registration includes, by example, trusts companies, certain trusts, life insurance companies, investment funds, banks.  The IRS has said that “At this time, the full FFI list is expected to be less than 500,000 records.”

Some financial pundits are estimating as many as twice this figure.  Yet it seems that the categories of ‘certified deemed compliant’ FFIs and exempt FFIs should soak up a number of small, local FFIs.  Yet,  the UK Revenue HMRC estimates 75,000 of its FFIs are impacted by FATCA (http://www.hmrc.gov.uk/fatca/itc-regs-2013.pdf – page 4) (down from 300,000 prior to the UK-USA IGA).   If the UK, as one albeit important financial center, requires anything close to 75,000 FFI registrations, then the IRS figure of 500,000 FFI registrations is far too low.  Note that the ‘500,000’ FFI figure, if it excludes the corresponding branch registrations in other jurisdictions, and if it excludes the five classifications of “Certified Deemed Compliant”, seems more realistic.

BRIC Registration

Brazil leads the BRIC countries with 2,258 FFI registered, followed by Russia (514), India (246) with China only having 211.

NAFTA Registrations

2,264 FFIs registered from Canada and Mexico at 418.

Major OECD Countries Registrations

The United Kingdom (6,263) Revenue has recently announced that it will not adopt the IRS issued six-month extension (until December 31, 2014) for entity accounts (see my articles of May 5th and 2nd).  Thus, from July 1st, UK FFIs must document all personal and entity accounts under the requirements for “new” accounts as opposed as to “pre-existing” account due diligence procedures.

Australia (1,864), France (2,290), Germany (2,254), Ireland (1,756) and Netherlands (2,053).

European Financial Centers Registrations

Switzerland (4,040), Luxembourg (3,560), Austria (2,978), Lichtenstein (239).  Guernsey (2,395), Jersey (1,618), Isle of Man (312) and Gibraltar (96).

Caribbean Financial Centers Registrations

BVI (1,837), Bahamas (610), Bermuda (1,242) and Panama (450).

State of Palestine Registrations

23 FFIs registered with the IRS, listed as from the State of Palestine.  Primarily MENA banks and a branch of HSBC Middle East Bank.  See June 8th article  about this contentious issue.

North Korean Registrations

While North Korean remains a sanctioned country by OFAC (see http://www.treasury.gov/resource-center/sanctions/Programs/pages/nkorea.aspx) with a FINCEN AML update available at http://www.fincen.gov/statutes_regs/guidance/pdf/FIN-2013-A005.pdf, it had 4 FFI branches register.

“Other” Registrations

23 financial firms listed “other” as the country / jurisdiction.  By example, Harneys Nevis by example should probably register under Nevis (or where it is incorporated, if not Nevis)?  Why is the Austrian insurance group, Sigal Life UNIQA group Austria,  registered under “Other”?  Perhaps the July 1st list will have movement from “Other” to actual countries?

Interesting Research on the UK FFI List (by “Edelweiss” in the comments on this blog)

Edelweiss has posted his research on the UK’s 6.263 registered FFIs (under comments to another one of this blog’s articles).  I think his research bears repeating in this article.  By example, he reviewed the list by GIIN and determined that about 1% of the global sign-ups of the June 2nd GIIN list are affiliated with AXA SA, the French financial services firm.

He then compares the 6,263 entities registered from the UK with the HMRC estimate (pg. 4) of 75,000 impacted FFIs (down from 300,000 prior to the IGA), finding that less than 10% of UK FFIs registered for the June GIIN list.  Either the HMRC estimated horribly wrong, or most UK FFIs are still undertaking initial FATCA preparation (relying on the October 25th registration deadline imposed by HRMC instead).

  • The UK list is dominated by fund management firms and their various funds, private equity and the plethora of feeder funds investment trusts and quite a few trusts. Bridgepoint, a small UK private equity firm, has 72 entities (globally), while 3i, a similarly small UK private equity firm, has 45 entities (globally).
  • There are quite a few entities that appear to have names suggesting they are part of a private equity holding company structure.  I presume they have an affiliation with a US private equity shareholder. Globally, there are 26 mentions of “Bidco”, 157 of “Holdco”, 37 “Midco”, 44 “Topco”, 144 “Acquisition”, 156 “Mezzanine” (not exclusively private equity, also specialty finance like mezz funds).
  • I found 321 instances of “LLP” and “265″ instances of partnership
  • I found 16 “deceased” and 33 “will trust”

Three Questions raised by Edelweiss

  • For some reason, the large UK retailers Marks and Spencer (a plc) and John Lewis (a co-operative) found it necessary to register. M&S offers a savings account (which presumably explains why) but John Lewis doesn’t.  Could it be credit card related?

Response: A FFI is eligible to be classified as a “registered deemed-compliant” FFI (“RDCFFI”) if it completes a registration process with the IRS (See Lexis Guide to FATCA Compliance § 7.04) and either is a Reporting Model 1 FFI, or falls within one of six categories listed in Treasury Regulations Section 1.1471-5(f)(1)(i). These six categories include:

  1. local FFIs; 
  2. nonreporting members of participating FFI groups; 
  3. qualified collective investment vehicles; 
  4. restricted funds; 
  5. qualified credit card issuers; or 
  6. sponsored investment entities and controlled foreign corporations. 

Qualified Credit Card Issuers 

A “qualified credit card issuer” is an entity that is an FFI solely because it is an issuer of credit cards that accepts deposits only when a customer makes a payment in excess of a balance due on the card and the overpayment is not immediately returned to the customer. …

  • Also present is Alliance-Boots, the UK’s largest pharmacy. They have 16 entities in the UK and Ireland (under AB Acquisition and Alliance Boots) though I assume this is because they are part owned by KKR.
  • I would be curious to get your take on why Nestle Suisse SA found it necessary to register as an FFI. Is this to avoid confiscation of 30% of principal and interest on the repayment of intercompany loans from a US subsidiary? Is it because it’s a finance subsidiary and they have US source income from bonds?

book coverPractical Compliance Guide for FATCA 

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf

Posted in FATCA, Uncategorized | Tagged: , , , | 1 Comment »

Changes Within Updated Model IGAs

Posted by William Byrnes on June 16, 2014


I ran a document compare for the June 6 released Reciprocal Model 1, Model 2 with TIEA / DTC and the Annex 1 to Model 1.  The updates to the June 6, 2014 versions are minor.

The material addition is the new Section VI(G), VI(H).  The most significant deletion is the elimination of the reference to the development by the OECD of a Common Reporting Standard (“CRS”) (which has now occurred).

G. Alternative Procedures for New Accounts Opened Prior to Entry Into Force of this Agreement.

1. Applicability. If [FATCA Partner] has provided a written notice to the United States prior to entry into force of this Agreement that, as of July 1, 2014, [FATCA Partner] lacked the legal authority to require Reporting [FATCA Partner] Financial Institutions either: (i) to require Account Holders of New Individual Accounts to provide the self-certification specified in section III of this Annex I, or (ii) to perform all the due diligence procedures related to New Entity Accounts specified in section V of this Annex I, then Reporting [FATCA Partner] Financial Institutions may apply the alternative procedures described in subparagraph G(2) of this section, as applicable, to such New Accounts, in lieu of the procedures otherwise required under this Annex I. The alternative procedures described in subparagraph G(2) of this section shall be available only for those New Individual Accounts or New Entity Accounts, as applicable, opened prior to the earlier of: (i) the date [FATCA Partner] has the ability to compel Reporting [FATCA Partner] Financial Institutions to comply with the due diligence procedures described in section III or section V of this Annex I, as applicable, which date [FATCA Partner] shall inform the United States of in writing by the date of entry into force of this Agreement, or (ii) the date of entry into force of this Agreement. If the alternative procedures for New Entity Accounts opened on or after July 1, 2014, and before January 1, 2015, described in paragraph H of this section are applied with respect to all New Entity Accounts or a clearly identified group of such accounts, the alternative procedures described in this paragraph G may not be applied with respect to such New Entity Accounts. For all other New Accounts, Reporting [FATCA Partner] Financial Institutions must apply the due diligence procedures described in section III or section V of this Annex I, as applicable, to determine if the account is a U.S. Reportable Account or an account held by a Nonparticipating Financial Institution.

2. Alternative Procedures.

a) Within one year after the date of entry into force of this Agreement, Reporting [FATCA Partner] Financial Institutions must: (i) with respect to a New Individual Account described in subparagraph G(1) of this section, request the self-certification specified in section III of this Annex I and confirm the reasonableness of such self-certification consistent with the procedures described in section III of this Annex I, and (ii) with respect to a New Entity Account described in subparagraph G(1) of this section, perform the due diligence procedures specified in section V of this Annex I and request information as necessary to document the account, including any self-certification, required by section V of this Annex I.

b) [FATCA Partner] must report on any New Account that is identified pursuant to subparagraph G(2)(a) of this section as a U.S. Reportable Account or as an account held by a Nonparticipating Financial Institution, as applicable, by the date that is the later of: (i) September 30 next following the date that the account is identified as a U.S. Reportable Account or as an account held by a Nonparticipating Financial Institution, as applicable, or (ii) 90 days after the account is identified as a U.S. Reportable Account or as an account held by a Nonparticipating Financial Institution, as applicable. The information required to be reported with respect to such a New Account is any information that would have been reportable under this Agreement if the New Account had been identified as a U.S. Reportable Account or as an account held by a Nonparticipating Financial Institution, as applicable, as of the date the account was opened.

c) By the date that is one year after the date of entry into force of this Agreement, Reporting [FATCA Partner] Financial Institutions must close any New Account described in subparagraph G(1) of this section for which it was unable to collect the required self-certification or other documentation pursuant to the procedures described in subparagraph G(2)(a) of this section. In addition, by the date that is one year after the date of entry into force of this Agreement, Reporting [FATCA Partner] Financial Institutions must: (i) with respect to such closed accounts that prior to such closure were New Individual Accounts (without regard to whether such accounts were High Value Accounts), perform the due diligence procedures specified in paragraph D of section II of this Annex I, or (ii) with respect to such closed accounts that prior to such closure were New Entity Accounts, perform the due diligence procedures specified in section IV of this Annex I.

d) [FATCA Partner] must report on any closed account that is identified pursuant to subparagraph G(2)(c) of this section as a U.S. Reportable Account or as an account held by a Nonparticipating Financial Institution, as applicable, by the date that is the later of: (i) September 30 next following the date that the account is identified as a U.S. Reportable Account or as an account held by a Nonparticipating Financial Institution, as applicable, or (ii) 90 days after the account is identified as a U.S. Reportable Account or as an account held by a Nonparticipating Financial Institution, as applicable. The information required to be reported for such a closed account is any information that would have been reportable under this Agreement if the account had been identified as a U.S. Reportable Account or as an account held by a Nonparticipating Financial Institution, as applicable, as of the date the account was opened.

H. Alternative Procedures for New Entity Accounts Opened on or after July 1, 2014, and before January 1, 2015.

For New Entity Accounts opened on or after July 1, 2014, and before January 1, 2015, either with respect to all New Entity Accounts or, separately, with respect to any clearly identified group of such accounts, [FATCA Partner] may permit Reporting [FATCA Partner] Financial Institutions to treat such accounts as Preexisting Entity Accounts and apply the due diligence procedures related to Preexisting Entity Accounts specified in section IV of this Annex I in lieu of the due diligence procedures specified in section V of this Annex I. In this case, the due diligence procedures of section IV of this Annex I must be applied without regard to the account balance or value threshold specified in paragraph A of section IV of this Annex I.

Model Intergovernmental Agreements (Model Agreements)

Following the enactment of FATCA, Treasury published the Model Intergovernmental Agreement to Improve Tax Compliance and to Implement FATCA. Use the links here to find the current version of the agreement you need.

book coverPractical Compliance Aspects of FATCA and GATCA

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf

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8 IGAs announced since June 3rd leave only 172 countries’ FFIs to withhold upon July 1st

Posted by William Byrnes on June 13, 2014


As mentioned in the June 8th article about the passing of the July GIIN List inclusion deadline, the estimate of states and jurisdictions that probably could benefit from an IGA (Model 2 for jurisdictions without populations) is the full number of countries and non-US Dependencies recognized by the US, which is 250, to accommodate the territories like British Indian Ocean Territory and French Southern Territories from which FFIs registered (to my, and many others, surprise).  Therefore, with 78 IGAs announced thus far, as of Friday June 13th, 172 countries and jurisdictions are without IGAs that could benefit from one – because withholding on their non-(FATCA) compliant financial institutions will begin July 1st.

The current 78 recognized IGAs as of June 12 include 31 signed Model 1s with another 39 treated as if signed, and 5 signed Model 2s with 3 treated as if signed.

Which firms are covered by the FATCA term “Financial Institutions”?

The definition of a financial institution in the final regulations includes any entity that is primarily engaged in the business of investing, reinvesting, or trading in securities, commodities, partnership interests, etc. For this purpose, an entity is primarily engaged in such activities if its gross income attributable to such activities equals or exceeds 50 percent during the relevant testing period.

Thus, foreign funds, collective investment vehicles, and passive investment corporations are considered financial institutions (FFIs) and not passive nonfinancial foreign entities (NFFEs), which is relevant in terms of compliance requirements.  Fund managers, as well as the funds that they manage, are likely considered FFIs under this definition.  However, passive investment corporations may not be captured by this definition because they do not generally engage in any of the activities for customers, nor are they generally managed by an entity that does.

Form 8957 FFI Registration

The instructions to Form 8957 indicate that the following FFIs and branches are eligible to register (on behalf of themselves and their branches) to obtain a GIIN (unless the entity is a Limited FFI or Limited Branch):

  1. Entities not covered by an IGA that wish to enter into an FFI agreement and become a PFFI;
  2. Reporting Model 1 FFIs (including branches of U.S. financial institutions that will be treated as such), registering as an RDCFFI;
  3. Reporting Model 2 FFIs that agree to comply with the terms of an FFI agreement, as modified under the applicable IGA;
  4. Limited FFIs or Limited Branches that confirm that they will comply with applicable terms;
  5. Sponsoring FFIs that agree to perform due diligence, reporting, and withholding on behalf of one or more Sponsored FFIs;
  6. QIs (or Withholding Partnerships and Withholding Trusts) wishing to renew their QI, WP, or WT Agreements; and
  7. Lead FIs/Compliance FIs wishing to identify themselves as such for the purposes of registering members and affiliates.

Model 1 IGA FFIs with a GIIN are classified as “Registered Deemed-Compliant Foreign Financial Institutions” (RDCFFI) on the new W-8BEN-E (see previous article) instead of as Participating Foreign Financial Institutions (PFFIs) pursuant to the regular FATCA FFI agreement and Model 2 IGA.

What is a “Compliance FI”? 

A Compliance FI means a PFFI, Reporting FI under a Model 1 or 2 IGA, or USFI that agrees to establish and maintain a consolidated compliance program and to perform a consolidated periodic review on behalf of one or more Member FIs that are part of its EAG (the compliance group).  A Compliance FI must meet the requirements to register as a Lead FI, and as part of that registration, it must identify each Member FI that is included in its compliance group.  A Compliance FI must also have the authority to terminate the FATCA status of each Member FI within its compliance group.

What is an Expanded Affiliated Group (EAG)? 

An Expanded Affiliated Group of FFIs (EAG) means one or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation, but only if the common parent owns directly stock in at least one of the other includible corporations totaling more than 50 percent of the total voting power of the stock of such corporation, and with a value equal to more than 50 percent of the total value of the stock of such corporation, and if stock meeting these vote and value requirements in each of the includible corporations (except the common parent) is owned directly by one or more of the other includible corporations.  A partnership or any entity other than a corporation shall be treated as a member of EAG if such entity is controlled by members of such EAG.

Must Each Member of an EAG separately Register?

In general, all FFIs, other than exempt beneficial owners or certified deemed-compliant FFIs, that are part of the same EAG must be registered. For purposes of registration, an EAG may have more than one Lead FI and may organize itself for purposes of registration into subgroups under different Lead FIs.

For example, an EAG of 10 FFIs may decide to select two different Lead FIs, Lead FI 1 and Lead FI 2. Lead FI 1 can carry out FATCA registration on behalf of four of its Member FIs and Lead FI 2 can carry out FACTA registration on behalf of four of its other Member FIs.  All 10 FFIs within the same EAG will be registered, even though they are registered under two different Lead FIs.

If an EAG has in place a consolidated compliance program, then Member FIs that elect to participate in the same consolidated compliance program should be registered as Member FIs by the Lead FI that is acting as the Compliance FI for that compliance group.

What is a Sponsored FFI?

A sponsored FFI means an investment entity or an FFI that is a controlled foreign corporation (CFC) having a Sponsoring Entity that will perform the due diligence, withholding, and reporting obligations on its behalf.  An FFI that is a Sponsored FFI will be registered by its Sponsoring Entity.

Must an Registered FFI that also acts as a Sponsoring Entity Register a Second Time?

Yes.  An FFI that will also act as a Sponsoring Entity for one or more Sponsored Entities is required to submit a second 8957 registration form to act as a Sponsoring Entity.  The Sponsoring Entity will receive a separate Sponsoring Entity GIIN and should only use that GIIN when it is fulfilling its obligations as a Sponsoring Entity.

Model 1 IGA – 31 (followed by number of registered FFIs)

  1. Australia (4-28-2014): 1,864
  2. Belgium (4-23-2014): 249
  3. Canada (2-5-2014): 2,264
  4. Cayman Islands (11-29-2013): 14,836
  5. Costa Rica (11-26-2013): 122
  6. Denmark (11-19-2012): 186
  7. Estonia (4-11-2014): 26
  8. Finland (3-5-2014): 466
  9. France (11-14-2013): 2,290
  10. Germany (5-31-2013): 2,554
  11. Gibraltar (5-8-2014): 96
  12. Guernsey (12-13-2013): 2,395
  13. Hungary (2-4-2014): 101
  14. Honduras (3-31-2014): 47
  15. Ireland (1-23-2013): 1,756
  16. Isle of Man (12-13-2013): 312
  17. Italy (1-10-2014): 456
  18. Jamaica (5-1-2014): 41
  19. Jersey (12-13-2013): 1,618
  20. Liechtenstein (5-19-2014): 239
  21. Luxembourg (3-28-2014): 3,560
  22. Malta (12-16-2013): 235
  23. Mauritius (12-27-2013): 727
  24. Mexico (4-9-2014): 418
  25. Netherlands (12-18-2013): 2,053
  26. New Zealand (6-12-2014) 334 < – moved from below list
  27. Norway (4-15-2013): 312
  28. Slovenia (6-2-2014): 20
  29. South Africa (6-9-2014): 317  < – moved from below list
  30. Spain (5-14-2013): 1,187
  31. United Kingdom (9-12-2012): 6,263

Model 2 IGA – 5

  1. Austria (4-29-2014): 2,978
  2. Bermuda (12-19-2013): 1,242
  3. Chile (3-5-2014): 324
  4. Japan (6-11-2013): 3,251
  5. Switzerland (2-14-2013): 4,040

Jurisdictions that have reached agreements in substance:

Model 1 IGA – 39 (followed by number of registered FFIs)

  1. Antigua and Barbuda (6-3-2014): 35 < – new entry
  2. Azerbaijan (5-16-2014): 16
  3. Bahamas (4-17-2014): 610
  4. Barbados (5-27-2014): 123
  5. Belarus (6-6-2014): 64 < – new entry
  6. Brazil (4-2-2014): 2,258
  7. British Virgin Islands (4-2-2014): 1,837
  8. Bulgaria (4-23-2014): 72
  9. Colombia (4-23-2014): 172
  10. Croatia (4-2-2014): 50
  11. Curaçao (4-30-2014): 173
  12. Czech Republic (4-2-2014): 92
  13. Cyprus (4-22-2014): 279
  14. Georgia (6-12-201): 24 < – new entry
  15. India (4-11-2014): 246
  16. Indonesia (5-4-2014): 307
  17. Israel (4-28-2014): 321
  18. Kosovo (4-2-2014) – nil
  19. Kuwait (5-1-2014): 77
  20. Latvia (4-2-2014): 40
  21. Lithuania (4-2-2014): 21
  22. Panama (5-1-2014): 450
  23. Peru (5-1-2014): 164
  24. Poland (4-2-2014): 164
  25. Portugal (4-2-2014): 255
  26. Qatar (4-2-2014): 46
  27. Romania (4-2-2014): 109
  28. St. Kitts and Nevis (6-4-2014)
  29. St. Lucia (6-12-2014): 60 < – new entry
  30. St. Vincent and the Grenadines (6-2-2014): 104 < – new entry
  31. Seychelles (5-28-2014): 37 < – new entry
  32. Singapore (5-5-2014): 783
  33. Slovak Republic (4-11-2014): 54
  34. South Korea (4-2-2014): 396
  35. Sweden (4-24-2014): 312
  36. Turkey (6-3-2014): 65
  37. Turkmenistan (6-3-2014): 1  < – new entry
  38. Turks and Caicos Islands (5-12-2014): 27
  39. United Arab Emirates (5-23-2014): 135

Model 2 IGA – 3

  1. Armenia (5-8-2014): 27
  2. Hong Kong (5-9-2014): 1.539
  3. Paraguay (6-6-2014): 17  < – new entry

 

book coverPractical Compliance Aspects of FATCA and GATCA

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf

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The FATCA GIIN list analyzed by IGA and by countries

Posted by William Byrnes on June 8, 2014


free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

The June 2nd FATCA GIIN list included 77,354 financial institutions from 205 countries and jurisdictions (give or take 1), nearly 75% of which are covered by Model 1 IGA.  As of June 8, 2014, only 70 IGAs have been signed or treated as if signed.  Below is a list of 100 country and jurisdiction FFI registrations, and the Deemed Compliant FFI registration by IGA Model 1.  (see follow up June 16 article with more countries and analysis of FFI registrations: https://profwilliambyrnes.com/2014/06/16/list-of-ffi-registrations-by-country/)

Do 180 More Countries and Jurisdictions Need IGAs?

The USA recognizes 196 independent states in the world (the IRS recognizes Palestine as a State according to the FATCA list, otherwise the State Department only recognizes 195 – see my June 2nd article here), 67 dependencies of states, and has contacts with Taiwan.  But 14 of the dependencies are administered by the United States.  So with Taiwan and Palestine counted, 54 jurisdictions have financial institutions that probably must register for FATCA.

I have previously written that not each of these 54 dependencies probably requires an IGA.  My estimate was that approximately 16 dependencies of the 54 have both local responsibility with regard to tax policy and more than de minimis US source income exposure, such as investments in US Treasuries, for the local authorities to seek an IGA. Such dependencies include by example Bermuda, Cayman Islands, and Hong Kong.

A host of dependencies, such as Antarctica and various atolls, have no (current) global economic relevance.  Yet, even the British Indian Ocean Territory, Falkland Islands, French Southern Territories, and Christmas Island have a registered FATCA financial firm each.  In that the French Southern Territories does not have a permanent population, being scientific research stations on uninhabited Islands by Madagascar, it is curious that the financial firm DBSBV Holding Sci registered there (I cannot find any information on this company?  Any readers want to help me on this one?).   Just as curious is the Russian Bank’s AK BARS Investments Corporation registering in the British Indian Ocean Territory, which is an insignificant  British and American military outpost with a couple hundred military staff, Mauritius and Philippine foreign-contract workers.  Christmas Island with its population of 2,000 entertains the FFI registration of Everbright Equity Advantage Fund (I wonder if anyone within these four extremely small dependencies has even heard of FATCA).

Thus, based on the GIIN list of registrations from dependent jurisdictions and multiple reader emails, I acknowledge underestimating the amount of dependent “jurisdictions”  that will require an IGA, at least a Model 2.  I thought that such minor dependencies FFIs would generally fall under registration exceptions and instead only require W-8BEN-E documentation (e.g. “Certified Deemed-Compliant Nonregistering Local Bank”, “Certified Deemed-Compliant FFI with Only Low-Value Accounts”).

Going forward in my articles, my previous estimate of 212 states and jurisdictions that probably could benefit from an IGA (Model 2 for jurisdictions without populations) will be replaced by the full number of countries and jurisdictions recognized by the US for FATCA, which is 250, accommodating even the economically insignificant territories like British Indian Ocean Territory and French Southern Territories, and the contentious ones such as Palestine and Taiwan.  Therefore, as of June 8th, 180 countries and jurisdictions are without IGAs that could benefit from one – substantially more than previously estimated.

FFI Registration Among Model 1 IGAs and the Rest

Did all the FFIs that are in the 180 countries and jurisdictions that do not have an IGA register for a GIIN by the final June 3rd deadline to be included in the July GIIN list?  Not even close.

Only 77,353 registered from 205 countries and jurisdictions by the initial May 5th extended deadline for the June 2nd GIIN list.  Of those, 74% (57,170) are from Model 1 IGAs (signed and recognized) and thus Deemed Compliant FFIs (reporting to their respective revenue authorities pursuant to local regulations, not directly to the IRS).[1]  These DCFFIs had until the end of the year to register, withholding only beginning for payments from January 1st. Only Kosovo, as a Model 1 IGA country, did not have a single FFI registration.

The remaining 10,260 registered FFIs are from 136 of the 205 countries on the GIIN list.  Thus, of 180 non-IGA countries and jurisdictions, 44 of them did not have any FFI registrations yet,  for which withholding begins upon withholdable payments to non compliant FFIs from July 1st.

Approximately 20% of the total registered FFIs are Cayman Islands firms (14,836) (see my article of June 2nd). 

There is not one reliable number of how many financial entities in the world qualify as a financial institution requiring FATCA registration.  The list of FFIs requiring registration includes, by example, trusts companies, certain trusts, life insurance companies, investment funds, banks.  The IRS has said that “At this time, the full FFI list is expected to be less than 500,000 records.” Thus, the IRS must plan that as many as another 420,000 still need to register, even if the final number is only half that.

BRIC Registration

Brazil leads the BRIC countries with 2,258 FFI registered, followed by Russia (514), India (246) with China only having 211.  Based on this list, it does not appear that India and China have wide spread acceptance for FATCA yet. Will Crimea financial firms register under the Ukraine or Russia (probably Russia)?  Will the IRS recognize such registration?

NAFTA Registrations

2,264 FFIs registered from Canada and Mexico at 418.

Major OECD Countries Registrations

The United Kingdom (6,263) Revenue has recently announced that it will not adopt the IRS issued six-month extension (until December 31, 2014) for entity accounts (see my articles of May 5th and 2nd).  Thus, from July 1st, UK FFIs must document all personal and entity accounts under the requirements for “new” accounts as opposed as to “pre-existing” account due diligence procedures.

Australia (1,864), France (2,290), Germany (2,254), Ireland (1,756) and Netherlands (2,053).

European Financial Centers Registrations

Switzerland (4,040), Luxembourg (3,560), Austria (2,978), Lichtenstein (239).

Guernsey (2,395), Jersey (1,618), Isle of Man (312) and Gibraltar (96).

Caribbean Financial Centers Registrations

BVI (1,837), Bahamas (610), Bermuda (1,242) and Panama (450).

State of Palestine Registrations

23 FFIs registered with the IRS, listed as from the State of Palestine.  Primarily MENA banks and a branch of HSBC Middle East Bank.  As I wrote June 2,  I suspect that this will be a contentious issue between the US and Israel because while “the State of Palestine” is not yet recognized by the State Department (it’s still the Palestinian Territories), this new IRS recognition may be an ‘under the radar screen’ Administration initiative.  It may have just been a contract programmer providing his/her own sentiments to the registration list.

