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IRS Updates FFI Agreement
Practical Law Legal Update w-005-2390 (Approx. 4 pages)
IRS Updates FFI Agreement
by Practical Law Corporate & Securities
| Published on 10 Jan 2017 • USA (National/Federal) |
The IRS issued a revenue procedure which updates the FFI agreement.
The IRS recently issued a revenue procedure which provides an updated FFI agreement for use by a foreign financial institution (FFI) to be treated as a participating FFI under the Foreign Account Tax Compliance Act (FATCA) (IRS Rev. Proc. 2017-16). The revenue procedure also provides guidance to FFIs and branches of FFIs treated as reporting FFIs under an applicable Model 2 intergovernmental agreement (IGA) on complying with the terms of the FFI agreement, as modified by the IGA.
An FFI may register on the FATCA registration website to enter into the FFI agreement on behalf of all its branches (including its home office), other than US branches and branches that are Model 1 FFIs, so that each branch may be treated as a participating FFI. An FFI that is eligible to be treated as a reporting Model 2 FFI with respect to one or more of its branches may also register on the FATCA registration website on behalf of these branches so the branches may be treated as reporting Model 2 FFIs. In general, the FFI agreement does not apply to a reporting Model 1 FFI (meaning an FFI covered by a Model 1 IGA) unless the FFI has registered a branch outside of a Model 1 IGA jurisdiction to comply with the terms of the FFI agreement and to treat the branch as a participating FFI or reporting Model 2 FFI.
The updated FFI agreement reflects changes made to the final and temporary FATCA regulations and clarifies certain requirements in the 2014 FFI agreement (IRS Rev. Proc. 2014-38). Changes from the 2014 FFI agreement include:
- Removal of provisions relating to US branches.
- Clarification that a reporting Model 2 FFI does not need to apply the FFI agreement to all of its branches (unless the reporting Model 2 FFI has other branches that need to be covered by an FFI agreement to be treated as participating FFIs).
- Incorporating rules clarifying information reporting by participating FFIs that are partnerships and combined reporting following a merger or bulk acquisition of an FFI's accounts.
- Updating the timing of compliance certifications and the scope of IRS inquiries.
- Changes to reflect the expiration of transitional periods in the 2014 FATCA regulations (for example, the expiration of limited FFI and limited branch statuses on December 31, 2016).
- Updating presumption rules for reporting Model 2 FFIs for entity accounts and extending, for certain accounts, the two-year period during which a Model 2 FFI can elect to apply the due diligence procedures of either the FFI agreement or Annex I of the applicable Model 2 IGA to two years from the date the applicable Model 2 IGA has entered into force (rather than two years from the date of signature).
- New procedures for final certifications of compliance on the termination of an FFI agreement.
The updated FFI agreement applies to FFIs with an FFI agreement effective on or after January 1, 2017. A participating FFI that seeks to renew its FFI agreement must renew the agreement on the FATCA registration website. The IRS anticipates that the renewal function for 2017 FFI agreements will be available in May 2017. A participating FFI that is renewing its FFI agreement must renew prior to July 31, 2017, and the renewed agreement will apply beginning January 1, 2017. An FFI that does not renew its FFI agreement by July 31, 2017 will be treated as having terminated its FFI agreement on January 1, 2017.
For more information on FATCA, see Practice Notes, FATCA: FFIs and NFFEs and FATCA Withholding.