The Foreign Account Tax Compliance Act (FATCA) was enacted in March 2010, as part of the Hiring Incentives to Restore Employment (HIRE) Act (IRC Sections 1471 – 1474) and requires Foreign Financial Institutions (HIREs) to report information regarding financial accounts or foreign entities held by United States (U.S.) taxpayers to the Internal Revenue Service (IRS). Offshore financial centers offer strict financial secrecy and low tax rates or no taxes to non-residents who maintain bank accounts, investments, and/or other financial assets or structures within their jurisdiction. They also allow the formation of non-resident entities, such as international business corporations, personal investment corporations, and foreign trusts to act as de facto holding companies to shield the beneficial ownership of those financial assets. This lack of transparency makes offshore financial centers a haven for U.S. taxpayers to divert income and shield assets.
As part of FATCA implementation the IRS is establishing the information technology services required to support reporting and withholding requirements of the act. Financial information will be received from domestic and foreign financial institutions and from foreign Governments.
Purpose of FATCA Registration
Under the Foreign Account Tax Compliance Act (FATCA), withholding agents must withhold tax on certain payments to Foreign Financial Institutions (HIREs) that do not agree to report certain information to the IRS about their U.S. accounts, including the accounts of certain foreign entities with substantial U.S. owners. A Foreign Financial Institution may agree to report certain information about its account holders by registering to be FATCA compliant. The FATCA Registration System is a secure, web-based system that Financial Institutions (FIs) may use to register completely online as a Participating Foreign Financial Institution (PFFI), a Registered Deemed-Compliant FFI (RDCFFI), a Limited FFI, or a Sponsoring Entity. This user guide provides instructions for completing the registration process online, including what information is required, how registration will vary depending on the type of FIs, and step-by-step instructions for each question. This user guide reflects the most current instructions to the registration. Please read the user guide thoroughly before you begin to register, as it provides needed details on how to answer each question. In addition, please use it to resolve any ambiguities or conflicts in portions of the text within the online system.
In connection with its FATCA Registration, a Financial Institution will be issued a Global Intermediary Identification Number (GIIN) and will be identified on a published list available at www.irs.gov/fatca. The GIIN may be used by an FIs to identify itself to withholding agents and to tax administrators for FATCA reporting. It is anticipated that the published list will be updated on a monthly basis. A separate GIIN will be issued to the FI to identify each jurisdiction where the FI maintains a branch that is participating or registered deemed-compliant. The FATCA Registration is used by an FI to register itself (and its branches, if any) as a PFFI, a RDCFFI, a Limited FFI, a Limited Branch, or a Sponsoring Entity. It is also used by an FI to renew its Qualified Intermediary (QI), Withholding Foreign Partnership (WP), or Withholding Foreign Trust (WT) Agreement, if applicable. In connection with its FATCA Registration, an FI (other than a Limited FFI, or Limited Branch) or a U.S. Financial Institution (USFI) acting as a Lead FI or Sponsoring Entity will be issued a GIIN and will be identified on the IRS FFI List. The first IRS FFI List will be posted electronically by June 2, 2014, and will be updated monthly thereafter.
Who is Eligible to Register
The following entities are eligible to register (on behalf of themselves and their branches) for the specific purposes described below, as well as to obtain a GIIN (unless the entity is a Limited FFI, Limited Branch):
- For an FFI, or foreign branch of an FFI or USFI, that is treated as a Reporting FI under a Model 1 IGA to authorize one or more Points of Contact (POCs) to receive information related to registration on the FI’s behalf.
For an FFI, or foreign branch of an FFI, that is treated as a Reporting FI under a Model 2 IGA:
- to authorize one or more POCs to receive information related to registration on the FI’s behalf, and
- to confirm that it will comply with the terms of an FFI Agreement, as modified by the applicable Model 2 IGA.
For an FFI, or branch of an FFI, other than one covered by an IGA:
- to enter into an FFI Agreement to be treated as a PFFI,
- to agree to meet the requirements to be treated as an RDCFFI, or
- to confirm that it will comply with the terms applicable to a Limited FFI or a Limited Branch.
- For an FI seeking to act as a Sponsoring Entity, to agree to perform the due diligence, reporting, and withholding responsibilities on behalf of one or more sponsored FFIs.
- For an FI, including a foreign branch of a USFI, currently acting as a QI, WP, or WT, to renew its QI, WP, or WT Agreement.
- For a USFI wishing to act as a Lead FI for purposes of registering its Member FIs, to identify itself as such.
A foreign branch of a USFI located in a Model 2 IGA jurisdiction does not need to register unless such foreign branch needs to renew its QI, WP, or WT Agreement.
FATCA regulations, notices, Frequently Asked Questions (FAQs), and other related topics are available on the IRS FATCA FI page (www.irs.gov/Businesses/Corporations/ Information-for-Foreign-Financial-Institutions). In addition, the Appendices/ Miscellaneous section at the end of the user guide provides supplementary resources, including a glossary of terms and an Account Status table, which details what the user will see on the home page during each registration status.
International Data Exchange Service (IDES)
The IDESIDES website is a securely managed file transfer data exchange service that allows FFIs and HCTAs to automatically exchange FATCA data with the United States. The IDES shall also allow the United States to make reciprocal exchanges where called for by an IGA that is in force.
The IRS envisions the long term intent for IDES to serve as the exchange service for additional FATCA information reporting such as the Form 1042S (Foreign Person's U.S. Source Income Subject to Withholding)