North Korean Registrations

I listed North Korean because, as you are probably aware, it is a sanctioned country by OFAC (see http://www.treasury.gov/resource-center/sanctions/Programs/pages/nkorea.aspx) with a FINCEN AML update available at http://www.fincen.gov/statutes_regs/guidance/pdf/FIN-2013-A005.pdf

So who registered from North Korea? Branches of Bank or America, Wells Fargo, and Deutsche Bank (search the first part of the GIIN until you find the ultimate party for it).

It is possible to receive exceptions to the OFAC sanctions for certain activities. Like I assume that US Aid to North Korea (a.k.a. nuke-mail shakedown funds) has to be transferred there by the US government somehow. I had assumed this occurred through approved intermediary South Korea banks, but now that I have reviewed the GIIN list, it appears that maybe some funds are transferred directly between countries.

“Other” Registrations

23 financial firms listed “other” as the country / jurisdiction.  I am not sure why, given that it appears by my glance over – each has a country in which to register.  Harneys Nevis by example should probably register under Nevis (or where it is incorporated, if not Nevis)?  Why is the Austrian insurance group, Sigal Life UNIQA group Austria,  registered under “Other”?  Perhaps the July 1st list will have movement from “Other” to actual countries?

Model 1 IGA – 29 (followed by number of registered FFIs)

  1. Australia (4-28-2014): 1,864
  2. Belgium (4-23-2014): 249
  3. Canada (2-5-2014): 2,264
  4. Cayman Islands (11-29-2013): 14,836
  5. Costa Rica (11-26-2013): 122
  6. Denmark (11-19-2012): 186
  7. Estonia (4-11-2014): 26
  8. Finland (3-5-2014): 466
  9. France (11-14-2013): 2,290
  10. Germany (5-31-2013): 2,554
  11. Gibraltar (5-8-2014): 96
  12. Guernsey (12-13-2013): 2,395
  13. Hungary (2-4-2014): 101
  14. Honduras (3-31-2014): 47
  15. Ireland (1-23-2013): 1,756
  16. Isle of Man (12-13-2013): 312
  17. Italy (1-10-2014): 456
  18. Jamaica (5-1-2014): 41
  19. Jersey (12-13-2013): 1,618
  20. Liechtenstein (5-19-2014): 239
  21. Luxembourg (3-28-2014): 3,560
  22. Malta (12-16-2013): 235
  23. Mauritius (12-27-2013): 727
  24. Mexico (4-9-2014): 418
  25. Netherlands (12-18-2013): 2,053
  26. Norway (4-15-2013): 312
  27. Slovenia (6-2-2014): 20
  28. Spain (5-14-2013): 1,187
  29. United Kingdom (9-12-2012): 6,263

Model 2 IGA – 5

  1. Austria (4-29-2014)
  2. Bermuda (12-19-2013)
  3. Chile (3-5-2014)
  4. Japan (6-11-2013)
  5. Switzerland (2-14-2013)

Jurisdictions that have reached agreements in substance:

Model 1 IGA – 33 (followed by number of registered FFIs)

  1. Azerbaijan (5-16-2014): 16
  2. Bahamas (4-17-2014): 610
  3. Barbados (5-27-2014): 123
  4. Brazil (4-2-2014): 2,258
  5. British Virgin Islands (4-2-2014): 1,837
  6. Bulgaria (4-23-2014): 72
  7. Colombia (4-23-2014): 172
  8. Croatia (4-2-2014): 50
  9. Curaçao (4-30-2014): 173
  10. Czech Republic (4-2-2014): 92
  11. Cyprus (4-22-2014): 279
  12. India (4-11-2014): 246
  13. Indonesia (5-4-2014): 307
  14. Israel (4-28-2014): 321
  15. Kosovo (4-2-2014) – nil
  16. Kuwait (5-1-2014): 77
  17. Latvia (4-2-2014): 40
  18. Lithuania (4-2-2014): 21
  19. New Zealand (4-2-2014): 334
  20. Panama (5-1-2014): 450
  21. Peru (5-1-2014): 164
  22. Poland (4-2-2014): 164
  23. Portugal (4-2-2014): 255
  24. Qatar (4-2-2014): 46
  25. Romania (4-2-2014): 109
  26. Seychelles (5-28-2014): 37
  27. Singapore (5-5-2014): 783
  28. Slovak Republic (4-11-2014): 54
  29. South Africa (4-2-2014): 317
  30. South Korea (4-2-2014): 396
  31. Sweden (4-24-2014): 312
  32. Turkey (6-3-2014): 65
  33. Turks and Caicos Islands (5-12-2014): 27
  34. United Arab Emirates (5-23-2014): 135

Model 2 IGA – 2

  1. Armenia (5-8-2014)
  2. Hong Kong (5-9-2014)

FFIs registered by a selection of 100 of 205 countries and jurisdictions.

  1. Afghanistan: 7
  2. Andorra: 33
  3. Anguilla: 70
  4. Antigua & Barbuda: 35
  5. Argentina: 269
  6. Armenia: 27
  7. Aruba: 13
  8. Australia: 1,864
  9. Austria: 2,978
  10. Azerbaijan: 16
  11. Bahamas: 610
  12. Barbados: 123
  13. Belgium: 249
  14. Belize: 122
  15. Bermuda: 1,242
  16. Brazil: 2,258
  17. Bulgaria: 72
  18. BVI: 1,837
  19. Canada: 2,264
  20. Cayman Islands: 14,836
  21. China: 211
  22. Christmas Island: 1 (Everbright Equity Advantage Fund)
  23. Colombia: 172
  24. Comoros Is.: 1
  25. Costa Rica: 122
  26. Cook Is.: 72
  27. Croatia: 50
  28. Curacao: 173
  29. Cyprus: 279
  30. Czech Republic: 92
  31. Denmark: 186
  32. Estonia: 26
  33. Falkland Islands: 1
  34. Finland: 466
  35. France: 2,290
  36. French Southern Territories: 1
  37. Germany: 2,554
  38. Gibraltar: 96
  39. Greenland: 1
  40. Guernsey: 2,395
  41. Honduras: 47
  42. Hong Kong: 1,539
  43. Hungary: 101
  44. Iceland: 5
  45. India: 246
  46. Indonesia: 307
  47. Ireland: 1,756
  48. Isle of Man: 312
  49. Israel: 321
  50. Italy: 456
  51. Jamaica: 41
  52. Japan: 3,251
  53. Jersey: 1,618
  54. North Korea: 4
  55. South Korea: 396
  56. Kuwait: 77
  57. Latvia: 40
  58. Lichtenstein: 239
  59. Lithuania: 21
  60. Luxembourg: 3,560
  61. Macao: 36
  62. Malta: 235
  63. Mauritius: 727
  64. Mexico: 418
  65. Monaco: 98
  66. Netherlands: 2,053
  67. New Zealand: 334
  68. Norway: 312
  69. Other: 22
  70. Panama: 450
  71. Peru: 164
  72. Poland: 164
  73. Portugal: 255
  74. Qatar: 46
  75. Romania: 109
  76. Russia: 514
  77. St Kitts & Nevis: 70
  78. St Lucia: 60
  79. Saint Pierre & Miquelon: 1
  80. San Marino: 14
  81. Saudi Arabia: 17
  82. Seychelles: 37
  83. Singapore: 783
  84. South Africa: 317
  85. Spain: 1,187
  86. Slovakia: 54
  87. Slovenia:  20
  88. St Vincent & the Grenadines: 104
  89. Sweden: 312
  90. Switzerland: 4,040
  91. Taiwan: 408
  92. Turkey: 65
  93. Turks & Caicos: 27
  94. Ukraine: 105
  95. United Arab Emirates: 135
  96. United Kingdom: 6,263
  97. USA: 562
  98. Uruguay: 131
  99. Venezuela: 29
  100. Wallis & Fortuna: 1

[1] Model 1 IGA FFIs with a GIIN are classified as “Registered Deemed-Compliant Foreign Financial Institutions” (RDCFFI) on the new W8-BEN-E (see previous article) instead of as Participating Foreign Financial Institutions (PFFIs) pursuant to the regular FATCA FFI agreement and Model 2 IGA.

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If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

  • Chapter 1 Background and Current Status of FATCA
  • Chapter 1A The International Financial System and FATCA
  • Chapter 2 Practical Considerations for Developing a FATCA Compliance Program
  • Chapter 2A FATCA Internal Policy
  • Chapter 3 FATCA Compliance and Integration of Information Technology
  • Chapter 4 Financial Institution Account Remediation
  • Chapter 4A FATCA Customer Outreach
  • Chapter 5 FBAR and Form 8938 Reporting and List of International Taxpayer IRS Forms
  • Chapter 6 Determining U.S. Ownership of Foreign Entities
  • Chapter 7 Foreign Financial Institutions
  • Chapter 7A Account reporting under FATCA
  • Chapter 8 Non-Financial Foreign Entities
  • Chapter 9 FATCA and the Offshore Trust Industry
  • Chapter 10 FATCA and the Insurance Industry
  • Chapter 11 Withholding and Qualified Intermediary
  • Chapter 12 FATCA Withholding Compliance
  • Chapter 13 “Withholdable” Payments
  • Chapter 13A Reporting Payments
  • Chapter 14 Determining and Documenting the Payee
  • Chapter 14A W8 Equivalents
  • Chapter 15 Framework of Intergovernmental Agreements
  • Chapter 16 Analysis of Current Intergovernmental Agreements
  • Chapter 17 European Union Cross Border Information Reporting
  • Chapter 18 The OECD Role in Exchange of Information: The Trace Project, FATCA, and Beyond
  • Chapter 19 Germany
  • Chapter 20 Ireland
  • Chapter 21 Japan
  • Chapter 22 Mexico
  • Chapter 23 Switzerland
  • Chapter 24 United Kingdom
  • Chapter 25 Brazil
  • Chapter 26 British Virgin Islands
  • Chapter 27 Canada
  • Chapter 28 Spain
  • Chapter 29 China
  • Chapter 30 Netherlands
  • Chapter 31 Luxembourg
  • Chapter 32 Russia
  • Chapter 33 Turkey
  • Chapter 34 India
  • Chapter 35 Argentina
  • Chapter 36 Aruba
  • Chapter 37 Australia
  • Chapter 38 Bermuda
  • Chapter 39 Colombia
  • Chapter 40 Cyprus
  • Chapter 41 Hong Kong
  • Chapter 42 Macau
  • Chapter 43 Portugal
  • Chapter 44 South Africa
  • Chapter 45 France
  • Chapter 46 Gibraltar
  • Chapter 47 Guernsey
  • Chapter 48 Italy

Posted in FATCA | Tagged: , , | 17 Comments »

final deadline passes and only 70 IGAs in place

Posted by William Byrnes on June 3, 2014


The June 3rd deadline for FATCA FFI registration to be included on the July 1 GIIN list has come and now gone.  In the past two weeks, only four additional IGAs have been added to the list (Turkey, Seychelles, UAE and Barbados) so that as of Tuesday June 3, 2014, only 70 FATCA IGAs have been signed or treated as if signed.  These 70 include 29 signed Model 1s with another 34 treated as if signed, and 5 signed Model 2s with 2 treated as if signed.  (Thank you to reader Alain Thielemans who alerted me to the two new IGAs published by Treasury today before I posted this story).

140 IGAs still left to be agreed by Treasury?

The USA recognizes 196 independent states in the world (the IRS recognizes Palestine as a State according to the 23 State of Palestine FFIs on the IRS FATCA list, otherwise the State Department only recognizes 195, at least according to its website), 67 dependencies of states, and has contacts with Taiwan.  But not each of these 67 dependencies requires an IGA.  14 of these jurisdictions are dependencies of the United States for which the financial institutions are not included in the definition of “foreign financial institutions” subject to FATCA registration.

Approximately 16 dependencies of the remaining 53 have both local responsibility with regard to tax policy and more than de minimis US source income exposure, such as investments in US Treasuries, for the local authorities to seek an IGA. Such dependencies include by example Bermuda, Cayman Islands, and Hong Kong.  Taiwan has its own peculiar status, claiming to represent the central government of greater China (the US of course recognizes Beijing).  Other dependencies, like the French departments of French Guiana, Guadeloupe, Martinique, Mayotte and Reunion, do not have local responsibility for fiscal policy and thus are protected within the IGA of the parent-state.  And a host of dependencies, such as Antarctica and various atolls, have no (current) global economic relevance.

Yet interestingly, even the British Indian Ocean Territory has a registered FATCA financial firm, albeit a Russian financial institution AK BARS Investments Corporation (see http://www.akbars.ru/en/about/).  Falkland Islands even had a registration, a branch, as did Wallis and Futuna (a French Pacific territory).

Thus, 196 recognized states and 16 economically relevant, semi-autonomous dependencies form the pool of 212 states and jurisdictions that probably need an IGA.  As of June 3rd, 70 have an IGA recognized by US Treasury, leaving 142 without.  FFIs in the remaining 140 countries and jurisdictions that did not register by today will have 30% withheld for Title IV (FATCA) purpose by US withholding agents who are gearing up their software systems to begin this withholding for payments made from July 1st.

How many FFIs did not register for FATCA (yet)?

FATCA Portal registration remains open, but the formal IRS deadline for inclusion on the July 1st GIIN list of participating foreign financial institutions (“PFFI”) passed. See my previous article about the May 5th deadline and consequences of its passing that applied to all FFIs in the non-IGA states and jurisdictions.

Did all the FFIs that are in the 142 countries and jurisdictions that do not have an IGA register for a GIIN?  Not even close since only 77,353 registered by the May 5 deadline to be included on the June 2nd GIIN list, and 20% of those were Cayman Islands firms (see my article yesterday breaking down the list).

There is not one reliable number of how many financial entities in the world qualify as a financial institution requiring FATCA registration.  It is a range of as few as 80,000 entities that qualify as FFIs still need to register or complete registration for a GIIN, but it could be as many as 380,000 still need to register.  The list of FFIs requiring registration includes by example trusts companies, investment funds, and banks.  The IRS has said that “At this time, the full FFI list is expected to be less than 500,000 records.”  If Cayman Islands is an indicator of a jurisdiction, then at 14,836 registered, the GIIN list will swell to the 500,000 figure by end of year.

BVI has 1,837 so far,  2.053 Netherlands financial firms registered, and nearly twice as many Swiss firms, 4,040, had GIINs.  Liechtenstein only had 239 register.  Of the BRIC countries, only 211 China firms were registered to date, 246 Indian ones, and 514 Russian ones, compared to 2,258 for Brazil.

It is possible that on July 1st an unregistered FFI is considered non-participating (NPFFI) for purposes of FATCA withholding, but by example, on August 1st its country agrees an IGA in substance that Treasury announces on its FATCA site and the NPFFI goes back to FFI non-withholding status because of the extension related to IGAs, at least until that final December 22 deadline mentioned in Announcement 2014-1.  Model 1 IGA FFIs with a GIIN are classified as “Registered Deemed-Compliant Foreign Financial Institutions” (RDCFFI) on the new W8-BEN-E (see previous article) instead of as Participating Foreign Financial Institutions (PFFIs) pursuant to the regular FATCA FFI agreement and Model 2 IGA.

Is the June 3rd Deadline a Drop-Dead Deadline?

Yes and No.  The IRS states the following on its FATCA Registration Portal: “the IRS believes it can ensure registering FFIs that their GIINs will be included on the July 1 IRS FFI List if their registrations are finalized by June 3, 2014.”  (See Notice 2014-17, page 6: “FFIs that finalize their registrations after … June 3 may still be included on the … July 1 IRS FFI List; however, the IRS cannot provide assurance that this will be the case.”)

Yet, the IRS built in a 90 day safeguard for FFIs when a GIIN has been applied for but not yet received:

§1.1471-3(e)(3) Participating FFIs and registered deemed-compliant FFIs—(i) In general. … A payee whose registration with the IRS as a participating FFI or a registered deemed-compliant FFI is in process but has not yet received a GIIN may provide a withholding agent with a Form W-8 claiming the chapter 4 status it applied for and writing “applied for” in the box for the GIIN. In such case, the FFI will have 90 calendar days from the date of its claim to provide the withholding agent with its GIIN and the withholding agent will have 90 calendar days from the date it receives the GIIN to verify the accuracy of the GIIN against the published IRS FFI list before it has reason to know that the payee is not a participating FFI or registered deemed-compliant FFI. … (emphasis added)

Do FFIs in IGA countries have an extension until December 22 for FATCA Registration? 

Financial institutions (FFIs) in the 68 IGA countries have an extension to register with the IRS in order to obtain a GIIN and thus appear on the IRS’ FATCA compliant list.  FATCA 30% withholding for FFIs in these Model 1 IGA countries and jurisdictions only begins January 1, 2015.

See Reg. § 1.1471-3(d)(4)(iv)(A): § 1.1471-3(d)(4)(iv) Exceptions for payments to reporting Model 1 FFIs.— (A) For payments made prior to January 1, 2015, a withholding agent may treat the payee as a reporting Model 1 FFI if it receives a withholding certificate from the payee indicating that the payee is a reporting Model 1 FFI and the country in which the payee is a reporting Model 1 FFI, regardless of whether the certificate contains a GIIN for the payee.

The situation of the last list to be published for 2014 and, more importantly, the last date to register as a Model 1 FFI to ensure being included on that list, is somewhat fluid.  In the past 18 months, the IRS has several times amended its deadlines and its timelines for GIIN registration.  Thus, it is at least feasible that another registration or withholding start date extension is granted before the end of 2014 (obviously Treasury will vehemently deny any more extensions on the horizon, but last year it did not expect a government shut down and this year it extended the registration date by at least 10 days weeks before the deadline of April 25).

In its January 6, 2014 Announcement 2014-1 (IRB 2014-2), the IRS stated:

Thus, while reporting Model 1 FIs will be able to register and obtain GIINs on or after January 1, 2014, they will not need to register or obtain GIINs until on or about December 22, 2014, to ensure inclusion on the IRS FFI list by January 1, 2015. (emphasis added)

However, at least one IGA country is suggesting an earlier (perhaps more prudent) date than December 22, 2014 for GIIN registration in order to be included on the IRS’ last 2014 FATCA compliant list.  The United Kingdom’s Law Society and Institute of Chartered Accountants in May 2014 published combined guidance to members stating:

To ensure that the registration has been processed in time for inclusion on that list the last practical date for registration is 25 October 2014.

The IRS will release its final 2014 list of FATCA compliant financial institutions (thus not subject to FATCA 30% withholding on January 1, 2015 and onward) most likely on Wednesday, December 31, 2014 (according to the United Kingdom guidance quoted above), albeit it seems just as reasonable for a Friday, January 2 list to be released.   The 90 day safeguard mentioned above is also in place for the IGA deadlines.

Jurisdictions that have signed agreements:

Model 1 IGA – 29

  1. Australia (4-28-2014)
  2. Belgium (4-23-2014)
  3. Canada (2-5-2014)
  4. Cayman Islands (11-29-2013)
  5. Costa Rica (11-26-2013)
  6. Denmark (11-19-2012)
  7. Estonia (4-11-2014)
  8. Finland (3-5-2014)
  9. France (11-14-2013)
  10. Germany (5-31-2013)
  11. Gibraltar (5-8-2014)
  12. Guernsey (12-13-2013)
  13. Hungary (2-4-2014)
  14. Honduras (3-31-2014)
  15. Ireland (1-23-2013)
  16. Isle of Man (12-13-2013)
  17. Italy (1-10-2014)
  18. Jamaica (5-1-2014)
  19. Jersey (12-13-2013)
  20. Liechtenstein (5-19-2014) <– IGA officially signed, moved from list below
  21. Luxembourg (3-28-2014)
  22. Malta (12-16-2013)
  23. Mauritius (12-27-2013)
  24. Mexico (4-9-2014)
  25. Netherlands (12-18-2013)
  26. Norway (4-15-2013)
  27. Slovenia (6-2-2014) <– IGA officially signed, moved from list below
  28. Spain (5-14-2013)
  29. United Kingdom (9-12-2012)

 

Model 2 IGA – 5

  1. Austria (4-29-2014)
  2. Bermuda (12-19-2013)
  3. Chile (3-5-2014)
  4. Japan (6-11-2013)
  5. 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 parenthesis):

 

Model 1 IGA – 34

  1. Azerbaijan (5-16-2014)
  2. Bahamas (4-17-2014)
  3. Barbados (5-27-2014) <– new IGA agreed
  4. Brazil (4-2-2014)
  5. British Virgin Islands (4-2-2014)
  6. Bulgaria (4-23-2014)
  7. Colombia (4-23-2014)
  8. Croatia (4-2-2014)
  9. Curaçao (4-30-2014)
  10. Czech Republic (4-2-2014)
  11. Cyprus (4-22-2014)
  12. India (4-11-2014)
  13. Indonesia (5-4-2014)
  14. Israel (4-28-2014)
  15. Kosovo (4-2-2014)
  16. Kuwait (5-1-2014)
  17. Latvia (4-2-2014)
  18. Lithuania (4-2-2014)
  19. New Zealand (4-2-2014)
  20. Panama (5-1-2014)
  21. Peru (5-1-2014)
  22. Poland (4-2-2014)
  23. Portugal (4-2-2014)
  24. Qatar (4-2-2014)
  25. Romania (4-2-2014)
  26. Seychelles (5-28-2014) <– new IGA agreed
  27. Singapore (5-5-2014)
  28. Slovak Republic (4-11-2014)
  29. South Africa (4-2-2014)
  30. South Korea (4-2-2014)
  31. Sweden (4-24-2014)
  32. Turkey (6-3-2014) <– new IGA agreed
  33. Turks and Caicos Islands (5-12-2014)
  34. United Arab Emirates (5-23-2014) <– new IGA agreed

 

Model 2 IGA – 2

  1. Armenia (5-8-2014)
  2. Hong Kong (5-9-2014)

 

book coverPractical Compliance Aspects of FATCA and GATCA

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf

Posted in FATCA, Uncategorized | Tagged: , | 1 Comment »

IRS FFI List FAQs

Posted by William Byrnes on June 3, 2014


FFI List Fields

#

Questions

Answers

Q1. What fields will be contained on the FFI list? The FFI list will contain only three fields: financial institution (FI) name or the term “branch,” Global Intermediary Identification Number (GIIN), and either country of residence for tax purposes (for an FI) or branch country (for branches).
Q2. What are the maximum lengths of each field? The FI name field and country fieldscan be up to 75 characters each. Currently there is a 40 character input limitation for the FI name, but thismay be expanded up to 75 characters in a future release.The GIIN field is 19 characters, including the period separators.

The country field is using the ISO 3166-1standard country list, with the maximum length currently of 44 characters; however, as this list is updated, the maximum length could increase.

If you plan to download the FFI list and import it into your system, please see the FFI list schema and test file link for more information on the format.

FFI List

#

Questions

Answers

Q1. Will the monthly update to the FFI List contain just the additions and deletions from the prior month after the initial list is published? No, only the current list of approved FI’s will be published on IRS.gov. At the beginning of each month, a complete new list will be published for all financial institutions and branches that have an assigned and approved GIIN as of a specified cut-off date five business days prior to the end of the previous month.
Q2. Will an archive of previously released versions of the monthly FFI List be available for viewing and download on the IRS Website? No, only the current list of approved FI’s will be available on the IRS Website. The previous month’s list will not be available to the public.
Q3. How frequently will the FFI list file be updated? The FFI list will be updated monthly on the 1st of the month.
Q4. What languages will the FFI list be available in? The FFI list will be published in English only.
Q5. Is there anything in the format of the FFI list that indicates that an FFI is a Deemed Compliant or a Participating FFI? No, the list does not indicate the FATCA classification.
Q6. How many records are expected in the full FFI list? At this time, the full FFI list is expected to be less than 500,000 records.

Downloading

#

Questions

Answers

Q1. What are the available FFI list file formats for download? You will only need to download the completeFFI list if you plan to import the list into your system. You will be able to search, view and download partial information using theFFI List search and download tool directly from the IRS Webpage. (See searchingcategory below).If you plan to download the complete FFI list, it will be available in XML and CSV (comma delimited) formats. You can also download your search results (partial list) in XML, CSV or PDF formats.

The FFI list will not be available in spreadsheet products, but the CSV file can be easily imported into most spreadsheet products

Q2. Do you need to be a registered user with a login and password to access the FFI List search and download tool, and download the FFI list on the IRS website? No, you do not need to be a registered user to access the FFI List search and download tool and download the FFI list on the IRS website. It is accessible to anyone with an internet connection.
Q3. Will there be a web service (SOAP based) – where FFIs can automatically download the latest version of the FFI list? No, the FFI list file will not be available for automatic download via a web service. The complete list can be downloaded manually in CSV or XML format or a partial list (from your search results) can be downloaded manually in CSV, XML or PDF format via the irs.gov web page.
Q4. Is the FFI List file available via FTP? No, the FFI list file will not be available via FTP. It can be downloaded manually via the irs.gov web page.

Searching

#

Questions

Answers

Q1. Will a search tool be available? In addition to downloading the full FFI list, the FFI List search and download tool will be available on the web site. This tool enables a user to create a partial list using search criteria such as the GIIN, countries, and/or financial institution name. These search results can be exported to an XML, CSV or PDF file. A CSV file can be imported into most spreadsheet products and word processor document products.

Legal Entity Name

#

Questions

Answers

Q1. Will the Legal Entity Names be standardized in any way, e.g., Bank Corp. vs. Bank Corporation or Chairs Ltd. vs. Chairs Limited vs. Chairs LTD.? The FFI list will contain the financial institution (FI) name or the term “branch” for branches. The FI name will display on the list in the exact way it was input on the registration.
Q2. How do I find the legal entity name of the branches in the FFI list? The legal entity names of branches are not provided on the FFI list. The FFI list will contain the term “branch” in the FI name field.
Q3. Are there any other “special” names similar to “Branch” that might appear on the list? No, there will be no other special names. The schema and test files provide the format and sample data.
Q4. Can the FI Legal Name be changed once it appears on the FFI List? The Financial Institution (FI) Names on the FFI list are obtained from the data entered by the FI on their registration form or online registration system. The FI can edit this field (or any other field except the FI type) on the online registration system at any time. If this field is changed by the FI, the updated name will appear on the next published list.

XML/CSV Files

#

Questions

Answers

Q1. Will the final FATCA FFI xml file contain a file date/production time identifier/tag? No, the XML file will not contain a file date or production time identifier in the content of the file itself. However, the date of the file will be posted on the web page.
Q2. Will the CSV format file contain a trailer record identifying the number of records or a simple end marker? No, the CSV file will not contain a trailer record or end marker. The test file on the FFI list Schema and Test File page provides the exact format that the published list will contain.

 

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77,353 FFI Listed by IRS as FATCA compliant – here’s a breakdown

Posted by William Byrnes on June 2, 2014


The IRS has published the FATCA compliant Foreign Financial Institution (FFI) list in downloadable XMS (excel) format.  The list contains the current 77,353 names of financial institutions and other entities that have completed Foreign Account Tax Compliance Act (FATCA) registration with the IRS and obtained a global intermediary identification number (GIIN).  At least another 70,000 – 100,000 FFIs remain to register and/or are waiting to receive a GIIN, although the IRS has stated in the FFI List FAQs the total number could reach as high as 500,000.

From July 1st a withholding of 30% will apply to FATCA withholdable payments to the 140 countries and jurisdictions without an IGA.  68 countries and jurisdictions have a an IGA with the USA and thus a FATCA registration extension until the end of the year.  See yesterday’s article about the IGAs and other deadlines.

20% of the FATCA compliant financial firms hailed from Cayman Islands at 14,836 registered whereas BVI had 1,837.  2.053 Netherlands financial firms registered thus far, whereas nearly twice as many Swiss firms had GIINs at 4,040.  Liechtenstein only had 239 register.  Of the BRIC countries, only 211 China firms were registered to date, 246 Indian ones, and 514 Russian ones, compared to 2,258 for Brazil.

