I Missed The Boat! I Didn’t Register By May 5th. What Do I Do Now?June 2, 2014
As we mentioned in an earlier tax alert under the FATCA rules, May 5, 2014 was the last day to complete registration with the IRS and obtain the GIIN (Global Intermediary Identification Number) and to be included on the first IRS FFI (Foreign Financial Institution) List which is expected to come out today. If you are not included on the first IRS FFI List, you could be subject to withholding on U.S.-sourced investment income, such as interest and dividends, beginning on July 1, 2014.1
What if you did not finish the registration by May 5? The IRS continues to accept and process the FATCA registration applications and intends to update the FFI List on a monthly basis. After the initial publication of the FFI List, the IRS expects to update the list at the beginning of July. Note, however, that completing registration in a particular month does not guarantee inclusion in the next FFI List update.
If you complete the registration and receive the GIIN number before your first payment subject to FATCA withholding, you can still avoid the FATCA withholding. If you have not received the GIIN by the end of June but you have begun the process of registering as an FFI, you can still provide the updated FATCA information on the IRS withholding certificate (W-8) indicating that you have "applied for" the GIIN.
Generally, a withholding agent that has reason to know that the FATCA status (also known as the "Chapter 4" status) of a payee is unreliable or incorrect (for example, because of the lack of a GIIN) has to withhold. A withholding agent that receives a Form W-8 indicating that the payee has "applied for" a GIIN, however, has 90 days to obtain the GIIN from the payee and verify it against the IRS FFI List before it has to withhold.
This 90-day window buys a payee without a GIIN time to complete the registration process before the withholding kicks in. There can be, however, a significant time lag between the completion of the FATCA registration procession and the IRS publication of the FFI List including the name of the FFI. Therefore, the FFI actually would have significantly less than the 90 days after giving the Form W-8 in which to complete its FATCA registration.
For more information on this and other tax matters, please contact:
Louis Tuchman at +1 212 592 1490 or [email protected]
1 An exception applies to an FFI that reports to a foreign jurisdiction under a Model 1 Inter-Governmental Agreement. Such withholding agent does not need to obtain a reporting Model 1 FFI's GIIN for payments made before January 1, 2015.
To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication, unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax related matter(s) addressed herein.
Copyright 2014 Herrick, Feinstein LLP. This alert is published by Herrick, Feinstein LLP for information purposes only.
Nothing contained herein is intended to serve as legal advice or counsel or as an opinion of the firm.