This article addresses foreign financial institutions (FFIs) and what their reporting requirements may be.

Abstract: The IRS recently updated its frequently asked questions addressing its list of foreign financial institutions (FFIs) that have registered under the Foreign Account Tax Compliance Act. This article provides background on the FFI List and details about the updates.

FATCA Institution FAQs Have Been Updated

The IRS recently updated its frequently asked questions (FAQs) addressing its list of foreign financial institutions (FFIs) that have registered under the Foreign Account Tax Compliance Act (FATCA). This article provides background and more details about the updates.

The FFI List

The Internal Revenue Code (IRC) generally requires withholding agents to withhold and deduct 30% from certain payments made to an FFI unless it:

• Has entered into an “FFI agreement” with the federal government to, among other things, report certain information with respect to U.S. accounts, otherwise known as a participating FFI (PFFI),
• Is deemed to meet the requirements of IRC Section 1471(b), otherwise known as a deemed-compliant FFI, or
• Is treated as an exempt beneficiary owner under federal tax regulations.

The FATCA Registration System is a web-based system that allows an FFI to register under FATCA (on behalf of themselves and their branches) as, among other things, a PFFI. The system issues the FFI a global intermediary identification number (GIIN). The GIIN is used by an FFI to establish its Chapter 4 status for withholding purposes and identify the institution for reporting purposes.

When an FFI completes its FATCA registration, it generally will be included on the FFI List published on the IRS website. The FFI list includes all financial institutions, branches, direct reporting non-financial foreign entities, sponsored entities and sponsored subsidiary branches that have submitted a registration via the FATCA Registration System and have been assigned a GIIN.

Updated monthly, the FFI list may be used by financial institutions and other withholding agents to, among other things, determine whether: 1) another financial institution to which a payment is to be made is a PFFI, and 2) the payment is subject to U.S. tax withholding.

Two New FAQs

As mentioned, the IRS offers a series of FAQs regarding the FFI list and two new ones were recently added:

1. Is a search tool available? The answer is yes. The FFI list webpage has a search and download tool that enables a user to create a partial list using search criteria of the GIIN, country/jurisdiction, financial institution name or a combination of the three. These search results have a maximum of 30,000 entities and can be exported to an XML, CSV or PDF file.
2. Why can’t I find a financial institution or branch when I use the search and download tool? Sometimes the legal name that a financial institution or branch used to register for FATCA, and that appears on the FFI list, differs from its commonly known name. The IRS recommends using a search engine to find alternate spellings for the financial institution or branch and try those in the tool.

Alternate spellings can include abbreviations or symbols instead of fully spelled words (or vice versa). For example, an imaginary institution might be commonly known as “R&S Bank” but is “River and Sea Bank” on the FFI list because that’s how the financial institution listed its name on its FATCA registration.

Another possibility for a failed search is that the name entered into the search and download tool is too detailed. The IRS suggests simplifying the financial institution or branch name by removing words from the searched name and conducting another search.

For instance, if a user wanted to find a fund for imaginary institution, “River and Sea Bank,” but received no search results when “River and Sea Bank International Bond Fund Series 1” was entered into the search and download tool, reducing the name to “River and Sea Bank Bond Fund” might produce search results.

Challenging Yet Important

Compliance with FATCA remains a challenging yet important task for foreign account holders. Work closely with your CPA to understand all aspects of the law.

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