All Foreign Financial Institutions (FFIs) that have entered into an FFI Agreement with the US Internal Revenue Service (IRS) must renew their FFI Agreements by July 31, 2017.
The IRS anticipates that the FATCA portal will be ready for the FFI Agreement renewal process in May 2017.
FATCA Portal Registration
FFIs and other entities use the FATCA portal to obtain Global Intermediary Identification Numbers (GIINs). A GIIN is:
the identification number that is assigned to a participating FFI or registered deemed-compliant FFI. The term GIIN or Global Intermediary Identification Number also includes the identification number assigned to a reporting Model 1 FFI for purposes of identifying such entity to withholding agents.
For some entities, the FATCA portal registration process involves the entity entering into an FFI Agreement with the IRS. The FFI agreement establishes the FFI’s due diligence, withholding, information reporting, tax return filing, and other obligations.
For the most part, Reporting Model 1 FFIs are not entering into FFI Agreements when they register in the FATCA portal. 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.
Participating FFIs (PFFIs) and Reporting Model 2 FFIs do enter into an FFI Agreement when they register in the FATCA portal. In addition, a Reporting Model 1 FFI will enter into an FFI Agreement if it registers a branch located outside of a Model 1 jurisdiction.
Is My Entity a PFFI or Reporting Model 2 FFI?
A PFFI is an FFI that has agreed to comply with the requirements of an FFI agreement with respect to all branches of the FFI, other than a branch that is a reporting Model 1 FFI or a U.S. branch. A participating FFI also includes a reporting Model 2 FFI.
A Reporting Model 2 FFI is an FFI or branch of an FFI that is treated as a reporting financial institution under an applicable Model 2 IGA and that has registered with the IRS to comply with the terms of the FFI Agreement, as modified by an applicable Model 2 IGA.
The basic question of whether your entity is located in a Model 2 or non-IGA jurisdiction can be answered by checking the US Department of the Treasury website. However, it is best to determine the FATCA classification of your entity with the assistance of an experienced FATCA compliance professional.
New FFI Agreement
The effective date of an FFI Agreement is the date on which the IRS issues a GIIN to the FFI. The IRS published a revised FFI agreement on December 30, 2016 in Rev. Proc. 2017-16. FFIs that have already entered into an FFI Agreement must renew their FFI Agreements in the FATCA portal.
The IRS anticipates that the renewal function for 2017 FFI Agreements will be available in May 2017. An FFI that seeks to renew its FFI agreement must do so prior to July 31, 2017.
If the FFI completes its renewal by July 31, 2017 and it is in compliance with the new FFI Agreement since January 1, 2017, then the FFI’s renewal will be “backdated” to January 1, 2017.
However, an FFI that does not renew its FFI agreement by July 31, 2017, will be treated as having terminated its FFI agreement on January 1, 2017.
Change in Jurisdiction Status
Even if you think you know whether your FFI is a PFFI or a Model 2 Reporting FFI, it is important to periodically check the IGA status of your FFI’s jurisdiction. There have not been instances of a Model 2 IGA jurisdiction switching to a Model 1 IGA. However, there has been a steady stream of non-IGA jurisdictions completing the IGA process and becoming Model 1 or Model 2 IGA jurisdictions.
If your FFI’s jurisdiction does change its IGA type, then that is a change of circumstances that requires you to update your FFI’s registration in the IRS FATCA portal. One result of updating your FFI’s registration to reflect the jurisdiction’s change to a Model 1 IGA jurisdiction is that the FFI Agreement will be terminated. The FFI agreement will continue to apply to any branches of the reporting Model 1 FFI that are covered by the FFI agreement that are treated as PFFIs.
The change in FATCA status also requires you to provide updated Forms W-8 to counterparties.
For assistance, please contact me via my contact page or at elizabeth@elizabethmcmorrowlaw.com.