Do you have a FATCA Deadline of December 31, 2014 that you can not meet?

If your company operates in any of the following countries then the answer is probably yes.

Afghanistan Egypt Malawi Saint Martin (French part)
Aland Islands El Salvador Maldives Saint Pierre and Miquelon
Albania Equatorial Guinea Mali Sao Tome and Principe
American Samoa Eritrea Marshall Islands Senegal
Andorra Ethiopia Martinique Sierra Leone
Angola Falkland Islands (Malvinas) Mauritania Sint Maarten (Dutch part)
Antarctica Faroe Islands Mayotte Solomon Islands
Argentina Fiji Micronesia Somalia
Aruba French Guiana Monaco South Georgia and the South Sandwich Islands
Bangladesh French Polynesia Mongolia South Sudan
Belize French Southern Territories Montserrat Sri Lanka
Benin Gabon Morocco Sudan
Bhutan Gambia Mozambique Suriname
Bolivia, Plurinational State Of Ghana Myanmar Swaziland
Bonaire, Sint Eustatius And Saba Greece Namibia Syrian Arab Republic
Bosnia and Herzegovina Guadeloupe Nauru Tajikistan
Botswana Guatemala Nepal Tanzania, United Republic Of
Bouvet Island Guinea New Caledonia Timor-Leste
British Indian Ocean Territory Guinea-Bissau Niger Togo
Brunei Darussalam Heard Island and McDonald Islands Nigeria Tokelau
Burkina Faso Holy See (Vatican City State) Niue Tonga
Burundi Iceland Norfolk Island Trinidad and Tobago
Cambodia Iran Korea, Democratic People’s Republic Of Tunisia
Cameroon Jordan Palestine, State Of Tuvalu
Central African Republic Kazakhstan Oman Uganda
Chad Kenya Other United States Minor Outlying Islands
Christmas Island Kiribati Pakistan Uruguay
Cocos (Keeling) Islands Kyrgyzstan Palau Vanuatu
Comoros Lao People’s Democratic Republic Papua New Guinea Venezuela, Bolivarian Republic Of
Congo, Democratic Republic Of The Lebanon Philippines Viet Nam
Congo Lesotho Pitcairn Wallis and Futuna
Cook Islands Liberia Reunion West Bank And Gaza
Cote d’Ivoire Libya Russian Federation Western Sahara
Cuba Macao Rwanda Yemen
Djibouti Macedonia, The Former Yugoslav Republic Of Saint Barthelemy Zambia
Ecuador Madagascar Saint Helena Zimbabwe

There are 143 jurisdictions that are outside an Intergovernmental Agreement with the US Treasury for the purposes of FATCA.

This is important because not only is there withholding in Non IGA countries,1 the Responsible Officer is also personally liable2 for FATCA Compliance under penalty of perjury. Further, FATCA CDD must be completed by December 31, 2014 on Prima Facie FFIs.

Furthermore, of the 88K of FFIs on the IRS list of Approved FFIs (dated July 1, 2014) only 5% (or 4,228 FFIs to be precise) are from Non IGA Countries.

This means that for FFIs in Non IGA Countries not only is the deadline of December 31, 2014 very close; the FATCA CDD is more difficult because the vast majority of FFIs in Non-IGA Countries have no GIIN.

At a minimum to complete FATCA CDD, FFIs need to obtain, for customers who are Prima Facie FFIs (PF-FFIs) their “Chapter Four Status” (FATCA Status) obtain a GIIN and also verify the GIIN.

The format for obtaining the Chapter Four Status and the GIIN will generally be a W-8.

However, the IRS’s own analysis states that completing a W8 takes in excess on 8 hours (see the IRS’s own guidance notes for each W8 form).

FFIs face something of a double bind because they face having to verify the GIINs of their counter parties where, in the majority of cases, those counter parties do not yet have a GIIN because they have not registered on the IRS portal.

28 Non IGA jurisdictions have no FFI registered on the July 1, 2014 IRS list of approved FFIs whatsoever.

So what can be done?

Use of the pre FATCA W-9 and W-8 series is permitted until the end of 2014 (and those forms completed and validated in 2014 will be valid until December 31, 2017).

Notice 2014-33 announced that 2014 and 2015 would be transitional years for FATCA so long as FFIs could provide evidence of good faith in attempting to comply with FATCA. Evidence of good faith, in this context, is having documented procedures and proving, via audit, that these procedures have been followed.

When completing a W-8 form, the counter party can state, in the space for the GIIN, “applied for” where it does not yet have the GIIN.

This gives the recipient of the W-8 an additional 90 days to obtain and verify the GIIN before it has to treat the PF-FFIs as a Non Participating FFIs.

The takeaway is to document the procedures for complying with FATCA CDD on PF-FFIs now, schedule for an audit and put plans in place to make sure that the company can evidence its attempts to comply in time for that audit.

Also, given the proximity of the deadline, use of the pre-FATCA W8s is advisable, unless your company has had time to adapt to the post FATCA W-8 series.

Evidencing attempts to comply is all.

 


 

1 There is no withholding in IGA Countries except in exceptional circumstances.

2 The IGAs do not include the concept of the Responsible Officer. It is unlikely, in IGA Countries, that an occupant of the RO role would assume personal responsibility for the institution’s FATCA Programme.