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FOREIGN ACCOUNT TAX COMPLIANCE

ACTANSWER BOOK

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FOREIGN ACCOUNT TAX COMPLIANCE

ACTANSWER BOOK

2017 Edition

Matthew D. Lee

Fox Rothschild LLP

Practising Law Institute New York City

#205852

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This work is designed to provide practical and useful information on the subject matter covered. However, it is sold with the understanding that neither the publisher nor the author is engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

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Copyright © 2017 by Practising Law Institute. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Practising Law Institute.

LCCN: 2015936433ISBN: 978-1-4024-2853-12nd

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About the Author

Matthew D. Lee is a partner in the Philadelphia office of Fox Rothschild LLP, where he practices in his firm’s White Collar Compliance and Defense practice group. He is a former U.S. Department of Justice trial attorney who concentrates his practice on all aspects of white collar criminal defense, federal and state tax controversies, financial institu-tion regulatory compliance, and complex civil litigation.

Mr. Lee represents companies and individuals in criminal investi-gations involving tax, money laundering, health care, securities, pub-lic corruption, and fraud offenses, and has significant experience in handling all stages of state and federal litigation, including trials and appeals. He also represents individuals and companies in all stages of proceedings before the Internal Revenue Service, including audits, appeals, and collections, as well as Tax Court and district court litigation.

Mr. Lee has significant experience in conducting corporate internal investigations and advising banks and financial institutions as to com-pliance issues involving the Bank Secrecy Act, the USA PATRIOT Act, the Foreign Account Tax Compliance Act (FATCA), anti-money laun dering laws and regulations, and economic sanctions. He also represents financial institutions and individuals in enforcement pro-ceedings brought by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

Mr. Lee also advises clients on issues regarding foreign bank account reporting (FBAR) obligations, FATCA, and the Internal Rev-enue Service’s 2009 Offshore Voluntary Disclosure Program, 2011 Offshore Voluntary Disclosure Initiative, and 2012 and 2014 Offshore Voluntary Disclosure Programs. He has represented hundreds of U.S. taxpayers with undisclosed foreign bank accounts, has published numerous articles regarding the IRS voluntary disclosure programs and FBAR and FATCA reporting obligations, and speaks frequently on these topics. 2n

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Mr. Lee has also served as a Lecturer of Law at the Villanova Univer-sity School of Law and periodically serves as a guest lecturer at the Drexel University School of Law and the University of Pennsylvania Law School. He graduated with honors from the Emory University School of Law, where he was elected as Executive Managing Editor of the Emory Law Journal. He earned his undergraduate degree from Furman University. Mr. Lee also earned an LL.M. degree in taxation from the New York University School of Law.

Fox Rothschild LLP is a national law firm with nearly 750 attorneys prac-ticing in twenty-two offices coast to coast serving clients for more than a century. Fox Rothschild’s attorneys provide a full range of legal services to public and private companies, from family-run businesses to multinational corporations. Fox Rothschild also represents chari-table, medical, and educational institutions in the United States and in more than fifty countries worldwide. For additional information, please visit www.foxrothschild.com.

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Table of Chapters

Chapter 1 Background of the Foreign Account Tax Compliance Act (FATCA)

Chapter 2 Key FATCA Terms and ConceptsChapter 3 Classification of Non-U.S. Entities As Foreign

Financial InstitutionsChapter 4 Withholding Obligations on Payments to Foreign

Financial InstitutionsChapter 5 Identification of PayeeChapter 6 Obligations of Participating Foreign Financial

InstitutionsChapter 7 Foreign Financial Institution AgreementChapter 8 Exempt Beneficial OwnersChapter 9 Withholding Obligations on Payments to

Nonfinancial Foreign Entities Chapter 10 Obligations of Withholding Agents to Withhold

Tax and File ReturnsChapter 11 FATCA Responsible Officers and Compliance

ProgramsChapter 12 FATCA Implementation: 2014 and 2015 As

Transition YearsChapter 13 Intergovernmental AgreementsChapter 14 Frequently Asked Questions and Answers About