The most obscure GIIN registration is perhaps AK BARS Investments Corporation which listed BRITISH INDIAN OCEAN TERRITORY.  Falkland Islands even had a registration, albeit a branch, as did Wallis and Futuna (French Pacific territory).  The most contentious GIIN registrations will be the 23 from “the State of Palestine” (I must have missed the State Department press release recognizing its statehood).

The FFI List Search and Download Tool contains a link to a Search and Download Tool that allows the FFI List to be searched and downloaded to ensure ease of use.  A User Guide for the list search-and-download tools is posted online to explain the convenient features provided.

A cumulative updated FFI list will be posted monthly that will contain the names of all financial institutions and other entities that have completed FATCA registration with the IRS and obtained a GIIN up to 5 business days before the end of the previous month. The first updated list will be posted by the IRS on July 1.

<iframe width=”560″ height=”315″ src=”//www.youtube.com/embed/klTK_LsrwV0″ frameborder=”0″ allowfullscreen>


book cover
Practical Compliance Aspects of FATCA and GATCA

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf


If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

Posted in FATCA | Tagged: , , , , | 4 Comments »

Only 68 IGAs the day before the June 3rd FATCA registration deadline

Posted by William Byrnes on June 2, 2014


The silence is deafening.  In the past two weeks, only two additional IGAs have been added to the list (UAE and Barbados) so that as of Monday June 2, 2014, only 68 FATCA IGAs have been signed or treated as if signed.  These 68 include 28 signed Model 1s with another 33 treated as if signed, and 5 signed Model 2s with 2 treated as if signed.

FFIs in the remaining countries and jurisdictions rush to register by tomorrow, June 3rd, with the FATCA portal that they may be included on the GIIN List by the July 1st start of FATCA withholding.  Meanwhile, US withholding agents gear up to begin FATCA withholding for payments from July 1st.

What if these Non-IGA countries agree an IGA after July 1?

FATCA Portal registration remains open, but the formal IRS deadline for inclusion on today’s June 2nd GIIN list of participating foreign financial institutions (“PFFI”) passed May 5th. See my previous article about the May 5th deadline and consequences of its passing that applied to all FFIs in the non-IGA states and jurisdictions.

Did all the FFIs that are in the remaining countries and jurisdictions that do not have an IGA register for a GIIN?  There is not one reliable number of how many financial entities in the world qualify as a financial institution requiring FATCA registration.  It is possible that 80,000 entities that qualify as FFIs still need to register or complete registration for a GIIN.  The list of FFIs requiring registration includes by example trusts companies, investment funds, and banks.

It is possible that on July 1st an unregistered FFI is considered non-participating (NPFFI) for purposes of FATCA withholding, but by example, on August 1st its country agrees an IGA in substance that Treasury announces on its FATCA site and the NPFFI goes back to FFI non-withholding status because of the extension related to IGAs, at least until that final December 22 deadline mentioned in Announcement 2014-1.  Model 1 IGA FFIs with a GIIN are classified as “Registered Deemed-Compliant Foreign Financial Institutions” (RDCFFI) on the new W8-BEN-E (see previous article) instead of as Participating Foreign Financial Institutions (PFFIs) pursuant to the regular FATCA FFI agreement and Model 2 IGA.

Is the June 3rd Deadline a Drop-Dead Deadline?

Yes and No.  The IRS states the following on its FATCA Registration Portal: “the IRS believes it can ensure registering FFIs that their GIINs will be included on the July 1 IRS FFI List if their registrations are finalized by June 3, 2014.”  (See Notice 2014-17, page 6: “FFIs that finalize their registrations after … June 3 may still be included on the … July 1 IRS FFI List; however, the IRS cannot provide assurance that this will be the case.”)

Yet, the IRS built in a 90 day safeguard for FFIs when a GIIN has been applied for but not yet received:

 §1.1471-3(e)(3) Participating FFIs and registered deemed-compliant FFIs—(i) In general. … A payee whose registration with the IRS as a participating FFI or a registered deemed-compliant FFI is in process but has not yet received a GIIN may provide a withholding agent with a Form W-8 claiming the chapter 4 status it applied for and writing “applied for” in the box for the GIIN. In such case, the FFI will have 90 calendar days from the date of its claim to provide the withholding agent with its GIIN and the withholding agent will have 90 calendar days from the date it receives the GIIN to verify the accuracy of the GIIN against the published IRS FFI list before it has reason to know that the payee is not a participating FFI or registered deemed-compliant FFI. … (emphasis added)

Do FFIs in IGA countries have an extension until December 22 for FATCA Registration? 

Financial institutions (FFIs) in the 68 IGA countries have an extension to register with the IRS in order to obtain a GIIN and thus appear on the IRS’ FATCA compliant list.  FATCA 30% withholding for FFIs in these Model 1 IGA countries and jurisdictions only begins January 1, 2015.

See Reg. § 1.1471-3(d)(4)(iv)(A): § 1.1471-3(d)(4)(iv) Exceptions for payments to reporting Model 1 FFIs.— (A) For payments made prior to January 1, 2015, a withholding agent may treat the payee as a reporting Model 1 FFI if it receives a withholding certificate from the payee indicating that the payee is a reporting Model 1 FFI and the country in which the payee is a reporting Model 1 FFI, regardless of whether the certificate contains a GIIN for the payee.

The situation of the last list to be published for 2014 and, more importantly, the last date to register as a Model 1 FFI to ensure being included on that list, is somewhat fluid.  In the past 18 months, the IRS has several times amended its deadlines and its timelines for GIIN registration.  Thus, it is at least feasible that another registration or withholding start date extension is granted before the end of 2014 (obviously Treasury will vehemently deny any more extensions on the horizon, but last year it did not expect a government shut down and this year it extended the registration date by at least 10 days weeks before the deadline of April 25).

In its January 6, 2014 Announcement 2014-1 (IRB 2014-2), the IRS stated:

Thus, while reporting Model 1 FIs will be able to register and obtain GIINs on or after January 1, 2014, they will not need to register or obtain GIINs until on or about December 22, 2014, to ensure inclusion on the IRS FFI list by January 1, 2015. (emphasis added)

However, at least one IGA country is suggesting an earlier (perhaps more prudent) date than December 22, 2014 for GIIN registration in order to be included on the IRS’ last 2014 FATCA compliant list.  The United Kingdom’s Law Society and Institute of Chartered Accountants in May 2014 published combined guidance to members stating:

To ensure that the registration has been processed in time for inclusion on that list the last practical date for registration is 25 October 2014.

The IRS will release its final 2014 list of FATCA compliant financial institutions (thus not subject to FATCA 30% withholding on January 1, 2015 and onward) most likely on Wednesday, December 31, 2014 (according to the United Kingdom guidance quoted above), albeit it seems just as reasonable for a Friday, January 2 list to be released.   The 90 day safeguard mentioned above is also in place for the IGA deadlines.

What Deadlines has Treasury NOT moved? 

For “individual” held accounts, Treasury has neither provided an extension to the FATCA compliance requirements, nor from withholding as of July 1st.  Thus, from July 1 these accounts must be characterized as “new” accounts for FATCA diligence procedures to determine whether the beneficial owner is a US person.

For accounts of ‘entities’ , while an FFI may still characterize accounts opened until December 31 as “pre-existing” accounts, Treasury did not mention extending the deadlines applicable for FATCA diligence procedures to determine whether the entity’s beneficial owner is a US person.

The pre-existing account due diligence analysis remains with three deadlines:

  1. December 31, 2014 for prima facie FFI account holders,
  2. June 30, 2015 for high value accounts, and
  3. June 30, 2016 for all remaining accounts, such as “pre-existing” entity accounts).

Note that FATCA withholding does not apply to all FATCA withholdable payments immediately on July 1st.  FATCA has a phase-in period for withholding on certain types of payments, see Ch 13: Withholdable Payments. 

Jurisdictions that have signed agreements:

Model 1 IGA – 28

  1. Australia (4-28-2014)
  2. Belgium (4-23-2014)
  3. Canada (2-5-2014)
  4. Cayman Islands (11-29-2013)
  5. Costa Rica (11-26-2013)
  6. Denmark (11-19-2012)
  7. Estonia (4-11-2014)
  8. Finland (3-5-2014)
  9. France (11-14-2013)
  10. Germany (5-31-2013)
  11. Gibraltar (5-8-2014)
  12. Guernsey (12-13-2013)
  13. Hungary (2-4-2014)
  14. Honduras (3-31-2014)
  15. Ireland (1-23-2013)
  16. Isle of Man (12-13-2013)
  17. Italy (1-10-2014)
  18. Jamaica (5-1-2014)
  19. Jersey (12-13-2013)
  20. Liechtenstein (5-19-2014) <— IGA officially signed, moved from list below
  21. Luxembourg (3-28-2014)
  22. Malta (12-16-2013)
  23. Mauritius (12-27-2013)
  24. Mexico (4-9-2014)
  25. Netherlands (12-18-2013)
  26. Norway (4-15-2013)
  27. Spain (5-14-2013)
  28. United Kingdom (9-12-2012)

Model 2 IGA – 5

  1. Austria (4-29-2014)
  2. Bermuda (12-19-2013)
  3. Chile (3-5-2014)
  4. Japan (6-11-2013)
  5. 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 parenthesis):

Model 1 IGA – 33

  1. Azerbaijan (5-16-2014)
  2. Bahamas (4-17-2014)
  3. Barbados (5-27-2014) <— new IGA agreed
  4. Brazil (4-2-2014)
  5. British Virgin Islands (4-2-2014)
  6. Bulgaria (4-23-2014)
  7. Colombia (4-23-2014)
  8. Croatia (4-2-2014)
  9. Curaçao (4-30-2014)
  10. Czech Republic (4-2-2014)
  11. Cyprus (4-22-2014)
  12. India (4-11-2014)
  13. Indonesia (5-4-2014)
  14. Israel (4-28-2014)
  15. Kosovo (4-2-2014)
  16. Kuwait (5-1-2014)
  17. Latvia (4-2-2014)
  18. Lithuania (4-2-2014)
  19. New Zealand (4-2-2014)
  20. Panama (5-1-2014)
  21. Peru (5-1-2014)
  22. Poland (4-2-2014)
  23. Portugal (4-2-2014)
  24. Qatar (4-2-2014)
  25. Romania (4-2-2014)
  26. Singapore (5-5-2014)
  27. Slovak Republic (4-11-2014)
  28. Slovenia (4-2-2014)
  29. South Africa (4-2-2014)
  30. South Korea (4-2-2014)
  31. Sweden (4-24-2014)
  32. Turks and Caicos Islands (5-12-2014)
  33. United Arab Emirates (5-23-2014) <— new IGA agreed

Model 2 IGA – 2

  1. Armenia (5-8-2014)
  2. Hong Kong (5-9-2014)

 

book coverPractical Compliance Aspects of FATCA and GATCA

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf


If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

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Turks & Caicos plus Azerbaijan IGAs bring total to 66

Posted by William Byrnes on May 16, 2014


66 IGAs Published or in Effect

Two IGAs “agreed in substance” have been added by Treasury to its list on Friday, May 16 – Turks & Caicos Islands and Azerbaijan.  This brings the total IGAs published and treated as in effect up to 62, comprised of 27 published Model 1, 5 published Model 2, while 32 Model 1 have been agreed in substance and 2 of the Model 2 agreed.  Updated list is below.  FFIS in the remaining 140+ countries and jurisdictions rush to register with the FATCA portal and to be placed on the GIIN List by the July 1st start of FATCA withholding.

Previous article and analysis is available at https://profwilliambyrnes.com/2014/05/11/2-new-igas-brings-it-to-64-brides-148-bridesmaids-remain-in-waiting-and-other-important-fatca-updates/

Model 1 IGA’s treated in effect = 32 (in red added since my > last IGA update < of May 11)

  1. Azerbaijan (5-16-2014) <— new
  2. Bahamas (4-17-2014)
  3. Brazil (4-2-2014)
  4. British Virgin Islands (4-2-2014)
  5. Bulgaria (4-23-2014)
  6. Columbia (4-23-2014)
  7. Croatia (4-2-2014)
  8. Curaçao (4-30-2014)
  9. Czech Republic (4-2-2014)
  10. Cyprus (4-22-2014)
  11. India (4-11-2014)
  12. Indonesia (5-4-2014) 
  13. Israel (4-28-2014)
  14. Kosovo (4-2-2014)
  15. Kuwait (5-1-2014)  
  16. Latvia (4-2-2014)
  17. Liechtenstein (4-2-2014)
  18. Lithuania (4-2-2014)
  19. New Zealand (4-2-2014)
  20. Panama (5-1-2014)  
  21. Peru (5-1-2014)  
  22. Poland (4-2-2014)
  23. Portugal (4-2-2014)
  24. Qatar (4-2-2014)
  25. Singapore (5-5-2014) 
  26. Slovak Republic (4-11-2014)
  27. Slovenia (4-2-2014)
  28. South Africa (4-2-2014)
  29. South Korea (4-2-2014)
  30. Sweden (4-24-2014)
  31. Romania (4-2-2014)
  32. Turks & Caicos (5-12-2014) <— new

Model 2 IGAs treated in effect = 2

  • Armenia (5-8-2014)  
  • Hong Kong (5-9-2014)  

jurisdiction that have signed and entered into a formal IGA

Model 2 IGA = 5

  1. Austria (4-29-2014)
  2. Bermuda (12-19-2013)
  3. Chile (3-5-2014)
  4. Japan (6-11-2013)
  5. Switzerland (2-14-2013)

book coverPractical Compliance Aspects of FATCA and GATCA

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf


If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

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tick-tock, tick-tock, no movement on IGAs yet this week with just 64 and 140 countries FFIs left out in the cold

Posted by William Byrnes on May 14, 2014


Same 64 IGAs Published or in Effect since Friday May 9th … 

2 IGAs “agreed in substance” have been added last week, importantly Hong Kong and Armenia.  See my weekend update at 2 new IGAs brings it to 64 brides, 148 bridesmaids remain in waiting … and other important FATCA updates

What about the other 148 Non-IGA countries?  

FATCA Portal registration remains open, but the formal IRS deadline for inclusion on the June 2nd GIIN list of participating foreign financial institutions (“PFFI”) passed May 5th. See my previous article about the May 5th deadline and consequences of its passing that applied to all FFIs in the non-IGA states and jurisdictions.

Did all the FFIs that are in the 148 countries and jurisdictions that do not have an IGA register for a GIIN?  There is not one reliable number of how many financial entities in the world qualify as a financial institution requiring FATCA registration.  Industry experts have put forward a reasonable range of 20,000 to 30,000 such entities that qualify as FFIs that still need to register or complete registration for a GIIN, though figures as high as 80,000 have been suggested (probably such estimates include branches in the count of financial institutions).  The list of FFIs requiring registration includes by example trusts companies, investment funds, and banks.

It is possible that on July 1st an unregistered FFI is considered non-participating (NPFFI) for purposes of FATCA withholding, but by example, on August 1st its country agrees an IGA in substance that Treasury announces on its FATCA site and the NPFFI goes back to FFI non-withholding status because of the extension related to IGAs, at least until that final December 22 deadline mentioned in Announcement 2014-1.  Model 1 IGA FFIs with a GIIN are classified as “Registered Deemed-Compliant Foreign Financial Institutions” (RDCFFI) on the new W8-BEN-E (see previous article) instead of as Participating Foreign Financial Institutions (PFFIs) pursuant to the regular FATCA FFI agreement and Model 2 IGA.

Was the May 5th Deadline a Hard Deadline?

Probably Not.  The IRS states the following on its FATCA Registration Portal: “the IRS believes it can ensure registering FFIs that their GIINs will be included on the July 1 IRS FFI List if their registrations are finalized by June 3, 2014.”  (See Notice 2014-17, page 6: “FFIs that finalize their registrations after May 5 or June 3 may still be included on the June 2 or July 1 IRS FFI List, respectively; however, the IRS cannot provide assurance that this will be the case. The IRS will continue processing registrations in the order received; however, processing times may increase as the May 5 and June 3 dates approach.”)  

Moreover, the IRS built in a 90 day safeguard for FFIs when a GIIN has been applied for but not yet received:

§1.1471-3(e)(3) Participating FFIs and registered deemed-compliant FFIs—(i) In general. … A payee whose registration with the IRS as a participating FFI or a registered deemed-compliant FFI is in process but has not yet received a GIIN may provide a withholding agent with a Form W-8 claiming the chapter 4 status it applied for and writing “applied for” in the box for the GIIN. In such case, the FFI will have 90 calendar days from the date of its claim to provide the withholding agent with its GIIN and the withholding agent will have 90 calendar days from the date it receives the GIIN to verify the accuracy of the GIIN against the published IRS FFI list before it has reason to know that the payee is not a participating FFI or registered deemed-compliant FFI. … (emphasis added)
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book coverPractical Compliance Aspects of FATCA and GATCA

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts 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.   A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf


If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

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New FATCA FAQ on Trustee Registration increases to 15 added this month

Posted by William Byrnes on May 13, 2014


On May 13, 2014 the IRS has released a new FATCA FAQ: How do Trustees of Trustee-Documented Trusts register? This FAQ adds to the 10 new ones included April 24th and the 4 added May 2nd.  See below for the date-annotated FAQs by topic, followed by the date-annotated by question. Link within this Blog for my other analysis of FATCA updates.

Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts <– 2 new FAQs on April 24 (see >April 24< update)

IGA Registration <– 1 new FAQs on April 24 (see >April 24< update)

Expanded Affiliated Groups <– 2 new FAQs on April 24 (see >April 24< update)

Sponsoring/Sponsored Entities

Responsible Officers and Points of Contact <– 2 new FAQs May 2 (see >May 2nd< update)

Financial Institutions

Exempt Beneficial Owners

NFFEs

Registration Update <–  1 new questions May 13 (see below), <– 1 new FAQ May 2 (see >May 2nd< update)

Branch/Disregarded Entity <– 1 new FAQ May 2 (see >May 2nd< update)

General Compliance <– 5 new FAQs on April 24 (see >April 24< update)

 

Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts

# Questions Answers
 Q1 How does a Financial Institution that is not currently a Qualified Intermediary (“QI”), a Withholding Foreign Partnership (“WP”), or a Withholding Foreign Trust (“WT”) register to become one? The process to become a QI, WP or WT has not been modified by the provisions of FATCA.The application for Qualified Intermediary status can be found here: QI ApplicationInformation on acquiring Withholding Foreign Partnership, or Withholding Foreign Trust status can be found here: WP/WT Application
 Q2 How do FIs that are currently QIs, WPs and WTs renew their agreements? Existing QIs, WPs and WTs are required to renew their QI agreements through the FATCA registration website as part of their FATCA registration process.All QI, WP, or WT agreements that would otherwise expire on December 31, 2013 will be automatically extended until June 30, 2014.  (Notice 2013-43; 2013-31 IRB 113).
 Q3 I am not currently a QI/WP/WT.  Can I use the LB&I registration portal to register for FATCA and become a new QI/WP/WT? QI/WP /WT status can only obtained by completing and submitting a Form 14345 (“QI Intermediary Application”) and Form SS-4 (“Application for Employer Identification Number”) directly to the QI Program.   Interested QIs/WPs/WT should submit the required paperwork to the QI program and separately use the FATCA registration portal to obtain a GIIN for FATCA purposes.    FFIs can not become a new QI/WP/WT through the FATCA portal.Applications for QI/WP/WT status can be made to:IRS-Foreign Intermediary Program
Attn:  QI/WP/WT Applications
290 Broadway, 12th floor
New York City, New York 10007Note:  Form 14345 (“QI Intermediary Application”) should be used for WPs and WTs in addition to QIs.
 Q4 Must an FI become a QI/WP/WT in order to register under FATCA? An FI is not required to obtain QI/WP or WT status to register under FATCA.  If at the time of FATCA registration, the FI does not have in effect a withholding agreement with the IRS to be treated as a QI, WP or WT, the FI will indicate “Not applicable” in box 6 and will continue with the registration process.
 Q5 If an FFI has a QI/WP/WT agreement in place, does the Responsible Party for purposes of the QI/WP/WT Agreement also have to the serve as the FFI’s Responsible Officer? (see >April 24< update) No, the FFI’s Responsible Party for purposes of a QI/WP/WT Agreement does not have to be the Responsible Officer chosen by the FFI for purposes of certification under the regulations or for FATCA Registration purposes.
 Q6 If a member of the Expanded Affiliated Group is a Qualified Intermediary/Withholding Trust/Withholding Partnership, does the Lead Financial Institution renew the Qualified Intermediary/Withholding Trust/Withholding Partnership agreement on behalf of the member or does the member renew its own agreement? (see >April 24< update) Each Member FI with a Qualified Intermediary/Withholding Trust/Withholding Partnership (“QI/WP/WT”) agreement will renew its own agreement on the registration system.  When a Member is completing its registration it will be asked about whether it maintains and seeks to renew a QI/WP/WT agreement with the Service.  If the Member indicates it has one of these agreements and would like to renew the agreement, the Member will do so in Part 3 of the registration system in addition to claiming status as a participating FFI or registered-deemed compliant FFI (and obtaining its required GIINs).

IGA Registration

# Questions Answers
 Q1 Please provide a link that lists the jurisdictions treated as having in effect a Model 1 or Model 2 IGA. The U.S. Department of Treasury’s list of jurisdictions that are treated as having an intergovernmental agreement in effect can be found by clicking on the following link: IGA LIST
 Q2 How do Foreign Financial Institutions in Model 1 jurisdictions register on the FATCA registration website? Financial Institutions that are treated as Reporting Financial Institutions under a Model 1 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Registered Deemed-Compliant Foreign Financial Institutions.More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)
 Q3 How do Foreign Financial Institutions in Model 2 jurisdictions register on the FATCA registration website? Financial Institutions that are treated as Reporting Financial Institutions under a Model 2 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Participating Foreign Financial Institutions.More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)
 Q4 We are an FFI in a country that has not signed an IGA, and the local laws of our country do not allow us to report U.S. accounts or withhold tax. What is our FATCA classification? Unless the Treasury website provides that your country is treated as having an IGA in effect, then, because of its local law restrictions, this FFI should register as a Limited FFI provided it meets the definition shown directly below. See FATCA – Archive   for a list of countries treated as having an IGA in effect.A Limited FFI means an FFI that, due to local law restrictions, cannot comply with the terms of an FFI Agreement, or otherwise be treated as a PFFI or RDCFFI, and that is agreeing to satisfy certain obligations for its treatment as a Limited FFI.
 Q5 In a Model 1 IGA jurisdiction, does the FFI need to fill out Question 10 about Responsible Officers? (see >April 24< update) Yes, if an FFI treated as a reporting Model 1 FFI wishes to have a GIIN, a Responsible Officer must be designated in Part 1, line 10 of Form 8957.     Please see the FAQs on Responsible Officers for further information.

Expanded Affiliated Groups

# Questions Answers
Q1 For registration purposes, can an EAG with a Lead FI and 2 Member FIs be divided into: (1) a group with a Lead FI and a member FI, and (2) a member FI that will register as a Single FI? Yes. An EAG may organize itself into subgroups, so long as all entities with a registration requirement are registered. An FI that acts as a Compliance FI for any members of the EAG is, however, required to register each such member as would a Lead FI for such members.
 Q2 What is required for an entity to be a Lead FI? A Lead FI means a USFI, FFI, or a Compliance FI that will initiate the FATCA Registration process for each of its Member FIs that is a PFFI, RDCFFI, or Limited FFI and that is authorized to carry out most aspects of its Members’ FATCA Registrations. A Lead FI is not required to act as a Lead FI for all Member FIs within an EAG. Thus, an EAG may include more than one Lead FI that will carry out FATCA Registration for a group of its Member FIs. A Lead FI will be provided the rights to manage the online account for its Member FIs. However, an FFI seeking to act as a Lead FI cannot have Limited FFI status in its country of residence. See Rev. Proc. 2014-13 to review the FFI agreement for other requirements of a Lead FI that is also a participating FFI.
 Q3 Can a Member FI complete its FATCA registration and obtain a GIIN if the Lead FI for that Member FI has not yet registered under FATCA? (see >April 24< update) No, a Member FI can only register after its Lead FI has registered.  When the Member FI does register, it should indicate in Part 1, line 1, that it is a member of an expanded affiliated group.In Part 2 of the Lead FI’s registration, the Lead FI will add basic identifying information for each Member, and the system will create the Member FATCA accounts.  Each Member FI will then be required to log into the system and complete its registration.
 Q4 Is a limited FFI who is a member of an Expanded Affiliated Group subject to Chapter 4 withholding?  (see >April 24< update) Yes. A limited FFI (regardless of whether it is a member of an Expanded Affiliated Group) must identify itself to withholding agents as a nonparticipating FFI and, as a result, is subject to Chapter 4 withholding.  Thus, while limited FFIs are generally required to register, they will not be issued GIINs.

Sponsoring/Sponsored Entities

# Questions Answers
 Q1 We are a Sponsoring Entity, and we would like to register our Sponsored Entities. How do we register our Sponsored Entities? The Sponsoring Entity that agrees to perform the due diligence, withholding, and reporting obligations of one or more Sponsored Entities pursuant to Treas. Reg. §1.1471-5(f)(1)(i)(F) should register with the IRS via the FATCA registration website to be treated as a Sponsoring Entity. To allow a Sponsoring Entity to register its Sponsored Entities with the IRS, and, as previewed in Notice 2013-69, the IRS is developing a streamlined process for Sponsoring Entities to register Sponsored Entities on the FATCA registration website. Additional information about this process will be provided by the IRS at a later date.While a Sponsoring Entity is required to register its Sponsored Entities for those entities to obtain GIINs, the temporary and proposed regulations provide a transitional rule that, for payments prior to January 1, 2016, permit a Sponsored Entity to provide the GIIN of its Sponsoring Entity on withholding certificates if it has not yet obtained a GIIN. Thus, a Sponsored Entity does not need to provide its own GIIN until January 1, 2016 and is not required to register before that date.

Responsible Officers and Points of Contact

# Questions Answers
 Q1 What is a Point Of Contact (POC)? The Responsible Officer listed on line 10 of Form 8957 (or the online registration system) can authorize a POC to receive FATCA-related information regarding the FI, and to take other FATCA-related actions on behalf of the FI. While the POC must be an individual, the POC does not need to be an employee of the FI. For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete and submit the FATCA Registration on behalf of an FI. John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.
 Q2 Is the Responsible Officer required to be the same person for all lines on Form 8957 or the online registration (“FATCA Registration”)? No, it is not required that the Responsible Officer (“RO”) be the same person for all lines on Form 8957 or the online registration.  It is possible, however, that the same person will have the required capacity to serve as the RO for all FATCA Registration purposes.The term “RO” is used in several places in the FATCA Registration process.  In determining an appropriate RO for each circumstance, the Financial Institution (“FI”) or direct reporting NFFE should review the capacity requirements and select an individual who meets those requirements.  This will be a facts and circumstances determination.Please note that the responsible officer used for registration purposes may differ from the certifying responsible officer of an FFI referenced in Treasury Regulation §1.1471-1(b)(116).  (See, however, below regarding “Delegation of RO Duties.”)Below is a description of the required RO capacity per line:

Part 1, Question 10 (FATCA RO for the Financial Institution)

Language from the Form 8957 Instructions and the FATCA Online Registration User Guide specifies that the RO for question 10 purposes is a person authorized under applicable local law to establish the statuses of the entity’s home office and branches as indicated on the registration form.  (See FAQ below for what it means to “establish the FATCA statuses” of the FI’s home office and branches or direct reporting NFFE.)

