In a series of Frequently Asked Questions (FAQs), IRS has provided information on its website with regard to procedural issues for making the certifications that are required by Responsible Officers (ROs) of foreign financial institutions (FFIs) under the Foreign Account Tax Compliance Act (FATCA). The FAQs provide that the certifications for the certification period ending Dec. 31, 2017 are generally due Dec. 15, 2018.
Background. The Foreign Account Tax Compliance Act (FATCA), included within the Hiring Incentives to Restore Employment Act of 2010 (P.L. 111-147), added Chapter 4 (Code Sec. 1471 through Code Sec. 1474) to the Code. Chapter 4 generally requires withholding agents to withhold a 30% tax on certain payments to a foreign financial institutions (FFI) unless it has entered into an FFI agreement with the U.S. to, among other things, report certain information with respect to U.S. accounts. Withholding can also apply to FFI account holders who refuse to identify themselves as U.S. taxpayers. The FATCA 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).
The participating FFI must appoint an RO to oversee the participating FFI’s compliance with the requirements of the FFI agreement. The RO must (either personally or through designated persons) establish a compliance program that includes policies, procedures, and processes sufficient for the participating FFI to satisfy the requirements of the FFI agreement.
The RO is required to make certifications with respect to both the FFI’s compliance with various FATCA requirements (the “periodic certification”) and certain diligence performed for its preexisting accounts (COPA). The due date for these certifications is is July 1 following the third full calendar year after the date the entity registered and received a global intermediary identification number (GIIN). For many FFIs, the first deadline for their ROs to submit compliance certifications was July 1, 2018.
In March, 2018, IRS noted on its website that it will be updating the “FATCA Registration Portal” on its website that contains FATCA certifications, but that the portal would not be available prior to July 2018. It said that, for entities that have certifications due by July 1, 2018, any RO that is required to certify will have no less than three months from when the certifications are posted on the FATCA Registration Portal to submit them.
New FAQs include postponed due date. Newly posted FAQs discuss procedural aspects of the certification process. Notably, FATCA Certifications FAQ Q13 provides that the certifications for the certification period ending Dec. 31, 2017 are generally due Dec. 15, 2018.
Also included in the FAQs are the following:
…Process for submitting a FATCA certification. The FATCA registration system will be updated in late July 2018. (Registration Update FAQ Q14) The certifications must be made online through the FATCA registration system. A link for each applicable certification (that is, one for COPA (if required) and one for periodic certification) will be available on the entity’s home page.
At the same time the FATCA registration system is being updated to include links to the FATCA certifications, question 4 of Part 1 of the Registration will be updated to request more specific information about the entity’s FATCA classification. Every entity for which a certification is required will be required to update their response to question 4 as part of the certification.
…Who must submit a certification. Not every entity that is registered in the FATCA registration system and has been issued a GIIN needs to submit a certification. FATCA Certifications FAQ Q2 provides a chart that indicates whether the COPA or periodic certification is required, depending on the financial institution’s FATCA classification in its country/jurisdiction of tax residence.
… One entity certifying on behalf of another entity. FATCA Certifications FAQ Q9 provides the circumstances under which the RO of one entity may certify on behalf of another entity and what procedures must be done in that case.
Entities may certify on behalf of other entities only in the following circumstances:
- COPA or periodic certification by a compliance FI (Filer) on behalf of all electing FFIs (Entities).
- Periodic certification by a registered deemed-compliant FFI (Filer) collectively on behalf of the registered deemed-compliant FFI members of the Filer’s expanded affiliated group (Entities).
- Periodic certification by a trustee on behalf of more than one trustee-documented trust.
- COPA or periodic certification by a sponsoring entity (Sponsor) on behalf of sponsored entities.
The FAQ provides different procedures for the certification depending on which above category the certification fits into.
For example, in the first two circumstances above, the RO of the Filer must be registered as a Lead and must register all Entities as members of the Filer’s expanded affiliated group (EAG). The RO will be allowed to certify only on behalf of Entities that are registered as members of the Filer’s EAG. Once properly registered, the RO can submit the certification by clicking on the link on the Filer’s home page. The RO will be allowed to select the Entities that are included in the certification. Only eligible members will appear on the list of possible Entities for which the Filer can certify. Eligibility is determined by registration status and effective date of the member’s registration. For example, a member with an effective date after Dec. 31, 2017, is not eligible to be part of the certification due for the period ending Dec. 31, 2017.
…Consequences of failure to certify. FATCA Certifications FAQ Q 12 provides that if an entity that is required to certify does not submit its certification(s) by the due date, the entity will not be in compliance with its obligations under FATCA. The consequences of being non-compliant may include the revocation of an entity’s FATCA status and, ultimately, the entity’s GIIN being removed from the FFI list.