FATCA Registration, Withholding, and Reporting

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About the Author ........................................................................................... viiTable of Chapters .............................................................................................ixTable of Contents .............................................................................................xiAcknowledgments ..................................................................................... lxviiIntroduction ..................................................................................................... lxixFrequently Used Terms ........................................................................... lxxiii

Chapter 1 Background of the Foreign Account Tax Compliance Act (FATCA)

Tax Policy Underlying FATCA ................................................................................1-3

Q 1.1 What is the tax policy behind FATCA? ..............................................1-3

Obligation to Report Worldwide Income and Disclose Foreign Bank Accounts and Certain Foreign Financial Assets .......................................1-4

Q 1.2 What are the U.S. tax and reporting obligations for taxpayers with offshore bank accounts? ............................................................1-4

Q 1.2.1 What must be reported on a U.S. income tax return with respect to an offshore bank account? ...........................1-4

Figure 1-1 Form 1040, Schedule B ....................................................................1-5Q 1.2.2 Under what circumstances is a U.S. taxpayer

required to file the FBAR form? ..............................................1-5Q 1.2.3 Under what circumstances is a U.S. taxpayer required

to report the existence of certain foreign assets? ...............1-7

The Global Crackdown on Offshore Tax Evasion ..............................................1-7

Q 1.3 What led the United States to enact FATCA? ...................................1-7Q 1.4 What efforts have other countries undertaken to combat

offshore tax evasion? ........................................................................1-21

FATCA Statutory Provisions ................................................................................1-22

Q 1.5 What are the FATCA statutory provisions contained in the Internal Revenue Code (“Code”)? ....................................................1-22

Q 1.5.1 What does Code section 1471 require? ...............................1-22Q 1.5.2 What does section 1472 require? .........................................1-24

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Q 1.5.3 What does section 1473 require? .........................................1-24Q 1.5.4 What does section 1474 require? .........................................1-24

FATCA Guidance Issued by Treasury and the IRS ............................................1-25

Q 1.6 What regulatory guidance regarding FATCA has been issued by Treasury and the IRS since enactment of the law in 2010? ........................................................................................1-25

Options for Noncompliant Taxpayers ...............................................................1-43

Q 1.7 What options exist for U.S. taxpayers with undisclosed offshore bank accounts? ...................................................................1-43

Chapter 2 Key FATCA Terms and Concepts

Definitions ...............................................................................................................2-2

Q 2.1 What is the definition of the terms “account” and “financial account”? ............................................................................2-2

Q 2.1.1 What is the definition of a “depository account”? ...............2-3Q 2.1.2 What is the definition of a “custodial account”? ..................2-3Q 2.1.3 What is the definition of an “equity or debt interest”? ........2-4Q 2.1.4 What is the definition of “cash value insurance

contract”? ..................................................................................2-5Q 2.1.5 What are the rules for determining when a financial

institution maintains a “financial account”? .........................2-7Q 2.1.6 What are the exceptions to the definition of

“financial account”? .................................................................2-7Q 2.2 How does an FFI determine the balance or value of a

financial account for FATCA purposes? ..........................................2-10Q 2.2.1 How does an FFI determine the balance or value

of an immediate annuity? ......................................................2-11Q 2.2.2 How is the account balance determined in the

case of multiple accounts? ....................................................2-11Q 2.2.3 How does an FFI determine an account’s balance or

value if the account is denominated in foreign currency? .................................................................................2-14

Q 2.3 What is the definition of the term “AML due diligence”? .............2-14Q 2.4 What is the definition of the term “annuity contract”? ................2-14Q 2.5 What is the definition of the term “assumes primary

withholding responsibility”? ............................................................2-15