Part 1, Question 11b (Point of Contact authorization)

The RO identified in question 11b must be an individual who is authorized under local law to consent on behalf of the FI or direct reporting NFFE (“an authorizing individual”) to the disclosure of FATCA-related tax information to third parties.  By listing one or more Points of Contact (each, a “POC”) in question 11b and selecting “Yes” in question 11a, the authorizing individual identified at the end of question 11b (to the right of the checkbox) is providing the IRS with written authorization to release the entity’s FATCA-related tax information to the POC.  This authorization specifically includes authorization for the POC to complete the FATCA Registration (except for Part 4), to take other FATCA-related actions, and to obtain access to the FI’s (or direct reporting NFFE’s) tax information.  Once the authorization is granted, it is effective until revoked by either the POC or by an authorizing individual of the FI or direct reporting NFFE.

Part 4

The authority required for an individual to be an RO for purposes of Part 4 is substantially similar to the authority required for RO status under Treas. Reg. § 1.1471-1(b)(116).

The RO designated in Part 4 must be an individual with authority under local law to submit the information provided on behalf of the FI or direct reporting NFFE.  In the case of FIs or FI branches not governed by a Model 1 IGA, this individual must also have authority under local law to certify that the FI meets the requirements applicable to the FI status or statuses identified on the registration form.  This individual must be able to certify, to the best of his or her knowledge, that the information provided in the FI’s or direct reporting NFFE’s registration is accurate and complete.  In the case of an FI, the individual must be able to certify that the FI meets the requirements applicable to the status(es) identified in the FI’s registration.  In the case of a direct reporting NFFE, the individual must be able to certify that the direct reporting NFFE meets the requirements of a direct reporting NFFE under Treas. Reg. § 1.1472-1(c)(3).

An RO (as defined for purposes of Part 4) can delegate authorization to complete Part 4 by signing a Form 2848 “Power of Attorney Form and Declaration of Representative” or other similar form or document (including an applicable form or document under local law giving the agent the authorization to provide the information required for the FATCA Registration).

Note: While the certification in Part 4 of the online registration does not include the term “responsible officer,” the FATCA Online Registration User Guide provides that the individual designated in Part 4 must have substantially the same authority as the RO as defined for purposes of Form 8957, Part 4.

Delegation of RO Duties

While the ROs for purposes of Question 10, Question 11b, and Part 4 of the FATCA Registration may be different individuals, in practice it will generally be the same individual (or his/her delegate)).  The regulatory RO is responsible for establishing and overseeing the FFI’s compliance program.  The regulatory RO may, but does not necessarily have to, be the registration RO for purposes of 1) ascertaining and completing the chapter 4 statuses in the registration process; 2) receiving the GIIN and otherwise interacting with the IRS in the registration process; and 3) making the Part 4 undertakings.  Alternatively, the regulatory RO, or the FFI (through another individual with sufficient authority), may delegate each of these registration roles to one or more persons pursuant to a delegation of authority (such as a Power of Attorney) that confers the particular registration responsibility or responsibilities to such delegate(s).  The scope of the delegation, and the delegate’s exercise of its delegated authority within such scope, will limit the scope of the potential liability of the delegate under the rules of agency law , to the extent applicable.  The ultimate principal, whether that is the regulatory RO or the FFI, remains fully responsible in accordance with the terms and conditions reflected in the regulations, and other administrative guidance to the extent applicable under FATCA, the regulations.

 Q3 The Instructions for Form 8957 state that for purposes of Part 1, question 10, “. . .  RO means the person authorized under applicable local law to establish the statuses of the FI’s home office and branches as indicated on the registration form.”  What does it mean for an RO to have the authority to “establish the statuses of the FI’s home office and branches as indicated on the registration form”? To have the authority to “establish the statuses” for purposes of question 10, an RO must have the authority to act on behalf of the FI to represent the FATCA status(es) of the FI to the IRS as part of the registration process.  This RO must also have the authority under local law to designate additional POCs.
 Q4 My FI plans on employing an outside organization (or individual) solely for the purpose of assisting with the registration process.  Once registration is complete, or shortly thereafter, my FI intends to discontinue its relationship with this organization.  Is this permissible under the FATCA registration system? How should my FI use the registration system to identify this relationship? Yes, the FI or direct reporting NFFE may employ an outside organization to assist with FATCA registration and discontinue the relationship with the outside organization once registration is complete.  As part of the registration process, an FI or direct reporting NFFE may appoint up to five POCs who are authorized to take certain FATCA-related actions on behalf of the entity, including the ability to complete all parts of the FATCA Registration (except for Part 4), to take other appropriate or helpful FATCA-related actions, and to obtain access to the entity’s FATCA-related tax information.  The POC authorization must be made by an RO within the meaning of Part 1, question 10.  Part 4 must be completed by the RO or a duly authorized agent of the RO.  (See FAQ 1 for a discussion of the process for delegating authorization to complete Part 4.)Once the services of a POC are no longer needed, the RO may log into the online FATCA account and delete the POC.  This process revokes the POC’s authorization.  At this point, the Responsible Officer can input a new POC, or leave this field blank if they no longer wish to have any POC other than the RO listed on Line 10.If a third-party adviser that is an entity is retained to help the FI or direct reporting NFFE complete its FATCA registration process, the name of the third-party individual adviser that will help complete the FATCA registration process should be entered as a POC in Part 1, question 11b, and the “Business Title” field for that individual POC should be completed by inserting the name of the entity and the POC’s affiliation with the entity.  For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete the FATCA Registration on behalf of FI Y.  John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.
 Q5 For each of the following FATCA classifications (i.e. Participating Foreign Financial Institution “PFFI”, PFFI that elects to be part of a consolidated compliance program, Registered Deemed-Compliant Foreign Financial Institution “RDCFFI”, Reporting Model 1 FFI, Limited FFI and US Financial Institution “USFI”) what type of individual may serve as a Responsible Officer for purposes of Part 1, Question 10 of the FATCA Registration? (see >May 2nd< update) With respect to a PFFI, an RO is an officer of the FFI (or an officer of any Member FI that is a PFFI, Reporting Model 1 FFI or Reporting Model 2 FFI) with sufficient authority to fulfill the duties of a Responsible Officer described in a FFI Agreement.With respect to a PFFI that elects to be part of a consolidated compliance program, an RO is an officer of the Compliance FI with sufficient authority to fulfill the duties of a Responsible Officer described in the FFI Agreement on behalf of each FFI in the compliance group (regardless of whether the FFI is a Limited FFI or treated as a Reporting Model 1 FFI or Reporting Model 2 FFI).With respect to a RDCFFI, other than a RDCFFI that is a Reporting Model 1 FFI, an RO is an officer of the FI (or an officer of any Member FFI that is a PFFI, Reporting Model 1 FFI, or Reporting Model 2 FFI) with sufficient authority to ensure that the FFI meets the applicable requirements to be treated as a RDCFFI.With respect to a Reporting Model 1 FFI, an RO is any individual specified under local law to register and obtain a GIIN on behalf of the FFI.  If, however, the Reporting Model 1 FFI operates any branches outside of a Model 1 IGA jurisdiction, then the RO identified must be an individual who can satisfy the requirements under the laws of the Model 1 IGA jurisdiction and the requirements relevant to the registration type selected for each of its non-Model 1 IGA branches.

With respect to a Limited FFI, an RO is an officer of the Limited FFI (or an officer of any Member FI that is a PFFI, Reporting Model 1 FFI, or Reporting Model 2 FFI) with sufficient authority to ensure that the FI meets the applicable requirements to be treated as a Limited FFI.

With respect to a USFI that is registering as a “Lead FI”, an RO is any officer of the FI (or an officer of any Member FI) with sufficient authority to register its Member FIs and to manage the online FATCA accounts for such members.

 Q6 (see >May 2nd< update)Part 4 of the online registration system* states:By checking this box, I, _________, [(the responsible officer or delegate thereof (herein collectively referred to as the “RO”)], certify that, to the best of my knowledge, the information submitted above is accurate and complete and I am authorized to agree that the Financial Institution (including its branches, if any) will comply with its FATCA obligations in accordance with the terms and conditions reflected in regulations, intergovernmental agreements, and other administrative guidance to the extent applicable to the Financial Institution based on its status in each jurisdiction in which it operates.*Note: Part 4 of Form 8957 contains a substantially similar certification.

Can this statement be broken down into two declarations of the RO, as follows?

(i) The RO certifies that, to the best of its knowledge, the information submitted above is accurate and complete.

(ii) The RO agrees that the FI (including its branches, if any) will comply with its FATCA obligations in accordance with the terms and conditions reflected in regulations, intergovernmental agreements, and other administrative guidance to the extent applicable to the FI based on its status in each jurisdiction in which it operates.

 

 

 

 

 

Does the first declaration above mean that the RO certifies that, to the best of its knowledge, the FI meets the requirements of its claimed status?
Does the second declaration above apply to an FI treated as a reporting Model 2 FFI?
Does the second declaration above (relating to a Participating FFI) require the signing party to ensure that the FFI and its member FFIs (including its branches, if any) comply with its respective obligations under the terms of its FFI Agreement or any applicable intergovernmental agreement and any such applicable local law? The second declaration requires the signing party to be able to certify that, to the best of the signing party’s knowledge at the time the FATCA registration is signed, the FI and its member FFIs intend to comply with their respective FATCA obligations.A Participating FFI will have its certifying responsible officer (as defined in Treasury Regulation §1.1471-1(b)(116)) periodically certify to the IRS regarding the FFI’s compliance with its FFI agreement.  As noted in FAQ 1, the RO identified in Part 4 will normally be an individual with sufficient authority to be eligible for RO status under Treas. Reg. § 1.1471-1(b)(116).  (See, however, above regarding “Delegation of RO Duties.”)
How do the certifications in Part 4 apply to FIs treated as reporting Model 1 FFIs? The first declaration above applies to FIs treated as reporting Model 1 FFIs and, as such, the RO of an FI treated as a reporting Model 1 FFI certifies that, to the best of the RO’s knowledge, the information submitted as part of the FATCA Registration process is accurate and complete.  The second declaration, however, has limited applicability to FIs treated as reporting Model 1 FFIs because the FI does not have ongoing FATCA compliance obligations directly with the IRS.  Instead, the compliance and reporting obligations of an FI treated as a reporting Model 1 FFI are to its local authority.  However, a reporting Model 1 FFI that has branches (as identified in Part 1, line 9 of Form 8957) that are located outside of a Model 1 IGA jurisdiction will also agree to the terms applicable to the statuses of such branches.  Additionally, an FI (including an FI in a Model 1 IGA jurisdiction) that is also registering to renew its QI, WP, or WT Agreement will agree to the terms of such renewed QI, WP, or WT Agreements by making the second declaration.

Financial Institutions

# Questions Answers
 Q1 Are U.S. Financial Institutions (USFIs) required to register under FATCA? If so, under what circumstances would a USFI register? A USFI is generally not required to register under FATCA. However, a USFI will need to register if the USFI chooses to become a Lead FI and/or a Sponsoring Entity or seeks to maintain and renew the QI status of a foreign branch that is a QI. Furthermore, a USFI with a foreign branch that is a reporting Model 1 FFI is required to register on behalf of its foreign branches (and should identify each such branch when registering). A USFI with non-QI branch operations in a Model 2 jurisdiction or in a non-IGA jurisdiction is not required to register with the IRS.
 Q2 Is a Foreign Financial Institution (“FFI”) required to obtain an EIN? If the FFI has a withholding obligation and will be filing Forms 1042 and Forms 1042-S with the Internal Revenue Service, it will be required to have an EIN. Please see publication 515 (“Withholding of Tax on Nonresident Aliens and Foreign Entities”) for further information about U.S. Withholding requirements. See Pub. 515. An FFI is also required to obtain an EIN when it is a QI, WP, or WT (through the application process to obtain any such status) or when the FFI is a participating FFI that elects to report its U.S. accounts on Forms 1099 under Treas. Reg. §1.1471-4(d)(5).
How does a FFI apply for a EIN if it does not already have one? If a FFI does not have an EIN, it may apply for one using Form SS-4 (“Application for Employer Identification Number”) or the online registration system. See Apply-for-an-Employer-Identification-Number-(EIN)-Onlinefor more information.

Exempt Beneficial Owners

# Questions Answers
 Q1 We are a foreign central bank of issue. Will we be subject to FATCA withholding if we do not register? You will generally be exempt from FATCA Registration and withholding if you meet the requirements to be treated as an exempt beneficial owner (e.g. as a foreign central bank of issue described in Treas. Reg. § 1.1471-6(d), as a controlled entity of a foreign government under Treas. Reg. §1.1471-6(b)(2), or as an entity treated as either of the foregoing under an applicable IGA). A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner in accordance with the regulations. However, an exempt beneficial owner may be subject to withholding on payments derived from the type of commercial activity described in Treas. Reg. § 1.1471-6(h).
 Q2 We are a foreign pension plan. Will we be subject to FATCA withholding if we do not register? You will be exempt from FATCA Registration and withholding if you meet the requirements to be treated as a retirement fund described in Treas. Reg. § 1.1471-6(f), or under an applicable IGA. A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner (in this case, a retirement fund) in accordance with the regulations.

NFFEs

# Questions Answers
 Q1 How should an entity seeking the FATCA status of “direct reporting NFFE” (other than a sponsored direct reporting NFFE) register for this status to obtain a GIIN in order to avoid FATCA withholding? A direct reporting NFFE is eligible to register for this status and when registering should complete an online registration (or, alternatively, submit a paper Form 8957) based on the instructions provided in this FAQ.   For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information.In general, for purposes of completing the registration of a direct reporting NFFE, substitute the words “direct reporting NFFE” for the words “financial institution” wherever  they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).Part 1Question 1 – – Select “Single”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”.  (If using the portal online, selecting “no” will automatically skip Questions 8 and 9.)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and will act as a point of contact with the IRS in connection with its status as a direct reporting NFFE.

Part 2 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting Single in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Direct reporting NFFE QIs/WPs/WTs should renew their agreements through the existing traditional paper process.  Instructions can be found at the following link (Question IX), see:Qualified-Intermediary-Frequently-Asked-Questions

 Q2 How should a sponsor of a sponsored direct reporting NFFE register itself for this status and obtain a GIIN? A sponsor of a sponsored direct reporting NFFE is a sponsoring entity (see Treas. Reg. § 1.1471-1T(b)(124)) and  should complete an online registration (or, alternatively, submit a paper Form 8957) as a sponsoring entity, based on the instructions provided in this FAQ.  A sponsoring entity need only complete one registration to act as the sponsor for both sponsored FFIs and sponsored direct reporting NFFEs.  For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information, including by incorporating the definition of sponsoring entity provided in Treas. Reg. § 1.1471-1T(b)(124).In general, for purposes of having a sponsor register a sponsored direct reporting NFFE, substitute the words “sponsor of a direct reporting NFFE” for the words “sponsoring entity” wherever they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).Part 1Question 1 – – Select “Sponsoring Entity”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”. (If using the portal online, selecting “no” will automatically skip Questions 8 and 9)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and who will act as a point of contact with the IRS in connection with its obligations as a sponsoring entity.

Part 2 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section.  (If using the portal online, selecting Sponsoring Entity in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Registration Update

# Questions Answers
 Q1 Why has my registration been put into “Registration Incomplete”? What can I do? If your registration has been put into Registration Incomplete status, it is because the IRS has identified an issue with your registration.  If you are Registration Incomplete status, please review your registration for any of the following errors and update it accordingly:

  1. The FFI has identified itself as a Qualified Intermediary with a QI-EIN of which the IRS has no record.  (If you have QI, WP or WT Agreement signed with the IRS, please contact the Financial Intermediaries Team for further assistance.)
  2. The RO has been identified with initials only and no specific name has been provided.
  3. The RO does not appear to be a natural person.
  4. Notice 2013-43 stated that any registrations submitted prior to  January 1, 2014 would be taken out of submit and put into Registration Incomplete status. Thus, if your registration was submitted prior to  January 1, 2014, you must  re-submit your registration assuming that none of the other abovementioned reasons (1-3) are an issue with the FFI’s registration.

After you have updated your registration, you must resubmit in order for your registration to be processed.

 Q2 For each of the following FATCA classifications (i.e. Participating Foreign Financial Institution “PFFI” for Reporting Model 2 FFI, Registered Deemed Compliant Foreign Financial Institutions “RDCFFI” (for both Model 1 and non-Model 1 FFIs), Sponsoring Entity, Limited FFI or Limited Branch, Renewing QI/WP/WT, US Financial Institution “USFI” treated as a Lead FI and Direct Reporting NFFE) what is the impact of completing Part IV of the FATCA Registration? (see >May 2nd< update) PFFI Status for Reporting Model 2 FFIReporting Model 2 FFIs are registering to obtain a GIIN, provide authorization for individuals named in Part 1, Line 11 of the FATCA Registration to receive information related to FATCA registration, and to confirm that they will comply with the terms of an FFI Agreement in accordance with the FFI agreement, as modified by any applicable Model 2 IGA.Notwithstanding the paragraph above, Reporting Model 2 FFIs operating branches outside of Model 1 or 2 IGA jurisdictions are agreeing to the terms of an FFI Agreement for such branches, unless the branches are treated as Limited Branches or are U.S. branches that are treated as U.S. persons.  Additionally, Reporting Model 2 FFIs requesting renewal of a QI, WP or WT Agreement are entering into the renewed Model QI, WP, or WT Agreements, as applicable.RDCFFI Status for Reporting Model 1 FFI

Reporting Model 1 FFIs are not entering into FFI Agreements via the FATCA registration process.  Reporting Model 1 FFIs are registering to obtain a GIIN and to provide authorization for individuals named in Part 1, Line 11 of the FATCA Registration to receive information related to FATCA registration.  Notwithstanding the preceding sentence, Reporting Model 1 FFIs operating branches outside of Model 1 or 2 IGA jurisdictions are agreeing to the terms of an FFI Agreement for such branches, unless the branches are treated as Limited Branches.  Additionally, Reporting Model 1FFIs requesting renewal of a QI, WP or WT Agreement are entering into such renewed Model QI, WP, or WT Agreements, as applicable.

RDCFFI Status for FFI (other than a Reporting Model 1 FFI)

An FFI that is registering as an RDCFFI, other than a Reporting Model 1 FFI, is agreeing that it meets the requirements to be treated as an RDCFFI under relevant Treasury Regulations or is agreeing that it meets the requirements to be treated as a RDCFFI pursuant to an applicable Model 2 IGA.

Sponsoring Entity Status

An entity that is registering as a Sponsoring Entity is agreeing that it will perform the due diligence, reporting and withholding responsibilities of one or more Sponsored FFIs or Sponsored Direct Reporting NFFEs.

Limited FFI or Limited Branch Status

An FFI that is registering as a Limited FFI is confirming that it will comply with the terms applicable to a Limited FFI.  A branch of a PFFI that is registering as a Limited Branch is confirming that it will comply with the terms applicable to a Limited Branch.  GIINs will not be issued to a Limited FFI or Limited Branch.

Renewing QI/WP/WT 

An FFI, including a foreign branch of a USFI, requesting renewal of a QI Agreement is agreeing to comply with the relevant terms of the renewed Model QI Agreement with respect to its branches that are identified as operating as a QI.  The obligations under the renewed Model QI Agreement are in addition to any obligations imposed on the FFI to be treated as a PFFI, Reporting Model 2 FFI, RDCFFI, or Reporting Model 1 FFI.

 

An FFI that is applying to renew its WP or WT Agreement is agreeing to comply with the relevant terms of the renewed Model WP or WT Agreement.  The obligations under the renewed Model WP or WT Agreement are in addition to any obligations imposed on the FFI to be treated as PFFI, Reporting Model 2 FFI, RDCFFI, or Reporting Model 1 FFI.  Additionally, a QI, WP, or WT is also certifying that it has in place and has implemented written policies, procedures, and processes for documenting, withholding, reporting and depositing tax with respect to its chapters 3 and 61 withholding responsibilities under its QI, WP, or WT Agreement.

USFI treated as a Lead FI

A USFI that is part of an EAG and registering its Members FIs is agreeing to manage the online FATCA account for each such Member FI.

Direct Reporting NFFE

A direct reporting NFFE is agreeing to comply with the terms and obligations described under Treas. Reg. § 1.1472-1(c)(3).

 Q3 How do Trustees of Trustee-Documented Trusts register? Trustees needing to register Trustee-Documented Trusts (a certified deemed-compliant status for FFIs under the Model 1 and Model 2 IGAs) should use the same procedures Sponsors use to register Sponsored Entities.  The trustee should select “Sponsoring Entity” as its FI Type, and select “None of the above” in Part 1, Question 4.  More information on how to register a Sponsoring Entity can be found in the FATCA Registration Online User Guide.Please note that if a trustee is required to register itself based on its own applicable status as an FFI, it will do so on a separate registration, and thus will have two separate GIINs, one for such use and another for use in its capacity as a trustee of a Trustee-Documented Trust.The Trustee-Documented Trust itself will not be registered and does not need to obtain a GIIN.

Branch/Disregarded Entity

# Questions Answers
 Q1 How does a disregarded entity (DE) in a Model 1 IGA jurisdiction satisfy its FATCA registration requirements? (see >May 2nd< update) A DE in a Model 1 IGA jurisdiction must register as an entity separate from its owner in order to be treated as a reporting Model 1 FFI, provided that the DE is treated as a separate entity for purposes of its reporting to the applicable Model 1 jurisdiction.  Select either a “Single” FFI or “Member” FFI in Part 1, Question 1 of the FATCA Registration (as appropriate).  Select “Registered Deemed-Compliant Financial Institution (including a Reporting Financial Institution under a Model 1 IGA)” in Part 1, Question 4.  When the owner of the DE registers on its own behalf, it should not report the DE as a branch.
How does a branch in a Model 1 IGA jurisdiction satisfy its FATCA registration requirements? In general, a branch (as defined in Treas. Reg. § 1.1471-4(e)(2)(ii)) should be registered as a branch of its owner and not as a separate entity.  Thus, the branch will be registered by the FI of which the branch is a part (including an appropriate Lead FI or Sponsoring Entity) when that FI completes Part 1 of its own FATCA registration.  The online registration user guide provides further instructions on how to register branches.  In general, a branch is a unit, business, or office of an FFI that is treated as a branch under the regulatory regime of a country or is otherwise regulated under the laws of such country as separate from other offices, units, or branches of the FI.
How does a branch or a disregarded entity (DE) in a jurisdiction that does not have an IGA, or that is in a Model 2 IGA jurisdiction, satisfy its FATCA registration requirements? A branch (including a DE) that is in a Model 2 IGA jurisdiction, or a jurisdiction without an IGA, should be registered as a branch of its owner (rather than as a separate entity).  As such, the branch will be registered by the FI of which the branch is a part (including an appropriate Lead FI or Sponsoring Entity) when that FI completes Part 1 of its own FATCA registration.  The branch will not have a separate registration account, but will be assigned a separate GIIN, if eligible.  When the FI completes its FATCA registration and registers its branches by answering Questions 7, 8, and 9, GIINs will be assigned with respect to the registered branches, where appropriate.  The online registration user guide provides further instructions on how to register branches.   A separate GIIN will be issued to the FI to identify each jurisdiction where it maintains a branch that is participating or registered deemed-compliant.All branches (and, except in Model 1 IGA jurisdictions, disregarded entities) of an FI located in a single jurisdiction are treated as one branch and, as a result, will share a single GIIN.  U.S. branches and limited branches are not eligible to receive their own GIINs.  A branch of an FFI located in the FFI’s home country will use the GIIN of the FFI.  For example, suppose FI W (located in Country X) has one branch in Country X, two branches in Country Y and owns a DE in Country Z.  Country Z is a Model 1 IGA jurisdiction.  FI W will receive a Country X GIIN.  FI W’s Country X branch will use W’s GIIN.  The two branches in Country Y will be treated as a single branch, and so FI W will be issued a single Country Y GIIN for these two branches to share.  The Country Z DE will register as an entity separate from its owner, in order to be treated as a reporting Model 1 FFI, and will receive its own GIIN.

General Compliance

# Questions Answers
 Q1 How will Certified-Deemed Compliant FFIs, Owner-documented FFIs, or Excepted FFIs certify to U.S. withholding agents that they are not subject to Chapter 4 withholding given that they are not required to register with the IRS? (see >April 24< update) Certified-Deemed Compliant FFIs, Owner-documented FFIs, and Excepted FFIs will demonstrate their Chapter 4 withholding status to U.S. withholding agents by providing a withholding certificate and documentary evidence that complies with the requirements of Treas. Reg. 1.1471-3(d).
 Q2 We are an FFI in a non-IGA country.  Will we be subject to Chapter 4 withholding if we do not register with the IRS? (see >April 24< update) Yes, to the extent that you receive withholdable payments and are not subject to an exemption from the registration requirement.  Under FATCA, to avoid being withheld upon, FFIs that are not subject to an exemption from the registration requirement must register with the IRS and agree to report to the IRS certain information about their U.S. accounts, including accounts of certain foreign entities with substantial U.S. owners.  An FFI that fails to satisfy its applicable registration requirements will generally be subject to 30% withholding on withholdable payments that it receives.Categories of FFIs that are exempt from registration include:

  1. Certified deemed-compliant FFIs (including any entities treated as certified deemed-compliant);
  2. Exempt beneficial owners;
  3. Owner Documented FFIs; and
  4. Excepted FFIs.
 Q3 What are the consequences of terminating the FFI agreement for a Participating Foreign Financial Institution? (see >April 24< update) If the FFI agreement is terminated by either the IRS or the FFI pursuant to the termination procedures set forth in Section 12 of the FFI agreement, the FFI will be treated as a nonparticipating FFI and subject to 30% withholding on withholdable payments made after the later of (i) the date of termination of the FFI agreement, or (ii) June 30, 2014, except to the extent that the withholdable payments are exempt from withholding (e.g. under the rules related to grandfathered obligations) or the FFI qualifies for a chapter 4 status other than a nonparticipating FFI (such as a certified deemed-compliant FFI).  See Revenue Procedure 2014-13, 2014-3 I.R.B. 419, for the terms of the FFI agreement
 Q4 What happens if an FFI is not registered by May 5th, 2014? (see >April 24< update) As set forth in Announcement 2014-17, released April 2, 2014, to ensure inclusion on the first IRS FFI List (which is expected to first be electronically available on June 2, 2014) prior to the date FATCA withholding goes into effect, an FFI must finalize its registration by May 5, 2014.   The regulations generally provide that, in order for withholding not to apply, a withholding agent must obtain an FFI’s GIIN for payments made after June 30, 2014, though it need not confirm that the GIIN appears on the IRS FFI List until 90 days after the FFI provides a withholding certificate or written statement claiming status as a participating FFI or registered deemed-compliant FFI.  A special rule, however, provides that a withholding agent does not need to obtain a reporting Model 1 FFI’s GIIN for payments made before January 1, 2015.  See Treas. Reg. § 1.1471-3(d)(4)(iv)(A).  As a result, while a reporting Model 1 FFI is currently able to register and obtain a GIIN, it will have additional time beyond July 1, 2014, to register and obtain a GIIN in order to ensure that it is included on the IRS FFI list before January 1, 2015.  See Announcement 2014-17 for revised FATCA registration deadlines to ensure inclusion on the first FFI List (which is expected to be electronically available on June 2, 2014).
 Q5 Are Forms W-8 still required to be renewed by the appropriate beneficial owners? (see >April 24< update) Generally, a Form W-8BEN will remain in effect for purposes of establishing foreign status for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on September 30, 2015, remains valid through December 31, 2018.However, under certain conditions a Form W-8BEN will remain in effect indefinitely until a change of circumstances occurs. To determine the period of validity for Form W-8BEN for purposes of chapter 4, see Treas. Reg. § 1.1471-3(c)(6)(ii). To determine the period of validity for Form W-8BEN for purposes of chapter 3, see Teas. Reg. § 1.1441-1(e)(4)(ii).Withholding certificates and documentary evidence obtained for chapter 3 or chapter 61 purposes that would otherwise expire on December 31, 2013, will not expire before January 1, 2015, unless a change in circumstances occurs that would otherwise render the withholding certificate or documentary evidence incorrect or unreliable.Please note that various Forms in the W-8 series were revised in 2014 to incorporate the certifications required for FATCA purposes and can now be found at the following link: Form & Pubs.  See Treas. Reg. § 1.1471-3(c) for rules regarding reliance on a pre-FATCA Form W-8.

