IRS Releases 50 Pages of FATCA Guidance!

The IRS released today October 29, 2013 Notice 2013-69 which provides guidance for foreign financial institutions (FFIs) entering into an FFI agreement with the IRS to be treated as a participating FFI or Reporting Model 2 FFI under the provisions commonly referred to as FATCA.

This notice includes a draft copy of the FFI agreement, which will be finalized before December 31, 2013.   

1. This notice provides guidance to foreign financial institutions (FFIs) entering into an FFI agreement with the Internal Revenue Service (IRS) to be treated as participating FFIs.
2. This notice also provides guidance to FFIs and branches of FFIs treated as reporting financial institutions under an applicable Model 2 intergovernmental agreement (IGA) on complying with the terms of an FFI agreement, as modified by the IGA.
3. Section II of this notice provides background on the statutory and regulatory requirements for FFIs to be exempt from withholding under chapter 4 of the Internal Revenue Code (Code).
4. Section III of this notice provides a description of the general responsibilities of participating FFIs and reporting Model 2 FFIs and some of the intended updates to the regulations and related forms.
5. Section IV of this notice describes the procedures for FFIs to register for participating FFI or reporting Model 2 FFI status.
6. Section V of this notice provides the draft FFI agreement, which substantially incorporates the provisions set forth in §1.1471-4. The FFI agreement will be finalized by December 31, 2013.

In cases in which foreign law would prevent an FFI from complying with the terms of an FFI agreement, the Treasury Department has collaborated with other governments to develop two alternative model intergovernmental agreements (IGAs) that facilitate FATCA implementation and further reduce burdens on FFIs in partner jurisdictions.

 

1. Under a Model 1 IGA, reporting financial institutions under an applicable Model 1 IGA (reporting Model 1 FFIs) would satisfy their chapter 4 requirements by reporting specified information about U.S. accounts to their government, followed by the automatic exchange of that information on a government-to-government basis with the United States.
2. Under a Model 2 IGA, reporting Model 2 FFIs would report specified information about U.S. accounts directly to the IRS in a manner consistent with the final regulations (as modified by the applicable Model 2 IGA), supplemented by a government-to-government exchange of information on request. Accordingly, an FFI, or branch of an FFI, that is a reporting Model 2 FFI will apply §1.1471-4, as well as the terms of the FFI agreement, as modified by the applicable Model 2 IGA.

 

Covered Entities.

 

• An FFI that has one or more branches (including its home office or a U.S. branch) that can comply with the terms of the FFI agreement is eligible to enter into an FFI agreement.
• A branch of such an FFI that cannot, under the laws of the jurisdiction in which such branch is located, satisfy all of the terms of the FFI agreement will be treated as a limited branch (as defined in the FFI agreement) and will be subject to withholding under section 1471 as a nonparticipating FFI. A reporting 4
• Model 1 or 2 FFI that has a branch located outside of a Model 1 or 2 IGA jurisdiction may enter into an FFI agreement with respect to such branch in order for the branch to be treated as a participating FFI.
• A reporting Model 2 FFI that registers with the IRS to obtain a global intermediary identification number (GIIN) and complies with the terms of the FFI agreement, as modified by the applicable Model 2 IGA, will be treated as complying with the requirements of, and not subject to withholding under, section 1471. The FFI agreement provided in section V of this notice incorporates the modifications to the terms of the FFI agreement that are applicable to a reporting Model 2 FFI.
• The qualified intermediary (QI), withholding foreign partnership (WP), and withholding foreign trust (WT) agreements are being modified to address new requirements under chapter 4 in addition to chapter 3, and these requirements will be incorporated into all QI, WP, and WT agreements that are in effect on or after June 30, 2014.
• The updated QI agreement will incorporate by reference the requirements of the FFI agreement (including the modifications to the terms of the FFI agreement that are applicable to a reporting Model 2 FFI) and shall apply to any foreign branch of the QI that is treated as a participating FFI or reporting Model 2 FFI. In the case of an FFI that is a participating FFI or reporting Model 2 FFI and is also a WP or WT, the updated WP or WT agreement, as applicable, will incorporate by reference the requirements of the FFI agreement (including the modifications to the terms of the FFI agreement that are applicable to a reporting Model 2 FFI).
• In general, the FFI agreement does not apply to a reporting Model 1 FFI, or any branch of such an FFI, unless the reporting Model 1 FFI has a branch located outside of a Model 1 IGA jurisdiction that is treated as a participating FFI or reporting Model 2 FFI. In such a case, the terms of an FFI agreement apply to the operations of the branch treated as a participating FFI or reporting Model 2 FFI.

Notice 2013-69 will be published in Internal Revenue Bulletin 2013-46 on November 12, 2013.

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