By now, if you are a "foreign financial institution"
(FFI) for purposes of FATCA ("Foreign Account Tax Compliance
Act"), you probably have registered with the IRS and are
eagerly waiting your GIIN to be issued and for your name to be
published in the first FFI List this week.
When you registered as an FFI on the IRS website, you should have
been prompted to enter into an "FFI Agreement" with the
IRS. An FFI agreement provides the ground rules for an FFI to
conduct KYC (know-your-customer) due diligence, report applicable
information to the IRS, and withhold as required under FATCA. There
is only one version of the FFI Agreement. If you are located in a
Model 2 Inter-Governmental Agreement ("Model 2 IGA")
jurisdiction, you are still entering into an FFI Agreement with the
IRS, but the FFI Agreement ground rules are modified by the
applicable Model 2 IGA.
The effective date of the FFI Agreement is the date on which the
IRS issues a GIIN to the FFI. For a participating FFI that receives
a GIIN prior to June 30, 2014, the effective date of the FFI
Agreement is June 30, 2014. An FFI Agreement expires on
December 31, 2016, at the end of the FATCA transitional period but
is subject to renewal thereafter through the IRS website.
In contrast, an FFI located in a jurisdiction that enters into a
Model 1 Inter-Governmental Agreement with the U.S. (the "Model
1 IGA"), has until the end of 2014 to obtain a GIIN. If you
are located in a Model 1 IGA jurisdiction, you do not enter into an
FFI Agreement by registering with the IRS. Instead, you will follow
the ground rules as laid out by the applicable IGA and the
implementing legislation of the country where you are
located.
To complicate this further, if you have a branch located in a
jurisdiction different from that of your main office, the branch
may be exposed to a different set of rules from those applicable to
the main office, for example, because the two jurisdictions enter
into IGAs of different models. A branch located in a Model 2
IGA jurisdiction may be required to follow its FFI Agreement, as
modified by the applicable Model 2 IGA, while the main office in a
Model 1 IGA jurisdiction will have to follow the Model 1 IGA and
the local implementing legislation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.