 

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2 new IGAs brings it to 64 brides, 148 bridesmaids remain in waiting … and other important FATCA updates

Posted by William Byrnes on May 11, 2014


64 IGAs Published or in Effect

2 IGAs “agreed in substance” have been added this past week, importantly Hong Kong, and to the chagrin of Turkish diplomats – Armenia.  The IGA with Gibraltar has also been released and thus added to the published list.  This brings the total IGAs published and treated as in effect up to 64, comprised of 27 published Model 1, 5 published Model 2, while 30 Model 1 have been agreed in substance and 2 of the Model 2 agreed.

Yet, the important US foreign direct investment jurisdictions of China and Taiwan, as well as the Middle Eastern jurisdictions of United Arab Emirates and Saudi Arabia, remain deafeningly absent from the list as of May 9.  Commentators do not think that Russia, given the geopolitical tension  over the Ukraine and Crimea, will enter the IGA list by the July 1 start of FATCA withholding.

148 IGAs still left to be agreed by Treasury?

The USA recognizes 195 independent states in the world, 67 dependencies of states, and has contacts with Taiwan.  But not each of these 67 dependencies requires an IGA.

Approximately 16 dependencies of the 67 have both local responsibility with regard to tax policy and more than de minimis US source income exposure, such as investments in US Treasuries, for the local authorities to seek an IGA. Such dependencies include by example Bermuda, Cayman Islands, and Hong Kong.  Taiwan has its own peculiar status, claiming to represent the central government of greater China (the US of course recognizes Beijing).  Other dependencies, like the French departments of French Guiana, Guadeloupe, Martinique, Mayotte and Reunion, do not have local responsibility for fiscal policy and thus are protected within the IGA of the parent-state.  And a host of dependencies, such as Antarctica and various atolls, have no (current) global economic relevance.  

Thus, 195 recognized states and 16 economically relevant, semi-autonomous dependencies form the pool of 212 states and jurisdictions that probably could benefit from an IGA.  As of May 9th, 64 have an IGA recognized by US Treasury, leaving 148 without.  

What if these 148 Non-IGA countries agree an IGA after July 1?  

FATCA Portal registration remains open, but the formal IRS deadline for inclusion on the June 2nd GIIN list of participating foreign financial institutions (“PFFI”) passed May 5th. See my previous article about the May 5th deadline and consequences of its passing that applied to all FFIs in the non-IGA states and jurisdictions.

Did all the FFIs that are in the 148 countries and jurisdictions that do not have an IGA register for a GIIN?  There is not one reliable number of how many financial entities in the world qualify as a financial institution requiring FATCA registration.  Industry experts have put forward a reasonable range of 20,000 to 30,000 such entities that qualify as FFIs that still need to register or complete registration for a GIIN, though figures as high as 80,000 have been suggested (probably such estimates include branches in the count of financial institutions).  The list of FFIs requiring registration includes by example trusts companies, investment funds, and banks.

It is possible that on July 1st an unregistered FFI is considered non-participating (NPFFI) for purposes of FATCA withholding, but by example, on August 1st its country agrees an IGA in substance that Treasury announces on its FATCA site and the NPFFI goes back to FFI non-withholding status because of the extension related to IGAs, at least until that final December 22 deadline mentioned in Announcement 2014-1.  Model 1 IGA FFIs with a GIIN are classified as “Registered Deemed-Compliant Foreign Financial Institutions” (RDCFFI) on the new W8-BEN-E (see previous article) instead of as Participating Foreign Financial Institutions (PFFIs) pursuant to the regular FATCA FFI agreement and Model 2 IGA.

Was the May 5th Deadline a Hard Deadline?

Maybe Not.  The IRS states the following on its FATCA Registration Portal: “the IRS believes it can ensure registering FFIs that their GIINs will be included on the July 1 IRS FFI List if their registrations are finalized by June 3, 2014.”  (See Notice 2014-17, page 6: “FFIs that finalize their registrations after May 5 or June 3 may still be included on the June 2 or July 1 IRS FFI List, respectively; however, the IRS cannot provide assurance that this will be the case. The IRS will continue processing registrations in the order received; however, processing times may increase as the May 5 and June 3 dates approach.”)  

Moreover, the IRS built in a 90 day safeguard for FFIs when a GIIN has been applied for but not yet received:

§1.1471-3(e)(3) Participating FFIs and registered deemed-compliant FFIs—(i) In general. … A payee whose registration with the IRS as a participating FFI or a registered deemed-compliant FFI is in process but has not yet received a GIIN may provide a withholding agent with a Form W-8 claiming the chapter 4 status it applied for and writing “applied for” in the box for the GIIN. In such case, the FFI will have 90 calendar days from the date of its claim to provide the withholding agent with its GIIN and the withholding agent will have 90 calendar days from the date it receives the GIIN to verify the accuracy of the GIIN against the published IRS FFI list before it has reason to know that the payee is not a participating FFI or registered deemed-compliant FFI. … (emphasis added)

Do FFIs in IGA countries have an extension until December 22 for FATCA Registration? 

Financial institutions (FFIs) in the 64 IGA countries have an extension to register with the IRS in order to obtain a GIIN and thus appear on the IRS’ FATCA compliant list.  FATCA 30% withholding for FFIs in these Model 1 IGA countries and jurisdictions only begins January 1, 2015.  See Reg. § 1.1471-3(d)(4)(iv)(A):  

§ 1.1471-3(d)(4)(iv) Exceptions for payments to reporting Model 1 FFIs.— (A) For payments made prior to January 1, 2015, a withholding agent may treat the payee as a reporting Model 1 FFI if it receives a withholding certificate from the payee indicating that the payee is a reporting Model 1 FFI and the country in which the payee is a reporting Model 1 FFI, regardless of whether the certificate contains a GIIN for the payee.

The situation of the last list to be published for 2014 and, more importantly, the last date to register as a Model 1 FFI to ensure being included on that list, is somewhat fluid.  In the past 18 months, the IRS has several times amended its deadlines and its timelines for GIIN registration.  Thus, it is at least feasible that another registration or withholding start date extension is granted before the end of 2014 (obviously Treasury will vehemently deny any more extensions on the horizon, but last year it did not expect a government shut down and this year it extended the registration date by at least 10 days weeks before the deadline of April 25).

In its January 6, 2014 Announcement 2014-1 (IRB 2014-2), the IRS stated:

Thus, while reporting Model 1 FIs will be able to register and obtain GIINs on or after January 1, 2014, they will not need to register or obtain GIINs until on or about December 22, 2014, to ensure inclusion on the IRS FFI list by January 1, 2015. (emphasis added)

However, at least one IGA country is suggesting an earlier (perhaps more prudent) date than December 22, 2014 for GIIN registration in order to be included on the IRS’ last 2014 FATCA compliant list.  The United Kingdom’s Law Society and Institute of Chartered Accountants in May 2014 published combined guidance to members stating:  

To ensure that the registration has been processed in time for inclusion on that list the last practical date for registration is 25 October 2014.

The IRS will release its final 2014 list of FATCA compliant financial institutions (thus not subject to FATCA 30% withholding on January 1, 2015 and onward) most likely on Wednesday, December 31, 2014 (according to the United Kingdom guidance quoted above), albeit it seems just as reasonable for a Friday, January 2 list to be released.   Either way, the 90 day safeguard mentioned above is in place. 

What Deadlines has Treasury NOT moved? 

For “individual” held accounts, Treasury has neither provided an extension to the FATCA compliance requirements, nor from withholding as of July 1st.  Thus, from July 1 these accounts must be characterized as “new” accounts for FATCA diligence procedures to determine whether the beneficial owner is a US person.

For accounts of ‘entities’ , while an FFI may still characterize accounts opened until December 31 as “pre-existing” accounts, Treasury did not mention extending the deadlines applicable for FATCA diligence procedures to determine whether the entity’s beneficial owner is a US person.

The pre-existing account due diligence analysis remains with three deadlines:

  1. December 31, 2014 for prima facie FFI account holders,
  2. June 30, 2015 for high value accounts, and
  3. June 30, 2016 for all remaining accounts, such as “pre-existing” entity accounts).

Note that FATCA withholding does not apply to all FATCA withholdable payments immediately on July 1.  FATCA has a phase-in period for withholding on certain types of payments, see Ch 13: Withholdable Payments.

Model 1 IGA = 30 (in red added since my > last IGA update < of May 6)

  1. Bahamas (4-17-2014)
  2. Brazil (4-2-2014)
  3. British Virgin Islands (4-2-2014)
  4. Bulgaria (4-23-2014)
  5. Columbia (4-23-2014)
  6. Croatia (4-2-2014)
  7. Curaçao (4-30-2014)
  8. Czech Republic (4-2-2014)
  9. Cyprus (4-22-2014)
  10. India (4-11-2014)
  11. Indonesia (5-4-2014) 
  12. Israel (4-28-2014)
  13. Kosovo (4-2-2014)
  14. Kuwait (5-1-2014)  
  15. Latvia (4-2-2014)
  16. Liechtenstein (4-2-2014)
  17. Lithuania (4-2-2014)
  18. New Zealand (4-2-2014)
  19. Panama (5-1-2014)  
  20. Peru (5-1-2014)  
  21. Poland (4-2-2014)
  22. Portugal (4-2-2014)
  23. Qatar (4-2-2014)
  24. Singapore (5-5-2014) 
  25. Slovak Republic (4-11-2014)
  26. Slovenia (4-2-2014)
  27. South Africa (4-2-2014)
  28. South Korea (4-2-2014)
  29. Sweden (4-24-2014)
  30. Romania (4-2-2014)

Model 2 IGA = 2

  • Armenia (5-8-2014)  <— new
  • Hong Kong (5-9-2014)  <— new

jurisdiction that have signed and entered into a formal IGA

Model 2 IGA = 5

  1. Austria (4-29-2014)
  2. Bermuda (12-19-2013)
  3. Chile (3-5-2014)
  4. Japan (6-11-2013)
  5. Switzerland (2-14-2013)

book coverPractical Compliance for FATCA

Over 600 pages of in-depth analysis of the practical compliance and analysis by 50 experts in 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 requirements (Chapters 17–34), including  information exchange protocols and systems.  See Lexis Guide to FATCA Compliance  (complimentary chapter download: http://www.lexisnexis.com/store/images/samples/9780769853734.pdf)

 

If you are interested in discussing the Master or Doctor degree of international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

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FATCA Guidance for UK Trustees

Posted by William Byrnes on May 7, 2014


The Law Society, Institute of Chartered Accountants, and STEP published guidance with an accompanying flow chart that are intended to help United Kingdom trustees and their advisers determine whether FATCA registration is required.  See Law Society and Institute of Chartered Accountants FATCA Guidance for UK Trust Companies (May 2014)  (Chartered Accountants link)

The Law Society states that: “This guidance is relevant for all UK trusts and trustees, whether or not they have any known US connections. UK financial institutions must meet the requirements of the Treaty and UK legislation in order to avoid the withholding tax.  All UK trusts and trustees, whether or not they have any known US connections, need to consider their status under the UK/US agreement. If they are required to register with the IRS under the agreement, they must do so by 25 October 2014.”

The guidance states that: “The major impact of FATCA will fall on banks and investment houses but it is essential to understand that firms such as yours are directly affected, even if you only have UK clients. As partners (or as directors, administrators and trustees) you have direct UK legal obligations that must be met if you are to avoid financial (and reputational) penalties. The full guidance is available at http://www.hmrc.gov.uk/drafts/uk-us-fatca-guidance-notes.pdf.” (see page 2).

See the Flow Chart for UK trustees (under the UK/USA Intergovernmental Agreement (IGA))

Guidance excerpts below …

So what do I have to do?

Identify and classify the entities comprising your practice and the client entities with which you are connected such as trusts;
Register any FI for a Global Intermediaries Identification Number (GIIN);
Review your practice systems and implement any necessary changes to:

1) engagement letters
2) client take-on process
3) client identification
4) establishing reportable transactions
5) effecting the report
6) client communications;

Make the appropriate reports to HMRC.

United Kingdom Deadline

The deadline is October 2014, by which time you need to register any FIs with the IRS as an FI. At that time you will also need to demonstrate that you have adequate systems in
place to identify and record US Persons. The first reporting will be for the calendar year 2015, but systems will need to be put in place now. The mechanics of reporting, which will
be to HMRC, are not yet known.

Corporate trustees

Where there is a corporate trustee, it registers and reports on the trust; the individual trusts do not need to register or report. It may be worth considering whether there is merit in
appointing a corporate trustee in place of or in addition to the individual trustees to eliminate the need for the individual trust to register and report. The responsibility for doing so is
passed to the corporate trustee. In this situation the trust itself becomes known as a Trustee Documented Trust.

Owner documented trusts

Instead of registering it may be possible for trustees to opt for owner documented status. They can only do so without challenge if they have enough regular information to prove that
all owners (beneficiaries who receive one or more distributions) are and remain non-US Persons.

They will also have to recertify their status every three years via form W8-BEN-E and if at any time the trustees become aware that an owner has become a US person, they will have
to register with the IRS and report to HMRC in the normal way. Further, they will need to appoint a withholding agent. It is understood that banks and investment businesses, which
already act as Qualifying Intermediaries for US tax purposes, are currently considering whether they will be prepared to offer this service. The current indications are that they will
do so.

Trustees must notify withholding agents of any change in status within thirty days. They will need to have systems and procedures in place to ensure that this is adhered to.

Creation of new trusts

The current regulations are unclear as to the deadline for obtaining a GIIN or otherwise regulating the FATCA status of trusts created after October 2014, i.e. once the first set of
registration is completed. Taking into account the requirements of banks and other institutions to be able to operate accounts, the advice must be that FATCA status, and
registration as necessary, should be an integral part of the process for creating any new trust and completed as soon as practicable.

There is a particular point of concern surrounding executors. Executors themselves are not entities within FATCA and will therefore be reported upon as usual. There is one exception in that the accounts of deceased persons are not reportable accounts as long as the FI concerned is in possession of the death certificate. However, it is not uncommon for
executors to become the trustees of a will trust and the point of transition between the two can be difficult to identify with precision. Practitioners will need to be alert for this
circumstance and ensure that the appropriate steps are taken in good time, including whether a corporate trustee should be appointed, and align with the records at banks and
investment managers etc.


book cover
The LexisNexis® Guide to FATCA Compliance (2nd 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 requirements (Chapters 17–34), including  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, and insights as to the application of FATCA and the IGAs for BRIC and European country chapters.  

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or international taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

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5 New IGAs Bring Total to 62 Published by May 5 Deadline for FATCA Registration ! Only 150 to go …

Posted by William Byrnes on May 6, 2014


How many IGAs are left to be agreed by Treasury?

The USA recognizes 195 independent states in the world, 67 dependencies of states, and has contacts with Taiwan.

Of the 67 dependencies, some like the French departments of French Guiana, Guadeloupe, Martinique, Mayotte and Reunion, are included as part of the state, others like Antarctica have no economic relevance.  More important, approximately 16 dependencies have at least enough potential US source income exposure for local financial firms to warrant an IGA, such as Bermuda, Cayman Islands, and Hong Kong.  And then there’s Taiwan.

That means approximately 212 states and jurisdictions, give or take a couple, could benefit from an IGA.  62 have one recognized by US Treasury as being in effect as of yesterday May 5.  FFIs in IGA jurisdictions have an extension to register with the IRS – until December 22, 2014 to obtain their GIINs. 

So at least 150 IGAs to go by my count…. 

The May 5th Deadline for these Non-IGA Countries and Jurisdictions

FATCA registration remains open of course, but the deadline for inclusion on the June 2nd participating foreign financial institution list (“PFFI”) passed yesterday on May 5.  Yesterday’s article covered the May 5th deadline (and consequences of passing) that applied to all FFIs in these 150 non-IGA states and jurisdictions (see https://profwilliambyrnes.com/2014/05/05/which-fatca-deadlines-did-treasurys-may-2nd-notice-extend-is-todays-deadline-still-in-place/)

Did all the FFIs register that are in countries and jurisdictions that are not yet included on the list, such as China, Hong Kong and Taiwan, as well as the Middle Eastern jurisdictions such as United Arab Emirates and Saudi Arabia?  What about Russia and Ukraine institutions? What IGA will apply to Crimea?  It is possible that on July 1st an unregistered FFI is considered non-participating (NPFFI) for purposes of withholding, but by example, on August 1st its country agrees an IGA in substance that Treasury announces on its FATCA site and the NPFFI goes back to FFI non-withholding status because of the IGA, at least until the final Dec 22 deadline applying to the IGA FFIs.

56 days remain until the July 1st application of FATCA’s 30% withholding applies to payments from US sources for all these FFIs that missed the deadline.

IGA FATCA Registration Classification

Financial Institutions that are treated as Reporting Financial Institutions under a Model 1 IGA register as Registered Deemed-Compliant Foreign Financial Institutions, whereas Financial Institutions that are treated as Reporting Financial Institutions under a Model 2 IGA register as Participating Foreign Financial Institutions.  

The following jurisdictions are treated as having a FATCA intergovernmental agreement (IGA) in effect. (see the 8 IGA additions and 1 IGA Mexican revision update at https://profwilliambyrnes.com/2014/05/01/iga-list-expands-to-55-mexico-iga-revised/)

jurisdictions that have reached agreements in substance (beginning on the date indicated in parenthesis):

Model 1 IGA = 31 (in red added since my last IGA update)

  1. Bahamas (4-17-2014)
  2. Brazil (4-2-2014)
  3. British Virgin Islands (4-2-2014)
  4. Bulgaria (4-23-2014)
  5. Columbia (4-23-2014)
  6. Croatia (4-2-2014)
  7. Curaçao (4-30-2014)
  8. Czech Republic (4-2-2014)
  9. Cyprus (4-22-2014)
  10. Gibraltar (4-2-2014)
  11. India (4-11-2014)
  12. Indonesia (5-4-2014) <— new
  13. Israel (4-28-2014)
  14. Kosovo (4-2-2014)
  15. Kuwait (5-1-2014)  <— new
  16. Latvia (4-2-2014)
  17. Liechtenstein (4-2-2014)
  18. Lithuania (4-2-2014)
  19. New Zealand (4-2-2014)
  20. Panama (5-1-2014)  <— new
  21. Peru (5-1-2014)  <— new
  22. Poland (4-2-2014)
  23. Portugal (4-2-2014)
  24. Qatar (4-2-2014)
  25. Singapore (5-5-2014) <— new
  26. Slovak Republic (4-11-2014)
  27. Slovenia (4-2-2014)
  28. South Africa (4-2-2014)
  29. South Korea (4-2-2014)
  30. Sweden (4-24-2014)
  31. Romania (4-2-2014)

Model 2 IGA = 0

jurisdiction that have signed and entered into a formal IGA

Practical Compliance Aspects of FATCA and GATCAbook coverThe LexisNexis® Guide to FATCA Compliance (2nd 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 requirements (Chapters 17–34), including  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, and insights as to the application of FATCA and the IGAs for BRIC and European country chapters.  

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or international taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

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Which FATCA Deadlines did Treasury’s May 2nd Notice Extend? Is Today’s Deadline Still in Place?

Posted by William Byrnes on May 5, 2014


This is a follow up on my article Friday afternoon of May 2: Treasury provides temporary relief for five areas of FATCA compliance (Notice 2014-33) https://profwilliambyrnes.com/2014/05/02/treasury-provides-temporary-relief-for-five-areas-of-fatca-compliance-notice-2014-33-of-may-2/

What has Treasury done May 2? 

Treasury released Notice 2014-33.  Notice 2014-33 provides aspects of temporary relief for five areas of FATCA compliance:

1. 6 month extension (from July 1, 2014 until December 31, 2014) for characterizing as “pre-existing” the obligations (including accounts) held by an entity

2. soft-enforcement transition period 2014 and 2015 for good-faith actors

3. modification to the “standards of knowledge” for withholding agents for accounts documented before July 1, 2014

4. revision to the definition of a “reasonable explanation” for determination of foreign status

5. additional guidance for an FFI (or a branch of an FFI, including a disregarded entity owned by an FFI) that is a member of an expanded affiliated group of FFIs to be treated as a limited FFI or limited branch, including the requirement for a limited FFI to register on the FATCA registration website.

As the relief is limited to entity accounts, an FFI still must have procedures in place by July 1, 2014 to document new individual account holders and to apply FATCA withholding on withholdable payments to individual account holders where required.

Why is May 5th still an Important FATCA deadline? 

Treasury announced on April 2 (see my previous article explaining impact of announcement)  a 10-day extension from the original April 25th deadline  for foreign financial institutions (FFIs) to register with the FATCA Portal IRS to obtain a GIIN and to be included on the IRS’ June 2 list of participating FFIs (PFFI).  That extension thus ends today, on May 5, in a couple hours.

Some types of payments (there is a phase in period for applicability to all types of payments, see Ch 13: Withholdable Payments) made by US withholding agents as of July 1 will attract the 30% FATCA withholding.

Depending on who you ask, industry pundits quote a range of 20,000 to 100,000 FFIs that still need to register for a GIIN as of today.  I just do not know myself, but when I think of all the little trust companies, money managers, and small financial institutions in countries without an IGA, it seems plausible the worldwide number to still register is higher than 20,000.

Is the May 5th Deadline a Hard Deadline?

Yes, No, and Maybe.  Three significant caveats as to this May 5 deadline.

No: Firstly, FFIs in IGA jurisdictions have an extension to register with the IRS – until December 22, 2014 to obtain their GIINs.  To date, 60 IGAs are considered to be in effect (see my article last week – but Kuwait, Peru, Panama were all agreed as of May 1, and thus just uploaded to the list).  60 out of say 200 countries and jurisdictions still leaves 140 IGAs to go – and thus a May 5th deadline for the majority of countries’ and jurisdictions’ FFIs.

Yes: Secondly, Treasury has stated that every 30 days it will reissue its PFFI) list.  So at least by intention, on Tuesday July 1 the IRS should release another list of PFFIs that do not require withholding.  Moreover, if an FFI on May 6th registers, Treasury may still include it on the June 2 PFFI GIIN list – just no promises from Treasury.

Maybe: Finally, the IRS states the following on its FATCA Registration Portal: “the IRS believes it can ensure registering FFIs that their GIINs will be included on the July 1 IRS FFI List if their registrations are finalized by June 3, 2014.”  (See Notice 2014-17, page 6: “FFIs that finalize their registrations after May 5 or June 3 may still be included on the June 2 or July 1 IRS FFI List, respectively; however, the IRS cannot provide assurance that this will be the case. The IRS will continue processing registrations in the order received; however, processing times may increase as the May 5 and June 3 dates approach.”)*  [* Thank you to reader Vesselin (Vesco) Tzotchev, JD, LLM for spotting this note. He has practiced U.S. taxation for more than 15 years in industry, with Big 4 and boutique accounting firms in California, Ontario and Switzerland, and currently resides in Zurich, Switzerland.]

So it is possible that on July 1st an FFI is considered non-participating (NPFFI) for purposes of withholding, but on July 2nd its country agrees a IGA with Treasury and the NPFFI goes back to simple FFI non-withholding for FATCA, at least until Dec 22.

What Deadlines has Treasury NOT moved? 

For “individual” held accounts, Treasury has neither provided an extension to the FATCA compliance requirements, nor from withholding as of July 1st.  Thus, from July 1 these accounts must be characterized as “new” accounts for FATCA diligence procedures to determine whether the beneficial owner is a US person.

For accounts of ‘entities’ , while an FFI may still characterize accounts opened until December 31 as “pre-existing” accounts, Treasury did not mention extending the deadlines applicable for FATCA diligence procedures to determine whether the entity’s beneficial owner is a US person.

The pre-existing account due diligence analysis remains with three deadlines:

  1. December 31, 2014 for prima facie FFI account holders,
  2. June 30, 2015 for high value accounts, and
  3. June 30, 2016 for all remaining accounts, such as “pre-existing” entity accounts).

Did Treasury provide relief to the “standards of knowledge” compliance requirement? 

Again – Yes and No.

Yes, Treasury has relieved the application of the additional US indicia search for US telephone number and for US place of birth for a direct account holder already documented as “foreign” beneficially owned prior by June 30, 2014 because some institutions have already undertaken the due diligence procedures for determining which accounts are beneficially foreign owned and which are owned by US persons.  It would be egregious to force these institutions to re-do all their foreign account determinations, when they were early adopter actors. 

But No – for “new” account from July 1st, and for “pre-existing” account that have a “change in circumstances”, the new standard of knowledge indicia must be applied. 

What About the Deadlines of Annex I of the Current 60 IGAs in Effect?

Going forward, Treasury will amend Annex I to include the above six month extension and relief of compliance requirements for standard of knowledge / reasonable explanation of non-US person, foreign status.

The current 60 IGA countries and jurisdictions may, and presumably will, adopt the Annex 1 amendments by exercising the most-favored nation provision of the IGA.

 

book cover

The LexisNexis® Guide to FATCA Compliance (2nd 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 requirements (Chapters 17–34), including  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, and insights as to the application of FATCA and the IGAs for BRIC and European country chapters.

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or international taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

 

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Treasury provides temporary relief for five areas of FATCA compliance (Notice 2014-33 of May 2)

Posted by William Byrnes on May 2, 2014


For my blogs FATCA subscribers, below I summarize and (quickly) analyze the aspects of Notice 2014-33, published just before 3pm East Coast time on Friday May 2, and provide relevant links.

Treasury released Notice 2014-33 on May 2.  Notice 2014-33 provides aspects of temporary relief for five areas of FATCA compliance:

1. 6 month extension (from July 1, 2014 until December 31, 2014) for characterizing as “pre-existing” the obligations (including accounts) held by an entity

2. soft-enforcement transition period 2014 and 2015 for good-faith actors

3. modification to the “standards of knowledge” for withholding agents under §1.1441-7(b)[1] for accounts documented before July 1, 2014

4. revision to the definition of a “reasonable explanation” of foreign status in §1.1471-3(e)(4)(viii)[2]

5. additional guidance for an FFI (or a branch of an FFI, including a disregarded entity owned by an FFI) that is a member of an expanded affiliated group of FFIs to be treated as a limited FFI or limited branch, including the requirement for a limited FFI to register on the FATCA registration website.

1. Six Month Extension To Characterize Entity Accounts As Pre-Existing Obligations

Treasury stated that industry comments indicate that the release dates of the final Forms W-8 (click on the links for analysis of the April 2014 releases of the new W-8IMY and W-8BEN-E) and accompanying instructions present practical problems for both withholding agents and FFIs to implement new account opening procedures beginning on July 1, 2014.

Thus, obligations (including accounts) held by an entity – opened, executed, or issued from July 1, 2014 until December 31, 2014 – may be treated as preexisting obligations by a withholding agent or FFI for purposes of sections 1471 and 1472 (subject to certain modifications described in section IV of Notice 2014-33).

2. Transition Period For Enforcement And Administration Of Compliance

The IRS will regard 2014 and 2015 as a transition period for purposes of its enforcement and administration of the due diligence, reporting, and withholding provisions under chapter 4, as well as the provisions under chapters 3 and 61, and section 3406, to the extent these rules were modified by the temporary coordination regulations.

