Foreign financial institutions (FFIs) with existing FFI agreements with the US Internal Revenue Service have been given an extended deadline until 24 October 2017 to renew those agreements.
Participating foreign financial institutions (FFIs) (including Reporting Model 2 FFIs) which missed the deadline to renew their FFI Agreements with the IRS by 31 July 2017 have now been given until 24 October 2017 to rectify the position. The extended deadline is set out in a new FAQ released by the IRS. Failure to renew will result in an FFI losing its status as a participating FFI or as a Model 2 FFI, causing its GIIN to be revoked from November 2017. As a result, that FFI may be subjected to withholding tax on certain US source income.
In December 2016, the US Internal Revenue Service (IRS) released an updated agreement for Foreign Financial Institutions (FFIs) effective from 01 January 2017. As a result, all FFIs that had in place an existing FFI Agreement and which wish to retain their Global Intermediary Identification Number (GIIN) from the IRS, are required to renew their FFI agreement by 31 July 2017. This requirement principally affects FFIs operating in jurisdictions with a Model 2 Intergovernmental Agreement (IGA) with the US or with no IGA with the US.
Under FATCA, to avoid being subject to a 30% withholding tax on certain US related payments they receive, FFIs may register with the IRS and agree to report to the IRS certain information on “financial accounts” held by specified US persons and foreign entities in which US persons hold a substantial or controlling interest. Registered FFIs receive a GIIN from the IRS which enables them to receive payments without withholding. These rules are principally relevant to FFIs operating in jurisdictions that have entered into a Model 2 IGA with the US (such as Bermuda, Hong Kong and Switzerland) and FFIs operating in jurisdictions where there is no IGA with the US. FFIs only operating in jurisdictions that have a Model 1 IGA with the US (such as the UK, Cayman Islands, the British Virgin Islands, Ireland and Luxembourg) should not be affected. However, any such Model 1 IGA FFIs with branches in Model 2 or non-IGA jurisdictions will need to renew their FFI agreement on behalf of such branches.
As a result of the update to the FFI Agreement, affected FFIs that are required to renew their agreement with the US will need to review, update, and resubmit their registration application by 31 July 2017 in order to be treated as having in effect an FFI agreement from 01 January 2017. Those FFIs who are required to renew their FFI agreement and do not do so by 31 July 2017, will be treated as having terminated their FFI agreement with effect from 01 January 2017, and may be removed from the FFI List.
The FATCA FFI Registration system has now been updated to include the ability for FFIs to renew their agreement with the IRS, including a table of guidelines to assist an FFI to determine whether reregistration is necessary. If reregistration is required, the system enables an FFI to review and edit their registration form. The FFI will need to verify and update their registration information and submit to renew their FFI agreement.
However, we understand that all FFIs are being sent notifications from the IRS on the IRS portal requiring them to log on and determine if they need to renew an FFI agreement - so in practice all FFIs must engage in this process.
Further details can be found on the IRS FATCA registration FAQs page.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.