Responsible Officers (ROs) for certain foreign financial institutions (FFIs), including sponsoring entities and trustees of trustee-documented trusts, must confirm or update their Foreign Account Tax Compliance Act (FATCA) classifications and complete the relevant certifications of pre-existing account due diligence and periodic certifications (collectively, the FATCA Certifications) on behalf of the sponsored entities or trustee-documented trusts no later than March 31, 2019.
Sponsoring entities must submit FATCA Certifications on behalf of sponsored entities located in Model 2 intergovernmental agreement (IGA), non-IGA, and certain Model 1 IGA jurisdictions that do not provide exemptions for sponsored entities. Some of the Model 1 jurisdictions are in talks with the United States to update Annex II of the IGA to provide exemptions for sponsored entities located in those jurisdictions. Annex II of the current version of the Model I IGA removes the need for sponsoring entities to submit FATCA Certifications on behalf of sponsored entities in a Model 1 IGA jurisdiction, which otherwise would have been technically required. Currently, there are nine jurisdictions with earlier versions of the IGA that are negotiating under the ‘most favored nations clause’ to modify the FATCA Certification requirements of local sponsored entities to be consistent with the later IGAs that do not require certifications.
In addition, the IRS recently updated the frequently asked questions (FAQs) related to the FATCA Certifications to provide clarity to sponsoring entities completing certifications for sponsored entities whose global intermediary identification numbers (GIINs) have been withdrawn from the IRS portal.
The updates to Annex II of the US-UK IGA are welcome as the March 31, 2019 due date for FATCA Certifications approaches. The Annex II updates provide that sponsored entities registered under the US-UK IGA are now considered Non-Reporting UK Financial Institutions. Therefore, sponsoring entities are not required to submit the FATCA certifications on their behalf, although the ROs still should confirm the classification on the IRS FATCA portal. We anticipate that the existing nine jurisdictions will attempt to follow the UK’s lead and renegotiate their Annex II with the United States.
Until such action is taken, sponsoring entities should prepare to submit a certification to the IRS on behalf of sponsored entities located in Model 2 IGA, non-IGA, and Model 1 IGA jurisdictions that do not include provisions for sponsored entities in Annex II for the period ending December 31, 2017 by March 31, 2019. Moreover, all ROs are encouraged to review and confirm the classifications in the IRS FATCA portal for all entities, regardless of where they are located.