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Q 2.6 What is the definition of the term “backup withholding”? ...........2-15Q 2.7 What is the definition of the term “blocked account”? ................2-15Q 2.8 What is the definition of the term “branch”? .................................2-15Q 2.9 What is the definition of the term “broker”? ..................................2-16Q 2.10 What is the definition of the term “chapter 3”? ................................2-16Q 2.11 What is the definition of the term “chapter 4”? ................................2-16Q 2.12 What is the definition of the term “chapter 4 status”? .................2-17Q 2.13 What is the definition of the term “chapter 4 withholding

rate pool”? ..........................................................................................2-17Q 2.14 What is the definition of the term “clearing organization”?.........2-17Q 2.15 What is the definition of the term “complex trust”? .....................2-17Q 2.16 What is the definition of the term “Compliance FI”? .....................2-18Q 2.17 What is the definition of the term “consolidated obligations”? ......2-18Q 2.18 What is the definition of the term “customer master file”? .........2-19Q 2.19 What is the definition of the term “deferred annuity contract”? ......2-19Q 2.20 What is the definition of the term “direct reporting NFFE”? ........2-19Q 2.21 What is the definition of the term “documentary evidence”? .......2-19Q 2.22 What is the definition of the term “documentation”? ...................2-19Q 2.23 What is the definition of the term “dormant account”? ...............2-20Q 2.24 What is the definition of the term “effective date of the

FFI agreement”? .................................................................................2-20Q 2.25 What is the definition of the term “EIN”? .......................................2-20Q 2.26 What is the definition of the term “electronically

searchable information”? .................................................................2-20Q 2.27 What is the definition of the term “entity”? ...................................2-20Q 2.28 What is the definition of the term “entity account”? ....................2-21Q 2.29 What is the definition of the term “excepted NFFE”? ...................2-21Q 2.30 What is the definition of the term “exempt beneficial owner”? .......2-21Q 2.31 What is the definition of the term “exempt recipient”? ................2-21Q 2.32 What is the definition of the term “expanded affiliated group”? .......2-22

Q 2.32.1 What is the “ownership test” for purposes of an expanded affiliated group? ....................................................2-22

Q 2.32.2 How are warrants, options, and obligations convertible into equity treated for purposes of determining ownership? ........................................................2-23

Q 2.32.3 How is an investment entity considered for purposes of an expanded affiliated group? ..........................................2-24

Q 2.32.4 What other rules apply in the expanded affiliated group context? ........................................................................2-242n

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Q 2.33 What is the definition of the term “FATCA ID”? .............................2-25Q 2.34 What is the definition of the term “FATF”? .....................................2-26Q 2.35 What is the definition of the term “FATF-compliant

jurisdiction”? ......................................................................................2-26Q 2.36 What is the definition of the term “FFI”? ........................................2-26Q 2.37 What is the definition of the term “FFI agreement”? .....................2-26Q 2.38 What is the definition of the term “financial institution”? ...........2-27Q 2.39 What is the definition of the term “flow-through entity”? ............2-27Q 2.40 What is the definition of the term “flow-through

withholding certificate”? ..................................................................2-27Q 2.41 What is the definition of the term “foreign entity”? ......................2-27Q 2.42 What is the definition of the terms “passthru payment” and

“foreign passthru payment”? ...........................................................2-27Q 2.43 What is the definition of the term “foreign payee”? ......................2-28Q 2.44 What is the definition of the term “foreign person”? ....................2-28Q 2.45 What is the definition of the term “Global Intermediary

Identification Number” or GIIN? ......................................................2-28Q 2.46 What is the definition of the term “grandfathered obligation”? .......2-28Q 2.47 What is the definition of the term “grantor trust”? .......................2-28Q 2.48 What is the definition of the term “group annuity contract”? .......2-28Q 2.49 What is the definition of the term “group insurance contract”? .......2-29Q 2.50 What is the definition of the term “immediate annuity”? .............2-29Q 2.51 What is the definition of the term “individual account”? .............2-29Q 2.52 What is the definition of the term “insurance company”? ...........2-29Q 2.53 What is the definition of the term “insurance contract”? ............2-30Q 2.54 What is the definition of the term “intergovernmental

agreement”? .......................................................................................2-30Q 2.54.1 What is the definition of the term “Model 1 IGA”? .............2-30Q 2.54.2 What is the definition of the term “Model 2 IGA”? .............2-30

