New FATCA FAQs Clarify GIIN Requirement

The IRS added information to the FATCA Registration "Frequently Asked Questions" posted on its website. The new Q&A clarified that foreign financial institutions ("FFIs"), residing in jurisdictions that have agreed "in substance" with the United States as to the terms of a Model 1 Intergovernmental Agreement ("IGA") but which have not signed such an IGA, must register with the IRS and obtain a Global Intermediary Identification Number ("GIIN") by January 1, 2015.

Announcement 2014-38, issued by the IRS earlier in December, provides that a jurisdiction treated as if it has an IGA in effect, which has not yet signed an IGA, retains such status beyond December 31, 2014, provided that the jurisdiction continues to demonstrate firm resolve to sign the IGA that was agreed in substance. The IRS points out, however, Announcement 2014-38 does not change the requirement in the FATCA regulations for payments made on or after January 1, 2015. In order for withholding not to apply, a withholding agent may treat a reporting Model 1 FFI as a registered deemed-compliant FFI only if the withholding agent has a withholding certificate identifying the payee as a registered deemed-compliant FFI and the withholding certificate contains a GIIN for the payee that is verified in the manner described in those regulations.

To avoid withholding on certain payments made on or after January 1, 2015, a reporting Model 1 FFI should register and obtain a GIIN. This would properly certify its status to a withholding agent required to document the FFI for FATCA purposes. A reporting Model 1 FFI that has registered but not yet obtained a GIIN should indicate to its withholding agent that its GIIN is "applied for," and in such case, the withholding agent will have 90 days from the date it receives the Form W-8 to obtain a GIIN and 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 registered deemed-compliant FFI.

See: FATCA GIIN FAQs; Announcement 2014-38.See also: FATCA Specialty Page (available to Cabinet subscribers only).For more information, please contact Dan Mulcahy or Mark Howe.