During this transition period, the IRS will take into account the extent of good faith efforts to comply with the requirements of the chapter 4 regulations and the temporary coordination regulations by

  • a participating or deemed-compliant FFI,
  • direct reporting NFFE,
  • sponsoring entity,
  • sponsored FFI,
  • sponsored direct reporting NFFE, or
  • withholding agent.

The IRS will take into account whether a withholding agent has made reasonable efforts during the transition period to modify its account opening practices and procedures to document the chapter 4 status of payees, apply the standards of knowledge provided in chapter 4, and, in the absence of reliable documentation, apply the presumption rules of §1.1471-3(f).[3]

Additionally, for example, the IRS will consider the good faith efforts of a participating FFI, registered deemed-compliant FFI, or limited FFI to identify and facilitate the registration of each other member of its expanded affiliated group as required for purposes of satisfying the expanded affiliated group requirement under §1.1471-4(e)(1).

The IRS will not regard calendar years 2014 and 2015 as a transition period with respect to the requirements of chapters 3 and 61, and section 3406, that were not modified by the temporary coordination regulations. For example, the IRS will not provide transitional relief with respect to its enforcement regarding a withholding agent’s determinations of the character and source of payments for withholding and reporting purposes.

3. Modification To The Standards Of Knowledge For Withholding Agents Under §1.1441-7(b)[4] 

Treasury intends to amend the temporary coordination regulations to provide that a direct account holder will be considered documented pursuant to the requirements of §1.1441-1(e)(4)(ii)(A)[5] prior to July 1, 2014, without regard to whether the withholding agent obtains renewal documentation for the account holder on or after July 1, 2014. Therefore, a withholding agent that has documented a direct account holder prior to July 1, 2014, is not required to apply the new reason to know standards relating to a U.S. telephone number or U.S. place of birth until the withholding agent is notified of a change in circumstances with respect to the account holder’s foreign status other than renewal documentation or reviews documentation for the account holder that contains a U.S. place of birth.

The temporary coordination regulations also provide a transitional rule to allow a withholding agent that has previously documented the foreign status of a direct account holder for chapters 3 and 61 purposes prior to July 1, 2014, to continue to rely on such documentation without regard to whether the withholding agent has a U.S. telephone number or U.S. place of birth for the account holder. The withholding agent would, however, have reason to know that the documentation is unreliable or incorrect if the withholding agent is notified of a change in circumstances with respect to the account holder’s foreign status or the withholding agent reviews documentation for the account holder that contains a U.S. place of birth.

4. Revision Of The Definition Of Reasonable Statement 

Commentators have noted that the description of a reasonable explanation of foreign status in the final chapter 4 regulations differs from the description provided in the temporary coordination regulations.

Treasury and the IRS intend to amend the final chapter 4 regulations to adopt the description of a reasonable explanation of foreign status provided in the temporary coordination regulations, which permit an individual to provide a reasonable explanation that is not limited to an explanation meeting the requirements of §1.1471-3(e)(4)(viii)(A) through (D).

(viii) Reasonable explanation supporting claim of foreign status. A reasonable explanation supporting a claim of foreign status for an individual means a written statement prepared by the individual (or the individual’s completion of a checklist provided by the withholding agent), stating that the individual meets one of the requirements of paragraphs (e)(4)(viii)(A) through (D).

(A) The individual certifies that he or she—

(1) Is a student at a U.S. educational institution and holds the appropriate visa;

(2) Is a teacher, trainee, or intern at a U.S. educational institution or a participant in an educational or cultural exchange visitor program, and holds the appropriate visa;

(3) Is a foreign individual assigned to a diplomatic post or a position in a consulate, embassy, or international organization in the United States; or

(4) Is a spouse or unmarried child under the age of 21 years of one of the persons described in paragraphs (e)(4)(viii)(A) through (C) of this section;

(B) The individual provides information demonstrating that he or she has not met the substantial presence test set forth in § 301.7701(b)-1(c) of this chapter (for example, a written statement indicating the number of days present in the United States during the 3-year period that includes the current year);

(C) The individual certifies that he or she meets the closer connection exception described in § 301.7701(b)-2, states the country to which the individual has a closer connection, and demonstrates how that closer connection has been established; or

(D) With respect a payment entitled to a reduced rate of tax under a U.S. income tax treaty, the individual certifies that he or she is treated as a resident of a country other than the United States and is not treated as a U.S. resident or U.S. citizen for purposes of that income tax treaty.

5.1 Limited FFIs And Limited Branches

While Treasury stands ready and willing to negotiate IGAs based on the published models, commentators have expressed practical concerns about the status of FFIs and branches of FFIs in jurisdictions that are slow to engage in IGA negotiations and that have legal restrictions impeding their ability to comply with FATCA, including the conditions for limited FFI or limited branch status under the chapter 4 regulations. Specifically, comments have noted that the restrictions imposed by the final chapter 4 regulations on a limited branch or limited FFI on opening any account that it is required to treat as a U.S. account or as held by a nonparticipating FFI hinders the ability of an FFI to agree to the conditions of limited status due, for example, to requirements under local law to provide individual residents with access to banking services or to the business needs of the FFI to secure funding from another FFI in the same jurisdiction with similar impediments to complying with the requirements of FATCA.

Treasury and the IRS intend to amend the final chapter 4 regulations to permit a limited FFI or limited branch to open U.S. accounts for persons resident in the jurisdiction where the limited branch or limited FFI is located, and accounts for nonparticipating FFIs that are resident in that jurisdiction, provided that the limited FFI or limited branch does not solicit U.S. accounts from persons not resident in, or accounts held by nonparticipating FFIs that are not established in, the jurisdiction where the FFI (or branch) is located and the FFI (or branch) is not used by another FFI in its expanded affiliated group to circumvent the obligations of such other FFI under section 1471. This modification is consistent with the treatment of related entities and branches provided in the model IGAs.

5.2 Registration of Limited FFIs

Commentators have also stated that certain jurisdictions are explicitly prohibiting an FFI resident in, or organized under the laws of, the jurisdiction from registering with the IRS and agreeing to any status, including status as a limited FFI, regardless of whether the FFI would otherwise be able to comply with the requirements of limited FFI status.

Treasury and the IRS intend to amend the final chapter 4 regulations to provide that, if an FFI is prohibited under local law from registering as a limited FFI, the prohibition will not prevent the members of its expanded affiliated group from obtaining statuses as participating FFIs or registered deemed-compliant FFIs if the first-mentioned FFI is identified as a limited FFI on the FATCA registration website by a member of the expanded affiliated group that is a U.S. financial institution or an FFI seeking status as a participating FFI (including a reporting Model 2 FFI) or reporting Model 1 FFI.

In order to identify the limited FFI, the member of the expanded affiliated group will be required to register as a Lead FI with respect to the limited FFI and provide the limited FFI’s information in Part II of the FATCA registration website. If the Lead FI is prohibited from identifying the limited FFI by its legal name, it will be sufficient if the Lead FI uses the term “Limited FFI” in place of its name and indicates the FFI’s jurisdiction of residence or organization.

By identifying a limited FFI in the FATCA registration website, the Lead FI is confirming that:

(1) the FFI made a representation to the Lead FI that it will meet the conditions for limited FFI status,

(2) the FFI will notify the Lead FI within 30 days of the date that such FFI ceases to be a limited FFI because it either can no longer comply with the requirements for limited status or failed to comply with these requirements, or that the limited FFI can comply with the requirements of a participating FFI or deemed-compliant FFI and will separately register, to the extent required, to obtain its applicable chapter 4 status, and

(3) the Lead FI, if it receives such notification or knows that the limited FFI has not complied with the conditions for limited FFI status or that the limited FFI can comply with the requirements of a participating FFI or deemed-compliant FFI, will, within 90 days of such notification or acquiring such knowledge, update the information on the FATCA registration website accordingly and will no longer be required to act as a Lead FI for the FFI.

In the case in which the FFI can no longer comply or failed to comply with the requirements of limited FFI status, the Lead FI must delete the FFI from Part II of the FATCA registration website and must maintain a record of the date on which the FFI ceased to be a limited FFI and the circumstances of the limited FFI’s non-compliance that will be available to the IRS upon request.

For 600 pages of substantive expert analysis by 50 leading FATCA professionals and in-house compliance officers, see Guide to FATCA Compliance

—-Footnotes—–

[1] §1.1441-7 (b) Standards of knowledge

(1) In general. A withholding agent must withhold at the full 30-percent rate under section 1441, 1442, or 1443(a) or at the full 4-percent rate under section 1443(b) if it has actual knowledge or reason to know that a claim of U.S. status or of a reduced rate of withholding under section 1441, 1442, or 1443 is unreliable or incorrect. A withholding agent shall be liable for tax, interest, and penalties to the extent provided under sections 1461 and 1463 and the regulations under those sections if it fails to withhold the correct amount despite its actual knowledge or reason to know the amount required to be withheld.

[2] § 1.1471–3(e) Identification of payee

(4) Reason to know. A withholding agent shall be considered to have reason to know that a claim of chapter 4 status is unreliable or incorrect if its knowledge of relevant facts or statements contained in the withholding certificates or other documentation is such that a reasonably prudent person in the position of the withholding agent would question the claims made. For accounts opened on or after January 1, 2014, a withholding agent will also be considered to have reason to know that a claim of chapter 4 status is unreliable or incorrect if any information contained in its account opening files or other customer account files, including documentation collected for AML due diligence purposes, conflicts with the payee’s claim of chapter 4 status.

(viii) Reasonable explanation supporting claim of foreign status. A reasonable explanation supporting a claim of foreign status for an individual means a written statement prepared by the individual (or the individual’s completion of a checklist provided by the withholding agent), stating that the individual meets one of the requirements of paragraphs (e)(4)(viii)(A) through (D).

[3] (f) Presumptions regarding chapter 4 status of the person receiving the payment in the absence of documentation—(2) Presumptions of classification as an individual or entity—

(i) In general. A withholding agent that cannot reliably associate a payment with a valid withholding certificate, or that has received valid documentary evidence, as described in paragraph (c)(5) of this section, but cannot determine a person’s status as an individual or an entity from the documentary evidence, must presume that the person is an individual if the person appears to be an individual (for example, based on the person’s name or information in the customer file). If the person does not appear to be an individual, then the person shall be presumed to be an entity. In the absence of reliable documentation, a withholding agent must treat a person that is presumed to be an entity as a trust or estate if the person appears to be a trust or estate (for example, based on the person’s name or information in the customer file). In addition, a withholding agent must treat a person that is presumed to be a trust, or a person that is known to be a trust but for which the withholding agent cannot determine the type of trust, as a grantor trust if the withholding agent knows that the settlor of the trust is a U.S. person, and otherwise as a simple trust. In the absence of reliable indications that the entity is a trust or estate, the withholding agent must presume the person is a corporation if it can be treated …. If the withholding agent cannot treat the person as a corporation … then the person must be presumed to be a partnership.

[4] §1.1441-7 (b) Standards of knowledge

(1) In general. A withholding agent must withhold at the full 30-percent rate … if it has actual knowledge or reason to know that a claim of U.S. status or of a reduced rate of withholding … is unreliable or incorrect. A withholding agent shall be liable for tax, interest, and penalties to the extent provided … if it fails to withhold the correct amount despite its actual knowledge or reason to know the amount required to be withheld.

[5] §1.1441-1(e)(4)(ii) Period of validity—

(A) Three-year period. A withholding certificate … shall remain valid until the earlier of the last day of the third calendar year following the year in which the withholding certificate is signed or the day that a change in circumstances occurs that makes any information on the certificate incorrect.

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The LexisNexis® Guide to FATCA Compliance (2nd 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 requirements (Chapters 17–34), including  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, and insights as to the application of FATCA and the IGAs for BRIC and European country chapters.

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or international taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

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IRS releases 4 new FATCA FAQs three days before registration deadline

Posted by William Byrnes on May 2, 2014


On May 1, the IRS released 4 new FATCA Frequently Asked Questions (FAQs) and Answers.  The 4 new FAQs address the topics of Responsible Officers,  Branches/Disregarded Entities and Registration Update.  2 of the new FAQs, on Responsible Officer and on Branches, are further divided into multiple sub-questions.  The new Q&A are posted below.

The IRS answered important questions such as: How does a branch in a Model 1 IGA jurisdiction satisfy its FATCA registration requirements?  How does a branch or a disregarded entity (DE) in a jurisdiction that does not have an IGA, or that is in a Model 2 IGA jurisdiction, satisfy its FATCA registration requirements?

FATCA IRS Q&A has to date been provided on the following topics: (previous FAQ update is available at https://profwilliambyrnes.com/2014/04/24/irs-releases-new-fatca-faqs/)

Responsible Officers and Points of Contact

# Questions Answers
Q5. For each of the following FATCA classifications (i.e. Participating Foreign Financial Institution “PFFI”, PFFI that elects to be part of a consolidated compliance program, Registered Deemed-Compliant Foreign Financial Institution “RDCFFI”, Reporting Model 1 FFI, Limited FFI and US Financial Institution “USFI”) what type of individual may serve as a Responsible Officer for purposes of Part 1, Question 10 of the FATCA Registration?

With respect to a PFFI, an RO is an officer of the FFI (or an officer of any Member FI that is a PFFI, Reporting Model 1 FFI or Reporting Model 2 FFI) with sufficient authority to fulfill the duties of a Responsible Officer described in a FFI Agreement. 

With respect to a PFFI that elects to be part of a consolidated compliance program, an RO is an officer of the Compliance FI with sufficient authority to fulfill the duties of a Responsible Officer described in the FFI Agreement on behalf of each FFI in the compliance group (regardless of whether the FFI is a Limited FFI or treated as a Reporting Model 1 FFI or Reporting Model 2 FFI).

With respect to a RDCFFI, other than a RDCFFI that is a Reporting Model 1 FFI, an RO is an officer of the FI (or an officer of any Member FFI that is a PFFI, Reporting Model 1 FFI, or Reporting Model 2 FFI) with sufficient authority to ensure that the FFI meets the applicable requirements to be treated as a RDCFFI. 

With respect to a Reporting Model 1 FFI, an RO is any individual specified under local law to register and obtain a GIIN on behalf of the FFI.  If, however, the Reporting Model 1 FFI operates any branches outside of a Model 1 IGA jurisdiction, then the RO identified must be an individual who can satisfy the requirements under the laws of the Model 1 IGA jurisdiction and the requirements relevant to the registration type selected for each of its non-Model 1 IGA branches. 

With respect to a Limited FFI, an RO is an officer of the Limited FFI (or an officer of any Member FI that is a PFFI, Reporting Model 1 FFI, or Reporting Model 2 FFI) with sufficient authority to ensure that the FI meets the applicable requirements to be treated as a Limited FFI. 

With respect to a USFI that is registering as a “Lead FI”, an RO is any officer of the FI (or an officer of any Member FI) with sufficient authority to register its Member FIs and to manage the online FATCA accounts for such members.

Q6.

Part 4 of the online registration system* states:

By checking this box, I, _________, [(the responsible officer or delegate thereof (herein collectively referred to as the “RO”)], certify that, to the best of my knowledge, the information submitted above is accurate and complete and I am authorized to agree that the Financial Institution (including its branches, if any) will comply with its FATCA obligations in accordance with the terms and conditions reflected in regulations, intergovernmental agreements, and other administrative guidance to the extent applicable to the Financial Institution based on its status in each jurisdiction in which it operates.

*Note: Part 4 of Form 8957 contains a substantially similar certification.

Can this statement be broken down into two declarations of the RO, as follows? 

(i) The RO certifies that, to the best of its knowledge, the information submitted above is accurate and complete. 

(ii) The RO agrees that the FI (including its branches, if any) will comply with its FATCA obligations in accordance with the terms and conditions reflected in regulations, intergovernmental agreements, and other administrative guidance to the extent applicable to the FI based on its status in each jurisdiction in which it operates.

Yes.

 

 

 

 

 

 

 

 

 

Does the first declaration above mean that the RO certifies that, to the best of its knowledge, the FI meets the requirements of its claimed status?

Yes.

 

Does the second declaration above apply to an FI treated as a reporting Model 2 FFI?

Yes.

 

Does the second declaration above (relating to a Participating FFI) require the signing party to ensure that the FFI and its member FFIs (including its branches, if any) comply with its respective obligations under the terms of its FFI Agreement or any applicable intergovernmental agreement and any such applicable local law? 

The second declaration requires the signing party to be able to certify that, to the best of the signing party’s knowledge at the time the FATCA registration is signed, the FI and its member FFIs intend to comply with their respective FATCA obligations. 

A Participating FFI will have its certifying responsible officer (as defined in Treasury Regulation §1.1471-1(b)(116)) periodically certify to the IRS regarding the FFI’s compliance with its FFI agreement.  As noted in FAQ 1, the RO identified in Part 4 will normally be an individual with sufficient authority to be eligible for RO status under Treas. Reg. § 1.1471-1(b)(116).  (See, however, above regarding “Delegation of RO Duties.”)

 

How do the certifications in Part 4 apply to FIs treated as reporting Model 1 FFIs?

The first declaration above applies to FIs treated as reporting Model 1 FFIs and, as such, the RO of an FI treated as a reporting Model 1 FFI certifies that, to the best of the RO’s knowledge, the information submitted as part of the FATCA Registration process is accurate and complete.  The second declaration, however, has limited applicability to FIs treated as reporting Model 1 FFIs because the FI does not have ongoing FATCA compliance obligations directly with the IRS.  Instead, the compliance and reporting obligations of an FI treated as a reporting Model 1 FFI are to its local authority.  However, a reporting Model 1 FFI that has branches (as identified in Part 1, line 9 of Form 8957) that are located outside of a Model 1 IGA jurisdiction will also agree to the terms applicable to the statuses of such branches.  Additionally, an FI (including an FI in a Model 1 IGA jurisdiction) that is also registering to renew its QI, WP, or WT Agreement will agree to the terms of such renewed QI, WP, or WT Agreements by making the second declaration.

 

Registration Update

# Questions Answers
Q2.

For each of the following FATCA classifications (i.e. Participating Foreign Financial Institution “PFFI” for Reporting Model 2 FFI, Registered Deemed Compliant Foreign Financial Institutions “RDCFFI” (for both Model 1 and non-Model 1 FFIs), Sponsoring Entity, Limited FFI or Limited Branch, Renewing QI/WP/WT, US Financial Institution “USFI” treated as a Lead FI and Direct Reporting NFFE) what is the impact of completing Part IV of the FATCA Registration?

 

PFFI Status for Reporting Model 2 FFI

Reporting Model 2 FFIs are registering to obtain a GIIN, provide authorization for individuals named in Part 1, Line 11 of the FATCA Registration to receive information related to FATCA registration, and to confirm that they will comply with the terms of an FFI Agreement in accordance with the FFI agreement, as modified by any applicable Model 2 IGA.

Notwithstanding the paragraph above, Reporting Model 2 FFIs operating branches outside of Model 1 or 2 IGA jurisdictions are agreeing to the terms of an FFI Agreement for such branches, unless the branches are treated as Limited Branches or are U.S. branches that are treated as U.S. persons.  Additionally, Reporting Model 2 FFIs requesting renewal of a QI, WP or WT Agreement are entering into the renewed Model QI, WP, or WT Agreements, as applicable. 

RDCFFI Status for Reporting Model 1 FFI

Reporting Model 1 FFIs are not entering into FFI Agreements via the FATCA registration process.  Reporting Model 1 FFIs are registering to obtain a GIIN and to provide authorization for individuals named in Part 1, Line 11 of the FATCA Registration to receive information related to FATCA registration.  Notwithstanding the preceding sentence, Reporting Model 1 FFIs operating branches outside of Model 1 or 2 IGA jurisdictions are agreeing to the terms of an FFI Agreement for such branches, unless the branches are treated as Limited Branches.  Additionally, Reporting Model 1FFIs requesting renewal of a QI, WP or WT Agreement are entering into such renewed Model QI, WP, or WT Agreements, as applicable. 

RDCFFI Status for FFI (other than a Reporting Model 1 FFI)

An FFI that is registering as an RDCFFI, other than a Reporting Model 1 FFI, is agreeing that it meets the requirements to be treated as an RDCFFI under relevant Treasury Regulations or is agreeing that it meets the requirements to be treated as a RDCFFI pursuant to an applicable Model 2 IGA.

Sponsoring Entity Status

An entity that is registering as a Sponsoring Entity is agreeing that it will perform the due diligence, reporting and withholding responsibilities of one or more Sponsored FFIs or Sponsored Direct Reporting NFFEs.

Limited FFI or Limited Branch Status

An FFI that is registering as a Limited FFI is confirming that it will comply with the terms applicable to a Limited FFI.  A branch of a PFFI that is registering as a Limited Branch is confirming that it will comply with the terms applicable to a Limited Branch.  GIINs will not be issued to a Limited FFI or Limited Branch.

Renewing QI/WP/WT 

An FFI, including a foreign branch of a USFI, requesting renewal of a QI Agreement is agreeing to comply with the relevant terms of the renewed Model QI Agreement with respect to its branches that are identified as operating as a QI.  The obligations under the renewed Model QI Agreement are in addition to any obligations imposed on the FFI to be treated as a PFFI, Reporting Model 2 FFI, RDCFFI, or Reporting Model 1 FFI. 

 

An FFI that is applying to renew its WP or WT Agreement is agreeing to comply with the relevant terms of the renewed Model WP or WT Agreement.  The obligations under the renewed Model WP or WT Agreement are in addition to any obligations imposed on the FFI to be treated as PFFI, Reporting Model 2 FFI, RDCFFI, or Reporting Model 1 FFI.  Additionally, a QI, WP, or WT is also certifying that it has in place and has implemented written policies, procedures, and processes for documenting, withholding, reporting and depositing tax with respect to its chapters 3 and 61 withholding responsibilities under its QI, WP, or WT Agreement. 

USFI treated as a Lead FI

A USFI that is part of an EAG and registering its Members FIs is agreeing to manage the online FATCA account for each such Member FI.

Direct Reporting NFFE

A direct reporting NFFE is agreeing to comply with the terms and obligations described under Treas. Reg. § 1.1472-1(c)(3). 

 

Branch/Disregarded Entity

# Questions Answers

Q1.

How does a disregarded entity (DE) in a Model 1 IGA jurisdiction satisfy its FATCA registration requirements?

A DE in a Model 1 IGA jurisdiction must register as an entity separate from its owner in order to be treated as a reporting Model 1 FFI, provided that the DE is treated as a separate entity for purposes of its reporting to the applicable Model 1 jurisdiction.  Select either a “Single” FFI or “Member” FFI in Part 1, Question 1 of the FATCA Registration (as appropriate).  Select “Registered Deemed-Compliant Financial Institution (including a Reporting Financial Institution under a Model 1 IGA)” in Part 1, Question 4.  When the owner of the DE registers on its own behalf, it should not report the DE as a branch.

 

How does a branch in a Model 1 IGA jurisdiction satisfy its FATCA registration requirements?

In general, a branch (as defined in Treas. Reg. § 1.1471-4(e)(2)(ii)) should be registered as a branch of its owner and not as a separate entity.  Thus, the branch will be registered by the FI of which the branch is a part (including an appropriate Lead FI or Sponsoring Entity) when that FI completes Part 1 of its own FATCA registration.  The online registration user guide provides further instructions on how to register branches.  In general, a branch is a unit, business, or office of an FFI that is treated as a branch under the regulatory regime of a country or is otherwise regulated under the laws of such country as separate from other offices, units, or branches of the FI.

 

How does a branch or a disregarded entity (DE) in a jurisdiction that does not have an IGA, or that is in a Model 2 IGA jurisdiction, satisfy its FATCA registration requirements?

A branch (including a DE) that is in a Model 2 IGA jurisdiction, or a jurisdiction without an IGA, should be registered as a branch of its owner (rather than as a separate entity).  As such, the branch will be registered by the FI of which the branch is a part (including an appropriate Lead FI or Sponsoring Entity) when that FI completes Part 1 of its own FATCA registration.  The branch will not have a separate registration account, but will be assigned a separate GIIN, if eligible.  When the FI completes its FATCA registration and registers its branches by answering Questions 7, 8, and 9, GIINs will be assigned with respect to the registered branches, where appropriate.  The online registration user guide provides further instructions on how to register branches.   A separate GIIN will be issued to the FI to identify each jurisdiction where it maintains a branch that is participating or registered deemed-compliant. 

All branches (and, except in Model 1 IGA jurisdictions, disregarded entities) of an FI located in a single jurisdiction are treated as one branch and, as a result, will share a single GIIN.  U.S. branches and limited branches are not eligible to receive their own GIINs.  A branch of an FFI located in the FFI’s home country will use the GIIN of the FFI.  For example, suppose FI W (located in Country X) has one branch in Country X, two branches in Country Y and owns a DE in Country Z.  Country Z is a Model 1 IGA jurisdiction.  FI W will receive a Country X GIIN.  FI W’s Country X branch will use W’s GIIN.  The two branches in Country Y will be treated as a single branch, and so FI W will be issued a single Country Y GIIN for these two branches to share.  The Country Z DE will register as an entity separate from its owner, in order to be treated as a reporting Model 1 FFI, and will receive its own GIIN. 

book coverOperational Compliance Guide for FATCA .. a Lexis solution for compliance officers

The LexisNexis® Guide to FATCA Compliance (2nd 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.

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or international taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

Posted in FATCA | Tagged: , , , , , | 1 Comment »

IGA list expands to 57 – Mexico IGA revised!

Posted by William Byrnes on May 1, 2014


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[updated May 1 to include two IGAs posted this morning by Treasury] 60 days remain until the July 1st deadline that FATCA’s 30% withholding applies to payments from US sources. As of April 30th, the list of IGAs now to be treated in effect has expanded to 57, including 30 that have been signed and 27 that are agreed (but not yet officially signed).  8 IGAs have been added this past week, including Belgium, Bulgaria, Curaçao, Colombia, Cyprus, Estonia, Israel, and Sweden (albeit Estonia was signed over 2 weeks past but had not yet been included).  The Mexico-USA IGA of November 19, 2012 has been revised and re-issued (see Mexico (4-17-2014)).  Finally, the IGAs of Austria and Australia have now been released. 

Conspicuously, the most important US FDI jurisdictions that are not yet included on the list are China, Hong Kong and Taiwan, as well as the Middle Eastern jurisdictions such as United Arab Emirates and Saudi Arabia.  Recent US tension with Russia over the Ukraine and Crimea brought its treasury negotiations to a standstill.

But of immediate importance is the 4 days remaining for foreign financial institutions (FFIs) to register by May 5 with the IRS to obtain a GIIN and to be included on the IRS’ list of participating FFIs in order to avoid the attracting the 30% withholding by US withholding agents.   However, FFIs in IGA jurisdictions have an extension to register with the IRS – until December 22, 2014 to obtain their GIINs.

Financial Institutions that are treated as Reporting Financial Institutions under a Model 1 IGA register as Registered Deemed-Compliant Foreign Financial Institutions, whereas Financial Institutions that are treated as Reporting Financial Institutions under a Model 2 IGA register as Participating Foreign Financial Institutions.   One month ago now the IRS released the new 2014 Form W-8BEN-E that must be used by entities that are beneficial owners of a U.S. source payment, or of another entity that is the beneficial owner.  Form W-8BEN-E has thirty parts.  All filers will complete Parts I and XXIX.

Part I of the form requires general information, the QI status, and the FATCA classification of the filer.  Question 4 of Part I requests the QI status. If the filer is a disregarded entity, partnership, simple trust, or grantor trust, then the filer must complete Part III if the entity is claiming benefits under a U.S. tax treaty. Question 5 requests the FATCA classification of the filer. The classification indicated determines which one of the Parts IV through XXVIII must be completed.