Q 2.55 What is the definition of the term “intermediary”? ......................2-31Q 2.56 What is the definition of the term “intermediary withholding

certificate”? ........................................................................................2-31Q 2.57 What is the definition of the term “investment-linked

annuity contract”? .............................................................................2-31Q 2.58 What is the definition of the term “investment-linked

insurance contract”? .........................................................................2-31Q 2.59 What is the definition of the term “IRS FFI list”? ...........................2-31Q 2.60 What is the definition of the term “Lead FI”? .................................2-32Q 2.61 What is the definition of the term “life annuity contract”? ..........2-32Q 2.62 What is the definition of the term “life insurance contract”? ......2-32

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Q 2.63 What is the definition of the term “limited branch”? ....................2-32Q 2.64 What is the definition of the term “limited FFI”? ...........................2-34Q 2.65 What is the definition of the term “Member FFI”? .........................2-36Q 2.66 What is the definition of the term “nonfinancial foreign

entity” or “NFFE”? ..............................................................................2-36Q 2.67 What is the definition of the term “non-exempt recipient”? ........2-36Q 2.68 What is the definition of the term “nonparticipating FFI”? ..........2-37Q 2.69 What is the definition of the term “nonqualified

intermediary” or “NQI”? ...................................................................2-37Q 2.70 What is the definition of the term “nonreporting IGA FFI”? .........2-37Q 2.71 What is the definition of the term “non-U.S. account”? ................2-38Q 2.72 What is the definition of the term “nonwithholding

partnership” or “NWP”? ...................................................................2-38Q 2.73 What is the definition of the term “nonwithholding trust”

or “NWT”? ...........................................................................................2-39Q 2.74 What is the definition of the term “offshore obligation”? ............2-39Q 2.75 What is the definition of the term “owner”? ..................................2-39Q 2.76 What is the definition of the term “participating FFI”? .................2-39Q 2.77 What is the definition of the term “participating FFI group”? ........2-40Q 2.78 What is the definition of the term “passive NFFE”? ......................2-40Q 2.79 What is the definition of the term “payee”? ...................................2-40Q 2.80 What is the definition of the term “payment with respect

to an offshore obligation”? ...............................................................2-40Q 2.81 What is the definition of the term “payor”? ...................................2-40Q 2.82 What is the definition of the term “permanent residence

address”? ............................................................................................2-41Q 2.83 What is the definition of the term “person”? .................................2-42Q 2.84 What is the definition of the term “preexisting account”? ...........2-42Q 2.85 What is the definition of the term “preexisting entity

account”? ............................................................................................2-42Q 2.86 What is the definition of the term “preexisting individual

account”? ............................................................................................2-43Q 2.87 What is the definition of the term “preexisting obligation”? .......2-43Q 2.88 What is the definition of the term “pre-FATCA Form W-8”?..........2-45Q 2.89 What is the definition of the term “point of contact”? .................2-45Q 2.90 What is the definition of the term “private arrangement

intermediary”? ...................................................................................2-46Q 2.91 What is the definition of the term “qualified intermediary”

or “QI”? ...............................................................................................2-46Q 2.92 What is the definition of the term “qualified intermediary

agreement” or “QI agreement”? ..........................................................2-46

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Q 2.93 What is the definition of the term “QI branch of a U.S. financial institution”? ........................................................................2-46

Q 2.94 What is the definition of the term “recalcitrant account holder”? ..............................................................................................2-46

Q 2.94.1 When does an account holder’s status as “recalcitrant” begin? ..............................................................2-48

Q 2.94.2 When does an account holder’s status as “recalcitrant” end? .................................................................2-49

