64 IGAs Published or in Effect

Sixty-four IGAs are published and treated as in effect as of May 11, 2014, comprised of twenty-seven published Model 1s, five published Model 2s, whereas thirty Model 1s have been agreed in substance and two Model 2s agreed.

148 IGAs still left to be agreed by Treasury?

The USA recognizes 195 independent states in the world, 67 dependencies of states, and has contacts with Taiwan.  But only approximately 16 dependencies of the 67 have both local responsibility with regard to tax policy and more than de minimis US source income exposure, such as investments in US Treasuries, for the local authorities to sign an IGA (e.g. Bermuda, Cayman Islands, Jersey, and Hong Kong).  Thus, of a pool of 212 states and jurisdictions that may seek to sign an IGA, 148 are left.

What if a Non-IGA country agree an IGA after July 1?  

FATCA Portal registration remains open.  Have all the FFIs that are in the 148 countries and jurisdictions that do not have an IGA register for a GIIN? Industry experts have put forward a reasonable range of 20,000 to 30,000 such entities that qualify as FFIs that still need to register or complete registration for a GIIN, though the number could be much higher.  The list of FFIs requiring registration includes by example trusts companies, investment funds, and banks.

It is possible that on July 1st an unregistered FFI is considered non-participating (NPFFI) for purposes of FATCA withholding, but by example, on August 1st its country agrees an IGA in substance that Treasury announces on its FATCA site and the NPFFI goes back to FFI non-withholding status because of the extension related to IGAs, at least until that final December 22 deadline mentioned in Announcement 2014-1.  Model 1 IGA FFIs with a GIIN are classified as “Registered Deemed-Compliant Foreign Financial Institutions” (RDCFFI) on the new W8-BEN-E (see previous article) instead of as Participating Foreign Financial Institutions (PFFIs) pursuant to the regular FATCA FFI agreement and Model 2 IGA.

Is June 3rd the New Deadline?

The IRS states the following on its FATCA Registration Portal: “the IRS believes it can ensure registering FFIs that their GIINs will be included on the July 1 IRS FFI List if their registrations are finalized by June 3, 2014.”  Notice 2014-17, page 6:

“FFIs that finalize their registrations after May 5 or June 3 may still be included on the June 2 or July 1 IRS FFI List, respectively; however, the IRS cannot provide assurance that this will be the case.” (emphasis added)

Is June 3rd a “Hard” Deadline?

The IRS built in a 90 day safeguard for FFIs when a GIIN has been applied for but not yet received:

§1.1471-3(e)(3) Participating FFIs and registered deemed-compliant FFIs—(i) In general. … A payee whose registration with the IRS as a participating FFI or a registered deemed-compliant FFI is in process but has not yet received a GIIN may provide a withholding agent with a Form W-8 claiming the chapter 4 status it applied for and writing “applied for” in the box for the GIIN. In such case, the FFI will have 90 calendar days from the date of its claim to provide the withholding agent with its GIIN and the withholding agent will have 90 calendar days from the date it receives the GIIN to verify the accuracy of the GIIN against the published IRS FFI list before it has reason to know that the payee is not a participating FFI or registered deemed-compliant FFI. … (emphasis added)

Do FFIs in IGA countries have an extension until December 22 for FATCA Registration? 

Financial institutions (FFIs) in the current 64 IGA countries have an extension to register with the IRS in order to obtain a GIIN and thus appear on the IRS’ FATCA compliant list.  FATCA 30% withholding for FFIs in these Model 1 IGA countries and jurisdictions only begins January 1, 2015.

The date of the last list to be published for 2014 and, more importantly, the last date to register as a Model 1 FFI to ensure being included on that list, may be fluid.  The IRS has already amended its deadlines and its timelines for GIIN registration several times.  Thus, it is at least possible, regardless of Treasury’s denials, that another registration or withholding start date extension is granted for IGA countries before the end of 2014.

In its January 6, 2014 Announcement 2014-1 (IRB 2014-2), Treasury stated:

Thus, while reporting Model 1 FIs will be able to register and obtain GIINs on or after January 1, 2014, they will not need to register or obtain GIINs until on or about December 22, 2014, to ensure inclusion on the IRS FFI list by January 1, 2015. (emphasis added)

However, the United Kingdom’s Law Society and Institute of Chartered Accountants in May 2014 published combined guidance to members stating:

To ensure that the registration has been processed in time for inclusion on that list the last practical date for registration is 25 October 2014.

This self imposed earlier date is perhaps more prudent in order to be included on the IRS’ last 2014 FATCA compliant list than for FFIs to wait until December 22, 2014 for GIIN registration.

What Deadlines has Treasury Not moved? 

For “individual” held accounts, Treasury has neither provided an extension to the FATCA compliance requirements, nor from withholding as of July 1st.  Thus, from July 1 these accounts must be characterized as “new” accounts for FATCA diligence procedures to determine whether the beneficial owner is a US person.

For accounts of ‘entities’ , while an FFI may still characterize accounts opened until December 31 as “pre-existing” accounts, Treasury did not mention extending the deadlines applicable for FATCA diligence procedures to determine whether the entity’s beneficial owner is a US person.

The pre-existing account due diligence analysis remains with three deadlines:

1. December 31, 2014 for prima facie FFI account holders,
2. June 30, 2015 for high value accounts, and
3. June 30, 2016 for all remaining accounts, such as “pre-existing” entity accounts).

Note that FATCA withholding does not apply to all FATCA withholdable payments immediately on July 1.  FATCA has a phase-in period for withholding on certain types of payments, see Ch 13: Withholdable Payments.

In accordance with Circular 230 Disclosure

Original Source By: William Byrnes