Part XXIX requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf.  This part of the final form also contains the following language that does not appear in the current form: “I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect.”

Note that if the filer is a passive NFFE, it must complete Part XXVI as well as Part XXX if it has substantial U.S. owners.  For a Passive NFFE, a specified U.S. person is a substantial U.S. owner if the person has more than a 10 percent beneficial interest in the entity.  Completion of the other parts of the final form W-8BEN-E will depend upon the FATCA classification of the filer.  For further analysis of that form, see  https://profwilliambyrnes.com/2014/04/02/irs-releases-final-fatca-form-w-8ben-e/

The following jurisdictions are treated as having a FATCA intergovernmental agreement (IGA) in effect. jurisdictions that have reached agreements in substance (beginning on the date indicated in parenthesis):

Model 1 IGA = 27

  1. Bahamas (4-17-2014)
  2. Brazil (4-2-2014)
  3. British Virgin Islands (4-2-2014)
  4. Bulgaria (4-23-2014)  <— new
  5. Curaçao (4-30-2014)  <— new
  6. Colombia (4-23-2014)   <— new
  7. Croatia (4-2-2014)
  8. Czech Republic (4-2-2014)
  9. Cyprus (4-22-2014)   <— new
  10. Gibraltar (4-2-2014)
  11. India (4-11-2014)
  12. Israel (4-28-2014) <— new
  13. Jamaica (4-2-2014)
  14. Kosovo (4-2-2014)
  15. Latvia (4-2-2014)
  16. Liechtenstein (4-2-2014)
  17. Lithuania (4-2-2014)
  18. New Zealand (4-2-2014)
  19. Poland (4-2-2014)
  20. Portugal (4-2-2014)
  21. Qatar (4-2-2014)
  22. Slovak Republic (4-11-2014)
  23. Slovenia (4-2-2014)
  24. South Africa (4-2-2014)
  25. South Korea (4-2-2014)
  26. Sweden (4-24-2014)   <— new
  27. Romania (4-2-2014)

Model 2 IGA = 0

jurisdiction that have signed and entered into a formal IGA

Practical Compliance Aspects of FATCA and GATCAThe LexisNexis® Guide to FATCA Compliance (2nd 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 requirements (Chapters 17–34), including  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, and insights as to the application of FATCA and the IGAs for BRIC and European country chapters.  

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or international taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

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Analysis of the new FATCA W-8IMY released today

Posted by William Byrnes on April 30, 2014


free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

On April 30, 2014 the IRS released the new Form W-8IMY (“Form W-8IMY”), formally replacing its 2006 predecessor W-8IMY. This new Form W-8IMY has 28 parts whereas the previous August 2013 FATCA draft W-8IMY only contained 26.  The new 2014 Form W-8IMY is vastly different from the seven-part 2006 predecessor form.  (Analysis of the New W-8BEN-E released April 2 is available at https://profwilliambyrnes.com/2014/04/02/irs-releases-final-fatca-form-w-8ben-e/)

Below is a summary for the W-8IMY.  For a full compliance analysis of the new form W-8IMY and the other potentially required withholding forms drafted by the > Lexis FATCA experts <, see >LexisNexis® Guide to FATCA Compliance< Chapter 11 Withholding And Qualified Intermediary, § 11.08 Applicable Withholding Forms, [5] Analysis of Form W-8IMY.

Form W-8IMY is submitted generally by a payment recipient (the “filer”) with non-beneficial owner status, i.e. an intermediary.  Such intermediary can be a U.S. branch, a qualified intermediary, a non-qualified intermediary, foreign partnership, foreign grantor or a foreign simple trust.  Form W-8IMY requires a tax identification number.

Part I of the Form adds FATCA classification.   Part I of the form requires general information, the Chapter 3 QI status, and the Chapter 4 FATCA classification of the filer.

Question 4 of Part I requests the QI status:

If the filer is a Qualified Intermediary, then the filer must complete Part III Qualified Intermediary.  If the filer is a Nonqualified Intermediary, then the filer must complete Part IV Nonqualified Intermediary.

Territory Financial Institutions complete Part V. U.S. Branches complete Part VI.

Withholding Foreign Partnership or Withholding Foreign Trusts complete Part VII.

Nonwithholding Foreign Partnership, Nonwithholding Foreign Simple Trust, and Nonwithholding foreign grantor trusts must complete Part VIII.

Question 5 requests the FATCA classification of the filer. The classification indicated determines which one of the Parts IX through XXVII must be completed.

Part II of this form is to be completed if the entity is a disregarded entity or a branch receiving payment as an intermediary. Part II only applies to branches of an FFI outside the FFI’s country of residence.

Chapter 3 Status Certifications  Parts III – VIII

Parts III – VIII of this form address the QI Status of the entity. Part III is to be completed if the entity is a QI, and requires the entity to certify that it is a QI and has provided appropriate documentation. Part IV is to be completed if the entity is a Nonqualified Intermediary (NQI), and requires the entity to certify that it is a NQI not acting for its own account.

Part V is to be completed if the entity is a Territory Financial Institution. Part VI is to be completed by a U.S. branch only if the branch certifies on the form that it is the U.S. branch of a U.S. bank or insurance company, and that the payments made are not effectively connected to a U.S. trade or business. Part VII is to be completed if the entity is a Foreign Withholding Partnership (WP) or a Withholding Foreign Trust (WT). Part VIII is to be completed if the entity is either a Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust.

Chapter 4 Status Certifications Parts IX – XXVI

Parts IX – XXVI of this form address the FATCA Status of the entity. These classifications include the new classification of a Restricted Distributor (Part XVI), but do not include the new classification of a Reporting NFFE.

Statement of Certification

Part XXVIII requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf. Finally, the form contains the following language: “I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect.”

Structure of New Form Form W-8IMY

  • Part I Identification of Entity
  • Part II Disregarded Entity or Branch Receiving Payment.

Chapter 3 Status Certifications

  • Part III Qualified Intermediary
  • Part IV Nonqualified Intermediary
  • Part V Territory Financial Institution
  • Part VI Certain U.S. Branches
  • Part VII Withholding Foreign Partnership (WP) or Withholding Foreign Trust (WT)
  • Part VIII Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust

Chapter 4 Status Certifications

  • Part IX Nonparticipating FFI with Exempt Beneficial Owners
  • Part X Sponsored FFI That Has Not Obtained a GIIN
  • Part XI Owner-Documented FFI
  • Part XII Certified Deemed-Compliant Nonregistering Local Bank
  • Part XIII Certified Deemed-Compliant FFI with Only Low-Value Accounts
  • Part XIV Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
  • Part XV Certified Deemed-Compliant Limited Life Debt Investment Entity
  • Part XVI Restricted Distributor
  • Part XVII Foreign Central Bank of Issue
  • Part XVIII Nonreporting IGA FFI
  • Part XIX Exempt Retirement Plans
  • Part XX Excepted Nonfinancial Group Entity
  • Part XXI Excepted Nonfinancial Start-Up Company
  • Part XXII Excepted Nonfinancial Entity in Liquidation or Bankruptcy
  • Part XXIII Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
  • Part XXIV Excepted Territory NFFE
  • Part XXV Active NFFE
  • Part XXVI Passive NFFE
  • Part XXVII Sponsored Direct Reporting NFFE

Sworn Certification

  • Part XXVIII Certification

book coverPractical Compliance Aspects of 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, 2nd Edition just published!

The LexisNexis® Guide to FATCA Compliance (2nd 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 requirements (Chapters 17–34), including  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, and insights as to the application of FATCA and the IGAs for BRIC and European country chapters.

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or international taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

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IRS releases new FATCA FAQs

Posted by William Byrnes on April 24, 2014


On Thursday, April 24 the IRS released 10 new FATCA FAQs embedded within a previous release of FAQs, as well as reordering the FAQs.  For the subscribers of Lexis Guide to FATCA Compliance, below I have highlighted in RED the additional FAQs for your quick review and highlighted your attention to the amended FAQ sections.  For additional FATCA Updates for subscribers, see my link to FATCA Critical Updates and Analysis

By example, the IRS answered the oft heard question of late because of the new 30% withholding requirement that begins July 1: “How will Certified-Deemed Compliant FFIs, Owner-documented FFIs, or Excepted FFIs certify to U.S. withholding agents that they are not subject to Chapter 4 withholding given that they are not required to register with the IRS?” 

book coverOperational Compliance Guide for FATCA .. a Lexis solution for compliance officers

The LexisNexis® Guide to FATCA Compliance (2nd 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.

FATCA – FAQs General

Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts

# Questions Answers
Q1. How does a Financial Institution that is not currently a Qualified Intermediary (“QI”), a Withholding Foreign Partnership (“WP”), or a Withholding Foreign Trust (“WT”) register to become one?

The process to become a QI, WP or WT has not been modified by the provisions of FATCA.

The application for Qualified Intermediary status can be found here: QI Application

Information on acquiring Withholding Foreign Partnership, or Withholding Foreign Trust status can be found here: WP/WT Application

Q2. How do FIs that are currently QIs, WPs and WTs renew their agreements?

Existing QIs, WPs and WTs are required to renew their QI agreements through the FATCA registration website as part of their FATCA registration process.

All QI, WP, or WT agreements that would otherwise expire on December 31, 2013 will be automatically extended until June 30, 2014.  (Notice 2013-43; 2013-31 IRB 113).

Q3. I am not currently a QI/WP/WT.  Can I use the LB&I registration portal to register for FATCA and become a new QI/WP/WT?

No.

QI/WP /WT status can only obtained by completing and submitting a Form 14345 (“QI Intermediary Application”) and Form SS-4 (“Application for Employer Identification Number”) directly to the QI Program.   Interested QIs/WPs/WT should submit the required paperwork to the QI program and separately use the FATCA registration portal to obtain a GIIN for FATCA purposes.    FFIs can not become a new QI/WP/WT through the FATCA portal.

Applications for QI/WP/WT status can be made to:

IRS-Foreign Intermediary Program
Attn:  QI/WP/WT Applications
290 Broadway, 12th floor
New York City, New York 10007

Note:  Form 14345 (“QI Intermediary Application”) should be used for WPs and WTs in addition to QIs.

Q4. Must an FI become a QI/WP/WT in order to register under FATCA? An FI is not required to obtain QI/WP or WT status to register under FATCA.  If at the time of FATCA registration, the FI does not have in effect a withholding agreement with the IRS to be treated as a QI, WP or WT, the FI will indicate “Not applicable” in box 6 and will continue with the registration process.
Q5. If an FFI has a QI/WP/WT agreement in place, does the Responsible Party for purposes of the QI/WP/WT Agreement also have to the serve as the FFI’s Responsible Officer? No, the FFI’s Responsible Party for purposes of a QI/WP/WT Agreement does not have to be the Responsible Officer chosen by the FFI for purposes of certification under the regulations or for FATCA Registration purposes.
Q6. If a member of the Expanded Affiliated Group is a Qualified Intermediary/Withholding Trust/Withholding Partnership, does the Lead Financial Institution renew the Qualified Intermediary/Withholding Trust/Withholding Partnership agreement on behalf of the member or does the member renew its own agreement? Each Member FI with a Qualified Intermediary/Withholding Trust/Withholding Partnership (“QI/WP/WT”) agreement will renew its own agreement on the registration system.  When a Member is completing its registration it will be asked about whether it maintains and seeks to renew a QI/WP/WT agreement with the Service.  If the Member indicates it has one of these agreements and would like to renew the agreement, the Member will do so in Part 3 of the registration system in addition to claiming status as a participating FFI or registered-deemed compliant FFI (and obtaining its required GIINs). 

IGA Registration

# Questions Answers
Q1. Please provide a link that lists the jurisdictions treated as having in effect a Model 1 or Model 2 IGA. The U.S. Department of Treasury’s list of jurisdictions that are treated as having an intergovernmental agreement in effect can be found by clicking on the following link: IGA LIST
Q2. How do Foreign Financial Institutions in Model 1 jurisdictions register on the FATCA registration website?

Financial Institutions that are treated as Reporting Financial Institutions under a Model 1 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Registered Deemed-Compliant Foreign Financial Institutions.

More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)

Q3. How do Foreign Financial Institutions in Model 2 jurisdictions register on the FATCA registration website?

Financial Institutions that are treated as Reporting Financial Institutions under a Model 2 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Participating Foreign Financial Institutions.

More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)

Q4. We are an FFI in a country that has not signed an IGA, and the local laws of our country do not allow us to report U.S. accounts or withhold tax. What is our FATCA classification?

Unless the Treasury website provides that your country is treated as having an IGA in effect, then, because of its local law restrictions, this FFI should register as a Limited FFI provided it meets the definition shown directly below. SeeFATCA – Archive   for a list of countries treated as having an IGA in effect.

A Limited FFI means an FFI that, due to local law restrictions, cannot comply with the terms of an FFI Agreement, or otherwise be treated as a PFFI or RDCFFI, and that is agreeing to satisfy certain obligations for its treatment as a Limited FFI.

Q5. In a Model 1 IGA jurisdiction, does the FFI need to fill out Question 10 about Responsible Officers? Yes, if an FFI treated as a reporting Model 1 FFI wishes to have a GIIN, a Responsible Officer must be designated in Part 1, line 10 of Form 8957.     Please see the FAQs on Responsible Officers for further information. 

Expanded Affiliated Groups

# Questions Answers
Q1 For registration purposes, can an EAG with a Lead FI and 2 Member FIs be divided into: (1) a group with a Lead FI and a member FI, and (2) a member FI that will register as a Single FI? Yes. An EAG may organize itself into subgroups, so long as all entities with a registration requirement are registered. An FI that acts as a Compliance FI for any members of the EAG is, however, required to register each such member as would a Lead FI for such members.
Q2. What is required for an entity to be a Lead FI? A Lead FI means a USFI, FFI, or a Compliance FI that will initiate the FATCA Registration process for each of its Member FIs that is a PFFI, RDCFFI, or Limited FFI and that is authorized to carry out most aspects of its Members’ FATCA Registrations. A Lead FI is not required to act as a Lead FI for all Member FIs within an EAG. Thus, an EAG may include more than one Lead FI that will carry out FATCA Registration for a group of its Member FIs. A Lead FI will be provided the rights to manage the online account for its Member FIs. However, an FFI seeking to act as a Lead FI cannot have Limited FFI status in its country of residence. See Rev. Proc. 2014-13 to review the FFI agreement for other requirements of a Lead FI that is also a participating FFI.
Q3. Can a Member FI complete its FATCA registration and obtain a GIIN if the Lead FI for that Member FI has not yet registered under FATCA?

No, a Member FI can only register after its Lead FI has registered.  When the Member FI does register, it should indicate in Part 1, line 1, that it is a member of an expanded affiliated group.

In Part 2 of the Lead FI’s registration, the Lead FI will add basic identifying information for each Member, and the system will create the Member FATCA accounts.  Each Member FI will then be required to log into the system and complete its registration.

Q4. Is a limited FFI who is a member of an Expanded Affiliated Group subject to Chapter 4 withholding?  Yes. A limited FFI (regardless of whether it is a member of an Expanded Affiliated Group) must identify itself to withholding agents as a nonparticipating FFI and, as a result, is subject to Chapter 4 withholding.  Thus, while limited FFIs are generally required to register, they will not be issued GIINs.

Sponsoring/Sponsored Entities

# Questions Answers
Q1. We are a Sponsoring Entity, and we would like to register our Sponsored Entities. How do we register our Sponsored Entities?

The Sponsoring Entity that agrees to perform the due diligence, withholding, and reporting obligations of one or more Sponsored Entities pursuant to Treas. Reg. §1.1471-5(f)(1)(i)(F) should register with the IRS via the FATCA registration website to be treated as a Sponsoring Entity. To allow a Sponsoring Entity to register its Sponsored Entities with the IRS, and, as previewed in Notice 2013-69, the IRS is developing a streamlined process for Sponsoring Entities to register Sponsored Entities on the FATCA registration website. Additional information about this process will be provided by the IRS at a later date.

While a Sponsoring Entity is required to register its Sponsored Entities for those entities to obtain GIINs, the temporary and proposed regulations provide a transitional rule that, for payments prior to January 1, 2016, permit a Sponsored Entity to provide the GIIN of its Sponsoring Entity on withholding certificates if it has not yet obtained a GIIN. Thus, a Sponsored Entity does not need to provide its own GIIN until January 1, 2016 and is not required to register before that date.

Responsible Officers and Points of Contact

# Questions Answers
Q1. What is a Point Of Contact (POC)? The Responsible Officer listed on line 10 of Form 8957 (or the online registration system) can authorize a POC to receive FATCA-related information regarding the FI, and to take other FATCA-related actions on behalf of the FI. While the POC must be an individual, the POC does not need to be an employee of the FI. For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete and submit the FATCA Registration on behalf of an FI. John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.
Q2. Is the Responsible Officer required to be the same person for all lines on Form 8957 or the online registration (“FATCA Registration”)?

No, it is not required that the Responsible Officer (“RO”) be the same person for all lines on Form 8957 or the online registration.  It is possible, however, that the same person will have the required capacity to serve as the RO for all FATCA Registration purposes.

The term “RO” is used in several places in the FATCA Registration process.  In determining an appropriate RO for each circumstance, the Financial Institution (“FI”) or direct reporting NFFE should review the capacity requirements and select an individual who meets those requirements.  This will be a facts and circumstances determination.

Please note that the responsible officer used for registration purposes may differ from the certifying responsible officer of an FFI referenced in Treasury Regulation §1.1471-1(b)(116).  (See, however, below regarding “Delegation of RO Duties.”)

Below is a description of the required RO capacity per line:

Part 1, Question 10 (FATCA RO for the Financial Institution)

Language from the Form 8957 Instructions and the FATCA Online Registration User Guide specifies that the RO for question 10 purposes is a person authorized under applicable local law to establish the statuses of the entity’s home office and branches as indicated on the registration form.  (See FAQ below for what it means to “establish the FATCA statuses” of the FI’s home office and branches or direct reporting NFFE.)

Part 1, Question 11b (Point of Contact authorization)

The RO identified in question 11b must be an individual who is authorized under local law to consent on behalf of the FI or direct reporting NFFE (“an authorizing individual”) to the disclosure of FATCA-related tax information to third parties.  By listing one or more Points of Contact (each, a “POC”) in question 11b and selecting “Yes” in question 11a, the authorizing individual identified at the end of question 11b (to the right of the checkbox) is providing the IRS with written authorization to release the entity’s FATCA-related tax information to the POC.  This authorization specifically includes authorization for the POC to complete the FATCA Registration (except for Part 4), to take other FATCA-related actions, and to obtain access to the FI’s (or direct reporting NFFE’s) tax information.  Once the authorization is granted, it is effective until revoked by either the POC or by an authorizing individual of the FI or direct reporting NFFE.

Part 4

The authority required for an individual to be an RO for purposes of Part 4 is substantially similar to the authority required for RO status under Treas. Reg. § 1.1471-1(b)(116).

The RO designated in Part 4 must be an individual with authority under local law to submit the information provided on behalf of the FI or direct reporting NFFE.  In the case of FIs or FI branches not governed by a Model 1 IGA, this individual must also have authority under local law to certify that the FI meets the requirements applicable to the FI status or statuses identified on the registration form.  This individual must be able to certify, to the best of his or her knowledge, that the information provided in the FI’s or direct reporting NFFE’s registration is accurate and complete.  In the case of an FI, the individual must be able to certify that the FI meets the requirements applicable to the status(es) identified in the FI’s registration.  In the case of a direct reporting NFFE, the individual must be able to certify that the direct reporting NFFE meets the requirements of a direct reporting NFFE under Treas. Reg. § 1.1472-1(c)(3).

An RO (as defined for purposes of Part 4) can delegate authorization to complete Part 4 by signing a Form 2848 “Power of Attorney Form and Declaration of Representative” or other similar form or document (including an applicable form or document under local law giving the agent the authorization to provide the information required for the FATCA Registration).

Note: While the certification in Part 4 of the online registration does not include the term “responsible officer,” the FATCA Online Registration User Guide provides that the individual designated in Part 4 must have substantially the same authority as the RO as defined for purposes of Form 8957, Part 4.

Delegation of RO Duties

While the ROs for purposes of Question 10, Question 11b, and Part 4 of the FATCA Registration may be different individuals, in practice it will generally be the same individual (or his/her delegate)).  The regulatory RO is responsible for establishing and overseeing the FFI’s compliance program.  The regulatory RO may, but does not necessarily have to, be the registration RO for purposes of 1) ascertaining and completing the chapter 4 statuses in the registration process; 2) receiving the GIIN and otherwise interacting with the IRS in the registration process; and 3) making the Part 4 undertakings.  Alternatively, the regulatory RO, or the FFI (through another individual with sufficient authority), may delegate each of these registration roles to one or more persons pursuant to a delegation of authority (such as a Power of Attorney) that confers the particular registration responsibility or responsibilities to such delegate(s).  The scope of the delegation, and the delegate’s exercise of its delegated authority within such scope, will limit the scope of the potential liability of the delegate under the rules of agency law , to the extent applicable.  The ultimate principal, whether that is the regulatory RO or the FFI, remains fully responsible in accordance with the terms and conditions reflected in the regulations, and other administrative guidance to the extent applicable under FATCA, the regulations.

Q3. The Instructions for Form 8957 state that for purposes of Part 1, question 10, “. . .  RO means the person authorized under applicable local law to establish the statuses of the FI’s home office and branches as indicated on the registration form.”  What does it mean for an RO to have the authority to “establish the statuses of the FI’s home office and branches as indicated on the registration form”? To have the authority to “establish the statuses” for purposes of question 10, an RO must have the authority to act on behalf of the FI to represent the FATCA status(es) of the FI to the IRS as part of the registration process.  This RO must also have the authority under local law to designate additional POCs.
Q4. My FI plans on employing an outside organization (or individual) solely for the purpose of assisting with the registration process.  Once registration is complete, or shortly thereafter, my FI intends to discontinue its relationship with this organization.  Is this permissible under the FATCA registration system? How should my FI use the registration system to identify this relationship?

Yes, the FI or direct reporting NFFE may employ an outside organization to assist with FATCA registration and discontinue the relationship with the outside organization once registration is complete.  As part of the registration process, an FI or direct reporting NFFE may appoint up to five POCs who are authorized to take certain FATCA-related actions on behalf of the entity, including the ability to complete all parts of the FATCA Registration (except for Part 4), to take other appropriate or helpful FATCA-related actions, and to obtain access to the entity’s FATCA-related tax information.  The POC authorization must be made by an RO within the meaning of Part 1, question 10.  Part 4 must be completed by the RO or a duly authorized agent of the RO.  (See FAQ 1 for a discussion of the process for delegating authorization to complete Part 4.)

Once the services of a POC are no longer needed, the RO may log into the online FATCA account and delete the POC.  This process revokes the POC’s authorization.  At this point, the Responsible Officer can input a new POC, or leave this field blank if they no longer wish to have any POC other than the RO listed on Line 10.

If a third-party adviser that is an entity is retained to help the FI or direct reporting NFFE complete its FATCA registration process, the name of the third-party individual adviser that will help complete the FATCA registration process should be entered as a POC in Part 1, question 11b, and the “Business Title” field for that individual POC should be completed by inserting the name of the entity and the POC’s affiliation with the entity.  For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete the FATCA Registration on behalf of FI Y.  John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.

Financial Institutions

# Questions Answers
Q1. Are U.S. Financial Institutions (USFIs) required to register under FATCA? If so, under what circumstances would a USFI register? A USFI is generally not required to register under FATCA. However, a USFI will need to register if the USFI chooses to become a Lead FI and/or a Sponsoring Entity or seeks to maintain and renew the QI status of a foreign branch that is a QI. Furthermore, a USFI with a foreign branch that is a reporting Model 1 FFI is required to register on behalf of its foreign branches (and should identify each such branch when registering). A USFI with non-QI branch operations in a Model 2 jurisdiction or in a non-IGA jurisdiction is not required to register with the IRS.
Q2. Is a Foreign Financial Institution (“FFI”) required to obtain an EIN? If the FFI has a withholding obligation and will be filing Forms 1042 and Forms 1042-S with the Internal Revenue Service, it will be required to have an EIN. Please see publication 515 (“Withholding of Tax on Nonresident Aliens and Foreign Entities”) for further information about U.S. Withholding requirements. See Pub. 515. An FFI is also required to obtain an EIN when it is a QI, WP, or WT (through the application process to obtain any such status) or when the FFI is a participating FFI that elects to report its U.S. accounts on Forms 1099 under Treas. Reg. §1.1471-4(d)(5).
How does a FFI apply for a EIN if it does not already have one? If a FFI does not have an EIN, it may apply for one using Form SS-4 (“Application for Employer Identification Number”) or the online registration system. See Apply-for-an-Employer-Identification-Number-(EIN)-Onlinefor more information.

Exempt Beneficial Owners

# Questions Answers
Q1. We are a foreign central bank of issue. Will we be subject to FATCA withholding if we do not register? You will generally be exempt from FATCA Registration and withholding if you meet the requirements to be treated as an exempt beneficial owner (e.g. as a foreign central bank of issue described in Treas. Reg. § 1.1471-6(d), as a controlled entity of a foreign government under Treas. Reg. §1.1471-6(b)(2), or as an entity treated as either of the foregoing under an applicable IGA). A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner in accordance with the regulations. However, an exempt beneficial owner may be subject to withholding on payments derived from the type of commercial activity described in Treas. Reg. § 1.1471-6(h).
Q2. We are a foreign pension plan. Will we be subject to FATCA withholding if we do not register? You will be exempt from FATCA Registration and withholding if you meet the requirements to be treated as a retirement fund described in Treas. Reg. § 1.1471-6(f), or under an applicable IGA. A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner (in this case, a retirement fund) in accordance with the regulations.

NFFEs

# Questions Answers
Q1. How should an entity seeking the FATCA status of “direct reporting NFFE” (other than a sponsored direct reporting NFFE) register for this status to obtain a GIIN in order to avoid FATCA withholding?

A direct reporting NFFE is eligible to register for this status and when registering should complete an online registration (or, alternatively, submit a paper Form 8957) based on the instructions provided in this FAQ.   For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information.

In general, for purposes of completing the registration of a direct reporting NFFE, substitute the words “direct reporting NFFE” for the words “financial institution” wherever  they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).

Part 1

Question 1 – – Select “Single”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”.  (If using the portal online, selecting “no” will automatically skip Questions 8 and 9.)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and will act as a point of contact with the IRS in connection with its status as a direct reporting NFFE.

Part 2 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting Single in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Direct reporting NFFE QIs/WPs/WTs should renew their agreements through the existing traditional paper process.  Instructions can be found at the following link (Question IX), see:Qualified-Intermediary-Frequently-Asked-Questions

Q2. How should a sponsor of a sponsored direct reporting NFFE register itself for this status and obtain a GIIN?

A sponsor of a sponsored direct reporting NFFE is a sponsoring entity (see Treas. Reg. § 1.1471-1T(b)(124)) and  should complete an online registration (or, alternatively, submit a paper Form 8957) as a sponsoring entity, based on the instructions provided in this FAQ.  A sponsoring entity need only complete one registration to act as the sponsor for both sponsored FFIs and sponsored direct reporting NFFEs.  For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information, including by incorporating the definition of sponsoring entity provided in Treas. Reg. § 1.1471-1T(b)(124).

In general, for purposes of having a sponsor register a sponsored direct reporting NFFE, substitute the words “sponsor of a direct reporting NFFE” for the words “sponsoring entity” wherever they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).