Q 2.95 What is the definition of the term “registered deemed-compliant FFI”? ...................................................................2-49

Q 2.96 What is the definition of the term “related entity”? ......................2-50Q 2.97 What is the definition of the term “relationship manager”? ........2-50Q 2.98 What is the definition of the term “reportable payment”?...........2-50Q 2.99 What is the definition of the term “Reporting FI”? ........................2-50Q 2.100 What is the definition of the term “reporting Model 1 FFI”? ........2-51Q 2.101 What is the definition of the term “reporting Model 2 FFI”? ........2-51Q 2.102 What is the definition of the term “responsible officer”? .............2-51Q 2.103 What is the definition of the term “responsible party”? ..............2-52Q 2.104 What is the definition of the term “simple trust”? ........................2-52Q 2.105 What is the definition of the term “Single FI”? ...............................2-52Q 2.106 What is the definition of the term “specified insurance

company”? ..........................................................................................2-52Q 2.107 What is the definition of the term “sponsored FFI”? .....................2-53Q 2.108 What is the definition of the term “sponsored FFI group”? .........2-53Q 2.109 What is the definition of the term “sponsored direct

reporting NFFE”?................................................................................2-53Q 2.110 What is the definition of the term “sponsoring entity”? ...............2-53Q 2.111 What is the definition of the term “standardized industry

code”? .................................................................................................2-53Q 2.112 What is the definition of the term “standing instructions to

pay amounts”? ...................................................................................2-54Q 2.113 What is the definition of the term “subject to withholding”? ........2-54Q 2.114 What is the definition of the term “substantial U.S. owner”? .........2-54

Q 2.114.1 What are the rules for determining the extent of a person’s interest in a foreign corporation? .........................2-55

Q 2.114.2 What are the rules for determining the extent of a person’s interest in a foreign partnership or foreign trust? ........................................................................................2-55

Q 2.114.3 What are the rules for determining the extent of a person’s interest in a foreign entity if the person holds an option to acquire such interest? ..........................2-56

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Q 2.114.4 What are the rules for determining an individual’s proportionate interest in a foreign entity? ..........................2-56

Q 2.114.5 What are the rules for determining an individual’s interest in a foreign entity where the interests are owned or held by a related person? ....................................2-57

Q 2.114.6 How do you determine if an individual has a beneficial interest in a foreign trust? .....................................................2-58

Q 2.114.7 How do you determine the 10% threshold in the case of a beneficial interest in a foreign trust? ............................2-58

Q 2.114.8 What are the exceptions to the “substantial U.S. owner” rules in the context of foreign trusts? ....................2-59

Q 2.114.9 How do these rules apply in the context of investment entities and specified insurance companies? .....................2-60

Q 2.114.10 On what date must a foreign entity make the determination as to whether it has a “substantial U.S. owner”? ............................................................................2-60

Q 2.115 What is the definition of the term “territory entity”? ...................2-61Q 2.116 What is the definition of the term “territory financial

institution”? ........................................................................................2-61Q 2.117 What is the definition of the term “territory financial

institution treated as a U.S. person”? .............................................2-61Q 2.118 What is the definition of the term “territory NFFE”? ....................2-61Q 2.119 What is the definition of the term “TIN”? .......................................2-62Q 2.120 What is the definition of the term “United States”? ......................2-62Q 2.121 What is the definition of the term “U.S. account”? ........................2-62

Q 2.121.1 Who is a “specified U.S. person” for purposes of FATCA? .................................................................................2-62

Q 2.121.2 Who is a “U.S. person” for purposes of FATCA? .................2-63Q 2.121.3 What is the definition of the term “U.S.-owned

foreign entity”? .......................................................................2-65Q 2.121.4 What is the definition of “account holder”? ........................2-65Q 2.121.5 What are the exceptions to “U.S. account” status? ............2-67

Q 2.122 What is the definition of the term “U.S. branch treated as a U.S. person”? ...................................................................................2-68

