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IRS upgrades FATCA Online Registration System

IR 2015-131

IRS has upgraded the Foreign Account Tax Compliance Act (FATCA) Online Registration System to, among other things, enable sponsoring entities to register their sponsored entities to obtain a global intermediary identification number (GIIN).

Background. on FATCA. The Hiring Incentives to Restore Employment Act of 2010 (P.L. 111-147) added chapter 4 (Code Sec. 1471 to Code Sec. 1474, FATCA) to the Code. Chapter 4 generally requires withholding agents to withhold tax on certain payments to a foreign financial institution (FFI) unless the FFI has entered into an agreement (an FFI agreement) with the U.S. to, among other things, report certain information with respect to U.S. accounts. The withholding rules are essentially a mechanism to enforce reporting requirements. Chapter 4 also imposes withholding, documentation, and reporting requirements on withholding agents, with respect to certain payments made to certain non-financial foreign entities (NFFEs).

A Sponsored FFI is an investment entity or an FFI that is a controlled foreign corporation having a Sponsoring Entity that performs certain due diligence, withholding, and reporting obligations on its behalf. (Reg. § 1.1471-1(b)(122)) A Sponsoring Entity is an entity that has registered with the IRS to perform the due diligence, withholding, and reporting obligations of one or more Sponsored FFIs or direct reporting NFFEs. (Reg. § 1.1471-1T(b)(124))

Where foreign law would prevent an FFI from complying with the terms of an FFI agreement, IRS has collaborated with other governments to develop two alternative model intergovernmental agreements (Model 1 and Model 2 IGAs) that facilitate FATCA implementation.

A GIIN is used by an FFI, etc. to establish its chapter 4 status for withholding purposes and identify the institution for reporting purposes.

Background on the FATCA Online Registration System. Launched in 2013, the FATCA Online Registration System is a web-based system that financial institutions and other entities may use to register for FATCA purposes. In general, these entities use the system to report the foreign financial accounts held by U.S. taxpayers in accordance with FATCA or pursuant to the provisions of IGAs.

According to IRS, more than 170,000 financial institutions worldwide have registered using this system to date, and these financial institutions are located in more than 200 jurisdictions.

Updates concerning sponsored entities. IRS’s news release states that FATCA requires certain sponsored entities (including those covered by an IGA) to have their own GIIN for FATCA reporting and withholding purposes by Dec. 31, 2016.

IRS has updated the FATCA Online Registration System so that sponsoring entities may now register their sponsored entities, and, if applicable, sponsored subsidiary branches, to obtain GIINs. These entities may be added either individually or by submitting a file containing information for multiple entities.

Other updates. Other updates to the FATCA Online Registration System include:

  • Adding two new registration questions: country tax identification number (Question 3B) and common parent entity information (Question 13A and 13B);
  • Allowing certain financial institutions to change the “Financial Institution Type”; and
  • Allowing certain member financial institutions to transfer to another “expanded affiliated group” without canceling the current registration or creating a new registration.

Following such a change or transfer, a new FATCA account will be created with existing registration information, including branches.

User guide and FAQs. The FATCA Online Registration System User Guide and FAQs have been updated for these enhancements.

References: For reporting under FATCA, see FTC 2d/FIN ¶  O-13,230  et seq.; United States Tax Reporter ¶  14,714  et seq.

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