IRS Answers FATCA Query On Self-Certification
The US Internal Revenue Service (IRS) has clarified that a foreign financial institution must obtain a customer’s self-certification details when opening a new account, in a new addition to its Frequently Asked Questions on its Foreign Account Tax Compliance Act (FATCA) website.
The IRS was asked: If a Reporting Model 1 Foreign Financial Institution (FFI) or a Reporting Model 2 FFI that is applying the due diligence procedures in section III, paragraph B, of Annex I of an Intergovernmental Agreement (IGA) cannot obtain a self-certification upon the opening of a New Individual Account, can the FFI open the account and treat it as a US Reportable Account? The IRS has answered no – as self-certification is necessary to verify whether or not the person opening an account is a US person, these details must be obtained by FFIs.
FATCA, which was enacted by the US Congress in 2010 and took effect on July 1, 2014, is intended to ensure that the IRS obtains information on financial accounts held at FFIs by US persons. Failure by an FFI to disclose information on their US clients will result in a requirement to withhold 30 percent tax on payments of US-sourced income.
To address situations where foreign law would prevent an FFI from complying with the terms of its agreement with the IRS, US Treasury has developed model intergovernmental agreements. Under those agreements, an FFI must apply due diligence procedures, which include the obtaining of a self-certification when opening a new account.