Q 2.123 What is the definition of the term “U.S. financial institution”? .......2-68Q 2.124 What is the definition of the term “U.S. indicia”? ..........................2-68Q 2.125 What is the definition of the term “U.S. payee”? ...........................2-69Q 2.126 What is the definition of the term “U.S. payor”? ...........................2-69Q 2.127 What is the definition of the term “U.S. territory or

possession of the United States”? ...................................................2-69Q 2.128 What is the definition of the term “U.S. withholding agent”? ........2-69

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Q 2.129 What is the definition of “withholdable payment” for FATCA purposes? ...........................................................................................2-70

Q 2.129.1 What is the definition of “U.S. source FDAP income”? ........2-70Q 2.129.2 What is the amount of U.S. source FDAP income? .............2-71Q 2.129.3 When is a payment of U.S. source FDAP income made? .......2-72Q 2.129.4 What is the definition of the term “gross proceeds”? ........2-72Q 2.129.5 For purposes of determining “gross proceeds,” what

is the definition of “sale or other disposition”?..................2-72Q 2.129.6 What is the definition of “property of a type that can

produce interest or dividend payments that would be U.S. source FDAP income”? ..............................................2-73

Q 2.129.7 When are gross proceeds deemed to be paid? ...................2-74Q 2.129.8 What is the amount of gross proceeds? ..............................2-74Q 2.129.9 What types of payments are not treated as

withholdable payments under FATCA? ................................2-75Q 2.129.10 Under what circumstances must a flow-through

entity, complex trust, or estate treat U.S. source FDAP income as having been paid by such entity to its partners, owners, or beneficiaries? .....................................2-79

Q 2.130 What is the definition of the term “withholding”? ........................2-81Q 2.131 What is the definition of “withholding agent” for purposes

of FATCA? ............................................................................................2-81Q 2.131.1 Are participating FFIs and registered deemed-

compliant FFIs considered withholding agents? ................2-81Q 2.131.2 Are grantor trusts considered withholding agents? ..........2-82Q 2.131.3 What are a withholding agent’s obligations with

regard to depositing any tax withheld and filing income and information tax returns? ..................................2-82

Q 2.131.4 What are the withholding obligations when more than one person qualifies as a withholding agent with respect to a single payment? ................................................2-82

Q 2.131.5 What are the withholding obligations when an individual makes a withholdable payment outside the course of such individual’s trade or business? ..................2-82

Q 2.132 What is the definition of the term “withholding certificate”? ......2-83Q 2.133 What is the definition of the term “withholding foreign

partnership” or “WP”? ......................................................................2-83Q 2.134 What is the definition of the term “withholding foreign

trust” or “WT”? ..................................................................................2-83Q 2.135 What is the definition of the term “written statement”? ..............2-832n

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Chapter 3 Classification of Non-U.S. Entities As Foreign Financial Institutions

FFI .............................................................................................................................3-3

Q 3.1 What is an FFI? .....................................................................................3-3Q 3.1.1 What is the definition of “financial institution” for

FATCA purposes? ......................................................................3-3

Depository Institution .............................................................................................3-4

Q 3.1.2 What does it mean to be engaged in “banking or similar business”? ....................................................................3-4

Custodial Institution ...............................................................................................3-6

Q 3.1.3 What does it mean to hold financial assets for others? ........3-6

Investment Entity .....................................................................................................3-7

Q 3.1.4 What is an investment entity? ................................................3-7Q 3.1.5 What are some examples of investment entities? ................3-9

Specified Insurance Company ...........................................................................3-12

Q 3.1.6 What is a “specified insurance company”? .........................3-12

Holding Company or Treasury Center .............................................................3-12

Q 3.1.7 What is a holding company or treasury center? ................3-12

Exclusions from Definition of “Financial Institution” .......................................3-13

Q 3.2 What types of entities are excluded from the definition of “financial institution”? ......................................................................3-13