Part 1

Question 1 – – Select “Sponsoring Entity”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”. (If using the portal online, selecting “no” will automatically skip Questions 8 and 9)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and who will act as a point of contact with the IRS in connection with its obligations as a sponsoring entity.

Part 2 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section.  (If using the portal online, selecting Sponsoring Entity in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Registration Update

# Questions Answers
Q1. Why has my registration been put into “Registration Incomplete”? What can I do?

If your registration has been put into Registration Incomplete status, it is because the IRS has identified an issue with your registration.  If you are Registration Incomplete status, please review your registration for any of the following errors and update it accordingly:

  1. The FFI has identified itself as a Qualified Intermediary with a QI-EIN of which the IRS has no record.  (If you have QI, WP or WT Agreement signed with the IRS, please contact the Financial Intermediaries Team for further assistance.)

  2. The RO has been identified with initials only and no specific name has been provided.

  3. The RO does not appear to be a natural person.

  4. Notice 2013-43 stated that any registrations submitted prior to  January 1, 2014 would be taken out of submit and put into Registration Incomplete status. Thus, if your registration was submitted prior to  January 1, 2014, you must  re-submit your registration assuming that none of the other abovementioned reasons (1-3) are an issue with the FFI’s registration.

After you have updated your registration, you must resubmit in order for your registration to be processed.

General Compliance

# Questions Answers
Q1. How will Certified-Deemed Compliant FFIs, Owner-documented FFIs, or Excepted FFIs certify to U.S. withholding agents that they are not subject to Chapter 4 withholding given that they are not required to register with the IRS?  Certified-Deemed Compliant FFIs, Owner-documented FFIs, and Excepted FFIs will demonstrate their Chapter 4 withholding status to U.S. withholding agents by providing a withholding certificate and documentary evidence that complies with the requirements of Treas. Reg. 1.1471-3(d).
Q2. We are an FFI in a non-IGA country.  Will we be subject to Chapter 4 withholding if we do not register with the IRS?

Yes, to the extent that you receive withholdable payments and are not subject to an exemption from the registration requirement.  Under FATCA, to avoid being withheld upon, FFIs that are not subject to an exemption from the registration requirement must register with the IRS and agree to report to the IRS certain information about their U.S. accounts, including accounts of certain foreign entities with substantial U.S. owners.  An FFI that fails to satisfy its applicable registration requirements will generally be subject to 30% withholding on withholdable payments that it receives.  

Categories of FFIs that are exempt from registration include:

  1. Certified deemed-compliant FFIs (including any entities treated as certified deemed-compliant);
  2. Exempt beneficial owners;
  3. Owner Documented FFIs; and
  4. Excepted FFIs.
Q3. What are the consequences of terminating the FFI agreement for a Participating Foreign Financial Institution? If the FFI agreement is terminated by either the IRS or the FFI pursuant to the termination procedures set forth in Section 12 of the FFI agreement, the FFI will be treated as a nonparticipating FFI and subject to 30% withholding on withholdable payments made after the later of (i) the date of termination of the FFI agreement, or (ii) June 30, 2014, except to the extent that the withholdable payments are exempt from withholding (e.g. under the rules related to grandfathered obligations) or the FFI qualifies for a chapter 4 status other than a nonparticipating FFI (such as a certified deemed-compliant FFI).  See Revenue Procedure 2014-13, 2014-3 I.R.B. 419, for the terms of the FFI agreement
Q4. What happens if an FFI is not registered by May 5th, 2014? As set forth in Announcement 2014-17, released April 2, 2014, to ensure inclusion on the first IRS FFI List (which is expected to first be electronically available on June 2, 2014) prior to the date FATCA withholding goes into effect, an FFI must finalize its registration by May 5, 2014.   The regulations generally provide that, in order for withholding not to apply, a withholding agent must obtain an FFI’s GIIN for payments made after June 30, 2014, though it need not confirm that the GIIN appears on the IRS FFI List until 90 days after the FFI provides a withholding certificate or written statement claiming status as a participating FFI or registered deemed-compliant FFI.  A special rule, however, provides that a withholding agent does not need to obtain a reporting Model 1 FFI’s GIIN for payments made before January 1, 2015.  See Treas. Reg. § 1.1471-3(d)(4)(iv)(A).  As a result, while a reporting Model 1 FFI is currently able to register and obtain a GIIN, it will have additional time beyond July 1, 2014, to register and obtain a GIIN in order to ensure that it is included on the IRS FFI list before January 1, 2015.  See Announcement 2014-17 for revised FATCA registration deadlines to ensure inclusion on the first FFI List (which is expected to be electronically available on June 2, 2014).
Q5. Are Forms W-8 still required to be renewed by the appropriate beneficial owners?

Generally, a Form W-8BEN will remain in effect for purposes of establishing foreign status for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on September 30, 2015, remains valid through December 31, 2018.

However, under certain conditions a Form W-8BEN will remain in effect indefinitely until a change of circumstances occurs. To determine the period of validity for Form W-8BEN for purposes of chapter 4, see Treas. Reg. § 1.1471-3(c)(6)(ii). To determine the period of validity for Form W-8BEN for purposes of chapter 3, see Teas. Reg. § 1.1441-1(e)(4)(ii).

Withholding certificates and documentary evidence obtained for chapter 3 or chapter 61 purposes that would otherwise expire on December 31, 2013, will not expire before January 1, 2015, unless a change in circumstances occurs that would otherwise render the withholding certificate or documentary evidence incorrect or unreliable.

Please note that various Forms in the W-8 series were revised in 2014 to incorporate the certifications required for FATCA purposes and can now be found at the following link: Form & Pubs.  See Treas. Reg. § 1.1471-3(c) for rules regarding reliance on a pre-FATCA Form W-8. 

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3 new IGAs in effect – FATCA IGA update

Posted by William Byrnes on April 23, 2014


67 days remain until the July 1st deadline that FATCA’s 30% withholding applies to payments from US sources.  But with less than 2 weeks, the crunch time is on for foreign financial institutions (FFIs) to register by May 5 with the IRS to obtain a GIIN and to be included on the IRS’ list of participating FFIs in order to avoid the attracting the 30% withholding by US withholding agents.

51 IGAs are now to be treated in effect, including 26 that have been signed and 25 that are agreed (but not yet officially signed).  The 3 newly added IGAs in the past two weeks include Bahamas, India and Slovak Republic.  FFIs in these IGA jurisdictions have an extension to register with the IRS before December 22, 2014 to obtain their GIINs.

The following jurisdictions are treated as having a FATCA intergovernmental agreement (IGA) in effect:

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

Model 1 IGA = 24

  1. Australia (4-2-2014)
  2. Bahamas (4-17-2014) <— new
  3. Belgium (4-2-2014)
  4. Brazil (4-2-2014)
  5. British Virgin Islands (4-2-2014)
  6. Croatia (4-2-2014)
  7. Czech Republic (4-2-2014)
  8. Estonia (4-3-2014)
  9. Gibraltar (4-2-2014)
  10. India (4-11-2014) < — new
  11. Jamaica (4-2-2014)
  12. Kosovo (4-2-2014)
  13. Latvia (4-2-2014)
  14. Liechtenstein (4-2-2014)
  15. Lithuania (4-2-2014)
  16. New Zealand (4-2-2014)
  17. Poland (4-2-2014)
  18. Portugal (4-2-2014)
  19. Qatar (4-2-2014)
  20. Slovak Republic (4-11-2014) < — new
  21. Slovenia (4-2-2014)
  22. South Africa (4-2-2014)
  23. South Korea (4-2-2014)
  24. Romania (4-2-2014)

Model 2 IGA = 1

  1. Austria (4-2-2014)

Jurisdictions that have signed agreements:

 

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new FATCA FAQs released by IRS

Posted by William Byrnes on April 18, 2014


FATCA – FAQs General

  1. Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts
  2. IGA Registration
  3. Expanded Affiliated Groups
  4. Sponsoring/Sponsored Entities
  5. Responsible Officers and Points of Contact
  6. Financial Institutions
  7. Exempt Beneficial Owners
  8. NFFEs
  9. Registration Update
  10. ADDITIONAL SUPPORT
  11. FATCA Registration System Technical Support 
# Questions Answers
Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts

Q1.

How does a Financial Institution that is not currently a Qualified Intermediary (“QI”), a Withholding Foreign Partnership (“WP”), or a Withholding Foreign Trust (“WT”) register to become one?

The process to become a QI, WP or WT has not been modified by the provisions of FATCA.

The application for Qualified Intermediary status can be found here: QI Application

Information on acquiring Withholding Foreign Partnership, or Withholding Foreign Trust status can be found here: WP/WT Application

Q2.

How do FIs that are currently QIs, WPs and WTs renew their agreements?

Existing QIs, WPs and WTs are required to renew their QI agreements through the FATCA registration website as part of their FATCA registration process.

All QI, WP, or WT agreements that would otherwise expire on December 31, 2013 will be automatically extended until June 30, 2014.  (Notice 2013-43; 2013-31 IRB 113).

Q3.

I am not currently a QI/WP/WT.  Can I use the LB&I registration portal to register for FATCA and become a new QI/WP/WT?

No.

QI/WP /WT status can only obtained by completing and submitting a Form 14345 (“QI Intermediary Application”) and Form SS-4 (“Application for Employer Identification Number”) directly to the QI Program.   Interested QIs/WPs/WT should submit the required paperwork to the QI program and separately use the FATCA registration portal to obtain a GIIN for FATCA purposes.    FFIs can not become a new QI/WP/WT through the FATCA portal.

Applications for QI/WP/WT status can be made to:

IRS-Foreign Intermediary Program
Attn:  QI/WP/WT Applications
290 Broadway, 12th floor
New York City, New York 10007

Note:  Form 14345 (“QI Intermediary Application”) should be used for WPs and WTs in addition to QIs.

Q4.

Must an FI become a QI/WP/WT in order to register under FATCA?

An FI is not required to obtain QI/WP or WT status to register under FATCA.  If at the time of FATCA registration, the FI does not have in effect a withholding agreement with the IRS to be treated as a QI, WP or WT, the FI will indicate “Not applicable” in box 6 and will continue with the registration process.

IGA Registration

Q5.

Please provide a link that lists the jurisdictions treated as having in effect a Model 1 or Model 2 IGA.

The U.S. Department of Treasury’s list of jurisdictions that are treated as having an intergovernmental agreement in effect can be found by clicking on the following link: IGA LIST

Q6.

How do Foreign Financial Institutions in Model 1 jurisdictions register on the FATCA registration website?

Financial Institutions that are treated as Reporting Financial Institutions under a Model 1 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Registered Deemed-Compliant Foreign Financial Institutions.

More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)

Q7.

How do Foreign Financial Institutions in Model 2 jurisdictions register on the FATCA registration website?

Financial Institutions that are treated as Reporting Financial Institutions under a Model 2 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Participating Foreign Financial Institutions.

More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)

Q8.

We are an FFI in a country that has not signed an IGA, and the local laws of our country do not allow us to report U.S. accounts or withhold tax. What is our FATCA classification?

Unless the Treasury website provides that your country is treated as having an IGA in effect, then, because of its local law restrictions, this FFI should register as a Limited FFI provided it meets the definition shown directly below. See FATCA – Archive   for a list of countries treated as having an IGA in effect.

A Limited FFI means an FFI that, due to local law restrictions, cannot comply with the terms of an FFI Agreement, or otherwise be treated as a PFFI or RDCFFI, and that is agreeing to satisfy certain obligations for its treatment as a Limited FFI.

Expanded Affiliated Groups
Q9.

For registration purposes, can an EAG with a Lead FI and 2 Member FIs be divided into: (1) a group with a Lead FI and a member FI, and (2) a member FI that will register as a Single FI?

Yes. An EAG may organize itself into subgroups, so long as all entities with a registration requirement are registered. An FI that acts as a Compliance FI for any members of the EAG is, however, required to register each such member as would a Lead FI for such members.

Q10.

What is required for an entity to be a Lead FI?

A Lead FI means a USFI, FFI, or a Compliance FI that will initiate the FATCA Registration process for each of its Member FIs that is a PFFI, RDCFFI, or Limited FFI and that is authorized to carry out most aspects of its Members’ FATCA Registrations. A Lead FI is not required to act as a Lead FI for all Member FIs within an EAG. Thus, an EAG may include more than one Lead FI that will carry out FATCA Registration for a group of its Member FIs. A Lead FI will be provided the rights to manage the online account for its Member FIs. However, an FFI seeking to act as a Lead FI cannot have Limited FFI status in its country of residence. See Rev. Proc. 2014-13 to review the FFI agreement for other requirements of a Lead FI that is also a participating FFI.

Sponsoring/Sponsored Entities

Q11.

We are a Sponsoring Entity, and we would like to register our Sponsored Entities. How do we register our Sponsored Entities?

The Sponsoring Entity that agrees to perform the due diligence, withholding, and reporting obligations of one or more Sponsored Entities pursuant to Treas. Reg. §1.1471-5(f)(1)(i)(F) should register with the IRS via the FATCA registration website to be treated as a Sponsoring Entity. To allow a Sponsoring Entity to register its Sponsored Entities with the IRS, and, as previewed in Notice 2013-69, the IRS is developing a streamlined process for Sponsoring Entities to register Sponsored Entities on the FATCA registration website. Additional information about this process will be provided by the IRS at a later date.

While a Sponsoring Entity is required to register its Sponsored Entities for those entities to obtain GIINs, the temporary and proposed regulations provide a transitional rule that, for payments prior to January 1, 2016, permit a Sponsored Entity to provide the GIIN of its Sponsoring Entity on withholding certificates if it has not yet obtained a GIIN. Thus, a Sponsored Entity does not need to provide its own GIIN until January 1, 2016 and is not required to register before that date.

Responsible Officers and Points of Contact

Q12.

What is a Point Of Contact (POC)?

The Responsible Officer listed on line 10 of Form 8957 (or the online registration system) can authorize a POC to receive FATCA-related information regarding the FI, and to take other FATCA-related actions on behalf of the FI. While the POC must be an individual, the POC does not need to be an employee of the FI. For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete and submit the FATCA Registration on behalf of an FI. John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.

Q13.

Is the Responsible Officer required to be the same person for all lines on Form 8957 or the online registration (“FATCA Registration”)?

No, it is not required that the Responsible Officer (“RO”) be the same person for all lines on Form 8957 or the online registration.  It is possible, however, that the same person will have the required capacity to serve as the RO for all FATCA Registration purposes.

The term “RO” is used in several places in the FATCA Registration process.  In determining an appropriate RO for each circumstance, the Financial Institution (“FI”) or direct reporting NFFE should review the capacity requirements and select an individual who meets those requirements.  This will be a facts and circumstances determination.

Please note that the responsible officer used for registration purposes may differ from the certifying responsible officer of an FFI referenced in Treasury Regulation §1.1471-1(b)(116).  (See, however, below regarding “Delegation of RO Duties.”)

Below is a description of the required RO capacity per line:

Language from the Form 8957 Instructions and the FATCA Online Registration User Guide specifies that the RO for question 10 purposes is a person authorized under applicable local law to establish the statuses of the entity’s home office and branches as indicated on the registration form.  (See FAQ below for what it means to “establish the FATCA statuses” of the FI’s home office and branches or direct reporting NFFE.)

Part 1, Question 11b (Point of Contact authorization)

The RO identified in question 11b must be an individual who is authorized under local law to consent on behalf of the FI or direct reporting NFFE (“an authorizing individual”) to the disclosure of FATCA-related tax information to third parties.  By listing one or more Points of Contact (each, a “POC”) in question 11b and selecting “Yes” in question 11a, the authorizing individual identified at the end of question 11b (to the right of the checkbox) is providing the IRS with written authorization to release the entity’s FATCA-related tax information to the POC.  This authorization specifically includes authorization for the POC to complete the FATCA Registration (except for Part 4), to take other FATCA-related actions, and to obtain access to the FI’s (or direct reporting NFFE’s) tax information.  Once the authorization is granted, it is effective until revoked by either the POC or by an authorizing individual of the FI or direct reporting NFFE.

Part 4

The authority required for an individual to be an RO for purposes of Part 4 is substantially similar to the authority required for RO status under Treas. Reg. § 1.1471-1(b)(116).

The RO designated in Part 4 must be an individual with authority under local law to submit the information provided on behalf of the FI or direct reporting NFFE.  In the case of FIs or FI branches not governed by a Model 1 IGA, this individual must also have authority under local law to certify that the FI meets the requirements applicable to the FI status or statuses identified on the registration form.  This individual must be able to certify, to the best of his or her knowledge, that the information provided in the FI’s or direct reporting NFFE’s registration is accurate and complete.  In the case of an FI, the individual must be able to certify that the FI meets the requirements applicable to the status(es) identified in the FI’s registration.  In the case of a direct reporting NFFE, the individual must be able to certify that the direct reporting NFFE meets the requirements of a direct reporting NFFE under Treas. Reg. § 1.1472-1(c)(3).

An RO (as defined for purposes of Part 4) can delegate authorization to complete Part 4 by signing a Form 2848 “Power of Attorney Form and Declaration of Representative” or other similar form or document (including an applicable form or document under local law giving the agent the authorization to provide the information required for the FATCA Registration).

Note: While the certification in Part 4 of the online registration does not include the term “responsible officer,” the FATCA Online Registration User Guide provides that the individual designated in Part 4 must have substantially the same authority as the RO as defined for purposes of Form 8957, Part 4.

Delegation of RO Duties

While the ROs for purposes of Question 10, Question 11b, and Part 4 of the FATCA Registration may be different individuals, in practice it will generally be the same individual (or his/her delegate)).  The regulatory RO is responsible for establishing and overseeing the FFI’s compliance program.  The regulatory RO may, but does not necessarily have to, be the registration RO for purposes of 1) ascertaining and completing the chapter 4 statuses in the registration process; 2) receiving the GIIN and otherwise interacting with the IRS in the registration process; and 3) making the Part 4 undertakings.  Alternatively, the regulatory RO, or the FFI (through another individual with sufficient authority), may delegate each of these registration roles to one or more persons pursuant to a delegation of authority (such as a Power of Attorney) that confers the particular registration responsibility or responsibilities to such delegate(s).  The scope of the delegation, and the delegate’s exercise of its delegated authority within such scope, will limit the scope of the potential liability of the delegate under the rules of agency law , to the extent applicable.  The ultimate principal, whether that is the regulatory RO or the FFI, remains fully responsible in accordance with the terms and conditions reflected in the regulations, and other administrative guidance to the extent applicable under FATCA, the regulations.

Q14.

The Instructions for Form 8957 state that for purposes of Part 1, question 10, “. . .  RO means the person authorized under applicable local law to establish the statuses of the FI’s home office and branches as indicated on the registration form.”  What does it mean for an RO to have the authority to “establish the statuses of the FI’s home office and branches as indicated on the registration form”?

To have the authority to “establish the statuses” for purposes of question 10, an RO must have the authority to act on behalf of the FI to represent the FATCA status(es) of the FI to the IRS as part of the registration process.  This RO must also have the authority under local law to designate additional POCs.

Q15.

My FI plans on employing an outside organization (or individual) solely for the purpose of assisting with the registration process.  Once registration is complete, or shortly thereafter, my FI intends to discontinue its relationship with this organization.  Is this permissible under the FATCA registration system? How should my FI use the registration system to identify this relationship?

Yes, the FI or direct reporting NFFE may employ an outside organization to assist with FATCA registration and discontinue the relationship with the outside organization once registration is complete.  As part of the registration process, an FI or direct reporting NFFE may appoint up to five POCs who are authorized to take certain FATCA-related actions on behalf of the entity, including the ability to complete all parts of the FATCA Registration (except for Part 4), to take other appropriate or helpful FATCA-related actions, and to obtain access to the entity’s FATCA-related tax information.  The POC authorization must be made by an RO within the meaning of Part 1, question 10.  Part 4 must be completed by the RO or a duly authorized agent of the RO.  (See FAQ 1 for a discussion of the process for delegating authorization to complete Part 4.)

Once the services of a POC are no longer needed, the RO may log into the online FATCA account and delete the POC.  This process revokes the POC’s authorization.  At this point, the Responsible Officer can input a new POC, or leave this field blank if they no longer wish to have any POC other than the RO listed on Line 10.

If a third-party adviser that is an entity is retained to help the FI or direct reporting NFFE complete its FATCA registration process, the name of the third-party individual adviser that will help complete the FATCA registration process should be entered as a POC in Part 1, question 11b, and the “Business Title” field for that individual POC should be completed by inserting the name of the entity and the POC’s affiliation with the entity.  For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete the FATCA Registration on behalf of FI Y.  John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.

Financial Institutions

Q16.

Are U.S. Financial Institutions (USFIs) required to register under FATCA? If so, under what circumstances would a USFI register?

A USFI is generally not required to register under FATCA. However, a USFI will need to register if the USFI chooses to become a Lead FI and/or a Sponsoring Entity or seeks to maintain and renew the QI status of a foreign branch that is a QI. Furthermore, a USFI with a foreign branch that is a reporting Model 1 FFI is required to register on behalf of its foreign branches (and should identify each such branch when registering). A USFI with non-QI branch operations in a Model 2 jurisdiction or in a non-IGA jurisdiction is not required to register with the IRS.

Q17.

Is a Foreign Financial Institution (“FFI”) required to obtain an EIN?

If the FFI has a withholding obligation and will be filing Forms 1042 and Forms 1042-S with the Internal Revenue Service, it will be required to have an EIN. Please see publication 515 (“Withholding of Tax on Nonresident Aliens and Foreign Entities”) for further information about U.S. Withholding requirements. SeePub. 515. An FFI is also required to obtain an EIN when it is a QI, WP, or WT (through the application process to obtain any such status) or when the FFI is a participating FFI that elects to report its U.S. accounts on Forms 1099 under Treas. Reg. §1.1471-4(d)(5).

How does a FFI apply for a EIN if it does not already have one?

If a FFI does not have an EIN, it may apply for one using Form SS-4 (“Application for Employer Identification Number”) or the online registration system. See Apply-for-an-Employer-Identification-Number-(EIN)-Onlinefor more information.

Exempt Beneficial Owners

Q18.

We are a foreign central bank of issue. Will we be subject to FATCA withholding if we do not register?

You will generally be exempt from FATCA Registration and withholding if you meet the requirements to be treated as an exempt beneficial owner (e.g. as a foreign central bank of issue described in Treas. Reg. § 1.1471-6(d), as a controlled entity of a foreign government under Treas. Reg. §1.1471-6(b)(2), or as an entity treated as either of the foregoing under an applicable IGA). A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner in accordance with the regulations. However, an exempt beneficial owner may be subject to withholding on payments derived from the type of commercial activity described in Treas. Reg. § 1.1471-6(h).

Q19.

We are a foreign pension plan. Will we be subject to FATCA withholding if we do not register?

You will be exempt from FATCA Registration and withholding if you meet the requirements to be treated as a retirement fund described in Treas. Reg. § 1.1471-6(f), or under an applicable IGA. A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner (in this case, a retirement fund) in accordance with the regulations.

NFFEs

Q20.

How should an entity seeking the FATCA status of “direct reporting NFFE” (other than a sponsored direct reporting NFFE) register for this status to obtain a GIIN in order to avoid FATCA withholding?

A direct reporting NFFE is eligible to register for this status and when registering should complete an online registration (or, alternatively, submit a paper Form 8957) based on the instructions provided in this FAQ.   For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information.

In general, for purposes of completing the registration of a direct reporting NFFE, substitute the words “direct reporting NFFE” for the words “financial institution” wherever  they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).

Part 1

Question 1 – – Select “Single”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”.  (If using the portal online, selecting “no” will automatically skip Questions 8 and 9.)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and will act as a point of contact with the IRS in connection with its status as a direct reporting NFFE.

Part 2 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting Single in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Direct reporting NFFE QIs/WPs/WTs should renew their agreements through the existing traditional paper process.  Instructions can be found at the following link (Question IX), see:Qualified-Intermediary-Frequently-Asked-Questions

Q21.

How should a sponsor of a sponsored direct reporting NFFE register itself for this status and obtain a GIIN?

A sponsor of a sponsored direct reporting NFFE is a sponsoring entity (see Treas. Reg. § 1.1471-1T(b)(124)) and  should complete an online registration (or, alternatively, submit a paper Form 8957) as a sponsoring entity, based on the instructions provided in this FAQ.  A sponsoring entity need only complete one registration to act as the sponsor for both sponsored FFIs and sponsored direct reporting NFFEs.  For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information, including by incorporating the definition of sponsoring entity provided in Treas. Reg. § 1.1471-1T(b)(124).

In general, for purposes of having a sponsor register a sponsored direct reporting NFFE, substitute the words “sponsor of a direct reporting NFFE” for the words “sponsoring entity” wherever they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).

Part 1

Question 1 – – Select “Sponsoring Entity”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”. (If using the portal online, selecting “no” will automatically skip Questions 8 and 9)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and who will act as a point of contact with the IRS in connection with its obligations as a sponsoring entity.

Part 2 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section.  (If using the portal online, selecting Sponsoring Entity in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Registration Update

Q22.

Why has my registration been put into “Registration Incomplete”? What can I do?

If your registration has been put into Registration Incomplete status, it is because the IRS has identified an issue with your registration.  If you are Registration Incomplete status, please review your registration for any of the following errors and update it accordingly:

  1. The FFI has identified itself as a Qualified Intermediary with a QI-EIN of which the IRS has no record.  (If you have QI, WP or WT Agreement signed with the IRS, please contact the Financial Intermediaries Team for further assistance.)

  2. The RO has been identified with initials only and no specific name has been provided.

  3. The RO does not appear to be a natural person.

  4. Notice 2013-43 stated that any registrations submitted prior to  January 1, 2014 would be taken out of submit and put into Registration Incomplete status. Thus, if your registration was submitted prior to  January 1, 2014, you must  re-submit your registration assuming that none of the other abovementioned reasons (1-3) are an issue with the FFI’s registration.

After you have updated your registration, you must resubmit in order for your registration to be processed.

Additional FAQs are available for the FATCA Registration System and the FATCA FFI List.

book coverPractical 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, 2nd Edition just published!

The LexisNexis® Guide to FATCA Compliance (2nd 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.

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New FATCA Frequently Asked Questions (FAQs) Released

Posted by William Byrnes on April 4, 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”, reported the IRS, “…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.”  Treasury has signed IGAs with 26 jurisdictions and has reached agreements in substance with 20 more that have been published, and 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.  See https://profwilliambyrnes.com/2014/04/03/treasury-releases-22-new-fatca-igas/

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.  But 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.

On April 4, the following additional FATCA FAQS were released:

# Questions Answers
_Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts
Q1. How does a Financial Institution that is not currently a Qualified Intermediary (“QI”), a Withholding Foreign Partnership (“WP”), or a Withholding Foreign Trust (“WT”) register to become one? The process to become a QI, WP or WT has not been modified by the provisions of FATCA.

The application for Qualified Intermediary status can be found here: QI Application

Information on acquiring Withholding Foreign Partnership, or Withholding Foreign Trust status can be found here: WP/WT Application

Q2. How do FIs that are currently QIs, WPs and WTs renew their agreements? Existing QIs, WPs and WTs are required to renew their QI agreements through the FATCA registration website as part of their FATCA registration process.

All QI, WP, or WT agreements that would otherwise expire on December 31, 2013 will be automatically extended until June 30, 2014.  (Notice 2013-43; 2013-31 IRB 113).

Q3. If an FFI has a QI/WP/WT agreement in place, does the Responsible Party for purposes of the QI/WP/WT Agreement also have to the serve as the FFI’s Responsible Officer? No, the FFI’s Responsible Party for purposes of a QI/WP/WT Agreement does not have to be the Responsible Officer chosen by the FFI for purposes of certification under the regulations or for FATCA Registration purposes.</