Financial institutions (FIs) have until 25 April to register with the IRS to appear on its first published list of companies that officially comply with the Foreign Account Tax Compliance Act, enacted in 2010. The list will be published on 2 June.
Institutions located in countries that have signed an intergovernmental agreement (IGA) with the US will have to register with the US government, through a website referred to as the “FATCA Portal”, where they will receive a Global Intermediary Identification Number (GIIN).
A GIIN is a unique identifier that FIs will have to supply to other financial institutions with which they maintain accounts or act as payees.
A company's GIIN may be checked online and will certify a FI’s compliance with the FATCA regulations.
Large FIs with many branches will not have separate accounts, but will be assigned separate GIINs.
The FATCA portal will also allow FIs to appoint delegates to perform registration tasks and will generate automatic notification when a FI’s status changes.
'Difficult to dismiss'
FATCA is part of the US Hiring Incentives to Restore Employment Act. It ensures that US persons, wherever they are located and in whatever investment vehicle they hold their assets, are paying the correct amount of US tax.
When the act comes into force, those who are not compliant will suffer a 30% withholding tax on income and gross proceeds.
In September 2012 the UK signed an IGA with the US which will begin on 1 July this year.
However, the first non-compliance reports to HM Revenue & Customs will not begin until May 2015.
An IGA makes it easier for partner countries to comply with the provisions under FATCA. The benefits of an IGA include relaxation of deadlines and increased clarity and simplicity around due diligence with country specific provisions.
For a comparison between the IGA model 1 and 2 click here.
Andy Thompson, director of operations at the Wealth Management Association (formally APCIMS), says that many will want to be on the IRS’s list because GIINs will eventually be essential in reassuring a FI’s legitimacy.
“I expect that bigger institutions would want to be on the list just to show that they are compliant,” he said.
“There are going to be hundreds of thousands of applications to FATCA so it will be interesting to see who signs up and whether the application process will be able to cope.”
But he added that few companies will make the IRS's first GIIN list, as many are still preparing themselves for FATCA compliance.
“Many FIs won’t apply by April and this is not necessarily an issue from a tax point of view or a legislative point of view,” he said.
“Some FIs will have forgotten to [adjust to FATCA regulations] and will then talk to their peers and realise that it must be done.”
He also said that it would be difficult for firms to dismiss FATCA.
“I think [FATCA] has put people off the US but the only way out of it is by not having any contact with the US at all which is very difficult.”