Excepted Nonfinancial Group Entities .............................................................3-15

Q 3.2.1 What are “excepted nonfinancial group entities”? .............3-15Q 3.2.2 What is a “nonfinancial group”? ...........................................3-15Q 3.2.3 What is a “holding company”? ..............................................3-16Q 3.2.4 What is a “treasury center”? .................................................3-17Q 3.2.5 What is a “captive finance company”? ................................3-18

Excepted Nonfinancial Start-Up Companies/Companies Entering New Line of Business ..........................................................................................3-18

Q 3.2.6 What are “excepted nonfinancial start-up companies or companies entering a new line of business”? ................3-182n

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Excepted Nonfinancial Entities in Liquidation or Bankruptcy ........................3-19

Q 3.2.7 What are “excepted nonfinancial entities in liquidation or bankruptcy”? ..................................................3-19

Excepted Inter-Affiliate FFI ..................................................................................3-19

Q 3.2.8 What is an “excepted inter-affiliate FFI”? ............................3-19

Section 501(c) Entities ........................................................................................3-20

Q 3.2.9 What is an excluded “section 501(c) entity”? .....................3-20

Non-Profit Organizations ....................................................................................3-20

Q 3.2.10 What is an excluded “non-profit organization”? .................3-20

Deemed-Compliant FFIs ......................................................................................3-21

Q 3.3 What is a deemed-compliant FFI? ....................................................3-21

Registered Deemed-Compliant FFI ....................................................................3-22

Q 3.3.1 What is a “registered deemed-compliant FFI”? ...................3-22

Local FFI ................................................................................................................3-22

Q 3.3.2 What is a “local FFI”?..............................................................3-22

Nonreporting Member of a Participating FFI Group .....................................3-27

Q 3.3.3 What is a “nonreporting member of a participating FFI group”? ..............................................................................3-27

Qualified Investment Vehicle ..............................................................................3-28

Q 3.3.4 What is a “qualified investment vehicle”? ...........................3-28

Restricted Fund .....................................................................................................3-30

Q 3.3.5 What is a “restricted fund”? ..................................................3-30Q 3.3.6 What are the requirements to qualify for “restricted

fund” status? ...........................................................................3-32Q 3.3.7 What is a “restricted distributor”? .......................................3-35

Qualified Credit Card Issuer ..............................................................................3-37

Q 3.3.8 What is a “qualified credit card issuer”? .............................3-37

Sponsored Investment Entity/Controlled Foreign Corporation .....................3-38

Q 3.3.9 What is a “sponsored investment entity/controlled foreign corporation”? .............................................................3-38

Q 3.3.10 What are the requirements to qualify as a “sponsored investment entity” or “sponsored controlled foreign corporation”? ..........................................................................3-38

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Obligations of a Registered Deemed-Compliant FFI .......................................3-40

Q 3.4 What are the procedural obligations of a registered deemed-compliant FFI? .....................................................................3-40

Q 3.5 What if a deemed-compliant FFI becomes a participating FFI or a member of a participating FFI group as a result of a merger or acquisition? ...................................................3-41

Certified Deemed-Compliant FFIs.......................................................................3-41

Q 3.6 What is a “certified deemed-compliant FFI”? .................................3-41Q 3.7 What are the types of certified deemed-compliant

FFIs recognized by the IRS? ..............................................................3-42

Nonregistering Local Banks ...............................................................................3-42

Q 3.7.1 What is a “nonregistering local bank”? ................................3-42

FFIs with Only Low-Value Accounts ...................................................................3-44

Q 3.7.2 What is an “FFI with only low-value accounts”? .................3-44

Sponsored, Closely Held Investment Vehicles .................................................3-45

Q 3.7.3 What is a “sponsored, closely held investment vehicle”? ..................................................................................3-45

Limited Life Debt Investment Entities ..................................................................3-46

Q 3.7.4 What is a “limited life debt investment entity”? .................3-46Q 3.7.5 What are the requirements to qualify as a “limited

life debt investment entity”? .................................................3-47

