Chapter Four Entity Classifications Vs UK IGA Entity Classifications

If you look at, say, section 1.5 of a US W-8 BEN-E you will find the following “Chapter 4” Classifications for legal entities:

Ref Chapter Four Classification Part of W-8 BEN-E to complete Verification required
1 Nonparticipating FFI (including a limited FFI or an FFI related to a Reporting IGA FFI other than a registered deemed-compliant FFI or participating FFI)
2 Participating FFI (an FFI that is Participating and is outside of an IGA jurisdiction) GIIN
3 Reporting Model 1 FFI GIIN
4 Reporting Model 2 FFI GIIN
5 Registered deemed-compliant FFI (other than a reporting Model 1 FFI or sponsored FFI that has not obtained a GIIN) GIIN
6 Sponsored FFI that has not obtained a GIIN Complete Part IV
7 Certified deemed-compliant nonregistering local bank Complete Part V
8 Certified deemed-compliant FFI with only low-value accounts Complete Part VI
9 Certified deemed-compliant sponsored, closely held investment vehicle Complete Part VII
10 Certified deemed-compliant limited life debt investment entity Complete Part VIII
11 Certified deemed-compliant investment advisors and investment managers Complete Part IX
12 Owner-documented FFI Complete Part X GIIN
13 Restricted distributor Complete Part XI GIIN
14 Nonreporting IGA FFI (including an FFI treated as a registered deemed-compliant FFI under an applicable Model 2 IGA) Complete Part XII
15 Foreign government, government of a US possession, or foreign central bank of issue Complete Part XIII
16 International organization Complete Part XIV
17 Exempt retirement plans Complete Part XV
18 Entity wholly owned by exempt beneficial owners Complete Part XVI
19 Territory financial institution Complete Part XVII
20 Nonfinancial group entity Complete Part XVIII
21 Excepted nonfinancial start-up company Complete Part XIX
22 Excepted nonfinancial entity in liquidation or bankruptcy Complete Part XX
23 501(c) organization Complete Part XXI
24 Nonprofit organization Complete Part XXII
25 Publicly traded NFFE or NFFE affiliate of a publicly traded corporation Complete Part XXIII
26 Excepted territory NFFE Complete Part XXIV
27 Active NFFE Complete Part XXV
28 Passive NFFE Complete Part XXVI Controlling Persons
29 Excepted inter-affiliate FFI Complete Part XXVII
30 Direct reporting NFFE GIIN
31 Sponsored direct reporting NFFE Complete Part XXVIII

However, under the UK IGA it is necessary only to determine whether the account holder is:

I) A Specified US person;
II) A UKFI or other PJFI (Partner Jurisdiction FI);

i) Participating FFI [in this particular context this would not include an Model 2 FFI]
ii) DC-FFI [Non-Reporting UK FIs]

(A) Non-profit organisations,
(B) Financial Institutions with a Local Client Base

(a) Credit Unions
(b) Industrial and Provident Societies
(c) Friendly Societies
(d) Building Societies
(e) Investment Trust Companies
(f) Venture Capital Trusts
(g) A FI with a Local Client Base that means all of the below criteria:

a) The Financial Institution must be licensed and regulated under the laws of the United Kingdom;
b) The Financial Institution must have no fixed place of business outside the United Kingdom;
c) The Financial Institution must not solicit account holders outside the United Kingdom. For this purpose, a Financial Institution shall not be considered to have solicited account holders outside of the United Kingdom merely because it operates a website, provided that the website does not specifically indicate that the Financial Institution provides accounts or services to non-residents or otherwise target or solicit U.S. customers;
d) The Financial Institution must be required under the tax laws of the United Kingdom to perform either information reporting or withholding of tax with respect to accounts held by residents of the United Kingdom;
e) At least 98 percent of the accounts by value provided by the Financial Institution must be held by residents (including residents that are entities) of the United Kingdom or another Member State of the European Union;
f) Subject to subparagraph 2(g), below, beginning on January 1, 2014, the Financial Institution does not provide accounts to (i) any Specified U.S. Person who is not a resident of the United Kingdom (including a U.S. Person that was a resident of the United Kingdom when the account was opened but subsequently ceases to be a resident of the United Kingdom), (ii) a Non-participating Financial Institution, or (iii) any Passive NFFE with Controlling Persons who are U.S. citizens or residents;
g) On or before January 1, 2014, the Financial Institution must implement policies and procedures to monitor whether it provides any account held by a person described in subparagraph 2(f), and if such an account is discovered, the Financial Institution must report such account as though the Financial Institution were a Reporting United Kingdom Financial Institution or close such account;
h) With respect to each account that is held by an individual who is not a resident of the United Kingdom or by an entity, and that is opened prior to the date that the Financial Institution implements the policies and procedures described in subparagraph 2(g), above, the Financial Institution must review those accounts in accordance with the procedures described in Annex I applicable to Pre-existing Accounts to identify any U.S. Reportable Account or account held by a Non-participating Financial Institution, and must close any such accounts that were identified, or report on such accounts as though the Financial Institution were a Reporting United Kingdom Financial Institution; and
i) Each Related Entity of the Financial Institution must be incorporated or organized in the United Kingdom and must meet the requirements set forth in this paragraph.

This CRS also includes an:

o Exempt Collective Investment Vehicle
o A Trust established under the laws on the Reportable Jurisdiction to the extent that the trustee of the trust is a Reporting FI that reports all the information that it is required to report.
o Qualified Credit Card Issuer


iii) Exempt Beneficial Owners [Non Reporting]

(A) UK Governmental Organisations,
(B) Central Banks, International Organisations, or
(C) International Organisations
(D) Retirement Funds

iv) Excepted FFI (see below); or

v) An

i) Active or
ii) Passive NFFE

Excepted FFI – despite this phrase being referenced in the UK IGA “as those terms are defined in the relevant U.S. Treasury Regulations” it is not a defined term in either TD9610 or TD9657. However, the Term “Excepted inter-affiliate FFI” is defined thus:

The entity is a member of an expanded affiliated group; • Does not maintain financial accounts (other than accounts maintained for members of its expanded affiliated group); • Does not make withholdable payments to any person other than to members of its expanded affiliated group that are not limited FFIs or limited branches; • Does not hold an account (other than a depository account in the country in which the entity is operating to pay for expenses) with or receive payments from any withholding agent other than a member of its expanded affiliated group; and • Has not agreed to report under §1.1471-4(d)(2)(ii)(C) or otherwise act as an agent for chapter 4 purposes on behalf of any financial institution, including a member of its expanded affiliated group.

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