Under FATCA, payers (referred to in tax parlance as “withholding agents”) must withhold tax on certain payments to foreign financial institutions (FFIs) that do not agree to report certain information about their U.S. accounts or accounts of certain foreign entities with substantial U.S. owners.
An FFI may agree to report certain information about its account holders by entering into an agreement to do so with the IRS and then registering to obtain a global intermediary identification number (GIIN). Certain other FFIs that may be exempt as registered deemed-compliant FFIs must also register to obtain a GIIN, including Model 1 IGA FFIs that will report U.S. accounts to their foreign governments, who will in turn provide the information to the IRS.
Withholding agents may rely on an FFI’s claim of FATCA status based on checking the payee’s GIIN against the FFI List which will be published by the IRS and matching the GIIN within 90 days of the date the FFI provided the GIIN to the payer. Other FFI information, such as non-reporting members and limited FFIs in a participating FFI’s expanded affiliated group (EAG) will also appear on the published FFI List.
Payers will need to properly apply this information in their due diligence process. Validating GIINs provided by Model 1 IGA FFIs has been deferred to 2015, but until then, payers will need to validate the FFI’s address as being within known regions with IGA agreements. The IRS plans to publish the list monthly beginning with December, 2013. The expected date for posting the first FFI List is December 2.
To help payers prepare for FATCA compliance, the IRS has released the schema for this FFI List and also a test file which contains dummy data records to illustrate how FFI information will be presented in the FFI List. These can be downloaded in XML or as a CSV file on the IRS website. The FFI List will be a routine step in your compliance procedures; for example, where a GIIN is provided to you in a payee’s documentation, you must check and match the GIIN against the published IRS FFI List within 90 calendar days of receipt, except for Model 1 IGA FFIs where matching has been deferred until 2015.
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