Byrnes & Perryman’s FATCA Update of July 2015
The IRS released the fourteenth FATCA GIIN list of foreign financial institutions (FFIs) that have registered with the IRS through its FATCA portal. The IRS provides these FFIs a Global Intermediary Identification Number (GIIN). The FFI may then use its unique 19 digit GIIN to complete the IRS tax self certification forms, such as the W-8BEN-E, to avoid the 30 percent FATCA withholding tax.
As of July 2015, FFI registration increased 2,778 to 168,239 from a previous monthly total of 165,461. Thus, the month over month trend of FFI registration remains steady, albeit low.
May: 2,851
April: 2,600
March: 3,734
February: 2,479
In its FATCA FAQs (FFI #7), the IRS stated that it did not expect more than a half million entities will need to register as FFIs pursuant to the FATCA definition.
Many industry stakeholders disagreed stating the number will be higher. Their basic argument is based upon the broad definition of a financial institution that must register for a GIIN,. By example, the UK HMRC estimated that, after the UK-USA FATCA IGA and its accompanying local regulations scaled back the definition of which entities are to categorized as FFIs, 75,000 UK entities remain likely impacted. As of July 2015, 23,568 United Kingdom entities have registered as FFIs, up from 23,256 in June.
Has the United Kingdom HMRC over estimated the number of actors of its financial industry? Are some entities not registering with the IRS and seeking refuge from FATCA’s withholding pursuant to the protection of the IGA that offers Model 1 partners suppression of the FATCA withholding? Have some UK entities moved their investments to other non-US markets, and thus do not consider themselves directly impacted by FATCA?
The number of IGAs remains unchanged from last month. 90 countries and dependencies have entered into a FATCA IGA with the U.S. based on Model 1A (reciprocal), or are awaiting local ratification, accounting for 101,757 of the registrations. A further eight countries signed a Model 1B (non-reciprocal), accounting for a further 40,4763 GIINs. A final 14 countries signed a Model 2 version IGA, adding 18,642 FFI registrations covered by an IGA. Thus in total, 160,875, representing 96% of FFI registrations, are from the 112 IGA states and their dependencies.
The 131 countries and dependencies without an IGA have only registered 6,390 FFIs to date, a surprising low number given that the initial implementation of the 30% withholding for non-compliance with FATCA began more than a year ago on 1 July 2014.
The UK and its ten dependencies and overseas territories comprised 76,099 of the GIINs, representing 45% of the total, or without the UK included, 49,898 for 30.6%. The 34 OECD members have produced 79,057 GIIN registrations.
Cayman leads the FFI registration in total number and percentage of its financial institutions, with 31,533. If Cayman is the leader in transparency, why then did the EU Commission black list it last month as an offshore jurisdiction?
The major financial industries of the four BRIC countries have 8,320, barely nudging up from 8,254 the month before, and 8,186 in May, 8,060 in April and 7,962 in March.
5,862 of the total FFI registrations are members of an expanded affiliated group (EAG).
OECD Common Reporting Standard signatories has reached 99, the notable holdout being the U.S., with 57 committed to begin in 2017, 37 in 2018, and 5 not yet committed to a start date.
