The IRS requires that some sponsoring entities register their sponsored entities for their own Global Intermediary Identification Numbers (GIINs) for FATCA reporting and withholding purposes by December 31, 2016. It is possible you have longer than December 31, 2016 to register your sponsoring entities: it is not necessary to register sponsored investment entities and sponsored controlled foreign corporations covered by Annex II of a Model 1 IGA until before the later of December 31, 2016, and the date that is 90 days after a U.S. reportable account is first identified.
To Connect or Not to Connect
Before registering your sponsored entities, it is useful to determine whether to maintain the association between the particular sponsoring and sponsored entities or to disassociate them. Some FFIs combined sponsored entities under one sponsoring entity because the sponsored entities were in a state of flux (e.g., possible dissolution, sale, business realignment). There may no longer be a business rationale to keep the sponsored entities linked to the sponsoring entity.
Bulk v. Individual Registration
The IRS updated the FATCA Online Registration System and included a spreadsheet-based tool to allow a file upload of information for multiple sponsored entities as well as sponsored subsidiary branches. The FATCA Registration Sponsored Entity Data Preparation Tool can be a real time saver for those FFIs with multiple sponsored entities. However, if the FFI no longer prefers a connection between the sponsoring and sponsored entities, it is necessary to use the traditional individual GIIN registration process.
Expanded GIIN Composition Category Codes
Once you register your sponsored entities in the IRS portal, you will note that the IRS expanded the GIIN category codes related to sponsoring/sponsored entities:
SP - a sponsoring entity
SF - a sponsored entity that is a sponsored fund
SD - a sponsored entity that is a sponsored direct reporting NFFE
SS - a sponsored entity that is a sponsored subsidiary
SB - a sponsored subsidiary’s branch
New Forms W-8: Good Idea But Not Required
Ordinarily, the acquisition of a new GIIN would be a change in circumstances requiring the entity to provide the withholding agent new withholding documentation (e.g., a W-8 series form) within 30 days. However, the IRS created an exception for the registration of sponsored entities by their sponsored entities: if the withholding agent already has on file a withholding certificate for the payee that includes the GIIN of the sponsoring entity, oral or written confirmation of the payee’s GIIN (such as by e-mail) is sufficient. Nevertheless, it is likely that withholding agents will still require you to provide new documentation.
For assistance, please contact me via my contact page or at elizabeth@elizabethmcmorrowlaw.com.