Certain Investment Entities That Do Not Maintain Financial Accounts ........3-48

Q 3.7.6 What are the requirements to qualify as an “investment entity that does not maintain financial accounts”? ...........3-48

Owner-Documented FFIs .....................................................................................3-48

Q 3.8 What is an “owner-documented FFI”? .............................................3-48Q 3.8.1 What is the definition of a “designated withholding

agent” for purposes of an owner-documented FFI? ...........3-49Q 3.8.2 What are the requirements of owner-documented

FFI status? ................................................................................3-49

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Chapter 4 Withholding Obligations on Payments to Foreign Financial Institutions

Special Withholding Rules ....................................................................................4-2

Q 4.1 What is the withholding obligation on payments of U.S. source fixed or determinable annual or periodic (FDAP) income to participating FFIs and deemed-compliant FFIs that are nonqualified intermediaries (NQIs), nonwithholding foreign partnerships (NWPs), nonwithholding trusts (NWTs), or U.S. branches acting as intermediaries? ......................4-2

Q 4.1.1 What is the withholding obligation of intermediaries and flow-through entities?.......................................................4-3

Election to Be Withheld Upon ..............................................................................4-3

Q 4.1.2 What is the obligation to withhold if a participating FFI or registered deemed-compliant FFI makes an election to be withheld upon? ................................................4-3

Territory Financial Institution .................................................................................4-5

Q 4.1.3 What is the withholding obligation of a territory financial institution? ................................................................4-5

Foreign Branch of a U.S. Financial Institution ...................................................4-5

Q 4.1.4 What is the withholding obligation of a foreign branch of a U.S. financial institution? .................................................4-5

Gross Proceeds ......................................................................................................4-7

Q 4.1.5 What is the withholding obligation on payments of gross proceeds? ........................................................................4-7

Coordination of Withholding Under Section 1471(a) and (b) .........................4-7

Q 4.2 Which entities are deemed to satisfy their withholding obligations under both FATCA and section 1471? ...........................4-7

Payments for Which No Withholding Is Required .............................................4-7

Q 4.3 How does a withholding agent determine if an otherwise withholdable payment is exempt from withholding? .....................4-7

Q 4.3.1 What is the withholding obligation if the withholding agent lacks control, custody, or knowledge? ........................4-8

Q 4.3.2 What is the withholding obligation for certain payments made prior to July 1, 2016? ...................................4-92n

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Q 4.3.3 What is the withholding obligation with respect to payments to a participating FFI? ..........................................4-10

Q 4.3.4 What is the withholding obligation with respect to payments to a deemed-compliant FFI? ................................4-10

Q 4.3.5 What is the withholding obligation with respect to payments to an exempt beneficial owner?..........................4-11

Q 4.3.6 What is the withholding obligation with respect to payments to a territory financial institution?.....................4-11

Q 4.3.7 What is the withholding obligation with respect to payments to an account with a clearing organization with FATCA-compliant membership? ...................................4-11

Q 4.3.8 What is the withholding obligation with respect to payments to certain excepted accounts? ...........................4-12

Withholding Requirements If Source or Character of Payment Is Unknown .....4-12

Q 4.4 What is the withholding obligation if the withholding agent is unable to determine the source or character of a payment? ...................................................................4-12

Grandfathered Obligations ................................................................................4-13

Q 4.5 What is the withholding obligation with respect to “grandfathered obligations”? ...........................................................4-13

Q 4.5.1 What is the definition of “grandfathered obligation”? .......4-13Q 4.5.2 What is the definition of the term “obligation”? .................4-15Q 4.5.3 What is the definition of “date outstanding” for

purposes of “grandfathered obligations”? ..........................4-16Q 4.5.4 What is the definition of a “material modification”? ..........4-17

Application to Flow-Through Entities .................................................................4-17

Q 4.6 How are the “grandfathered obligation” rules applied to flow-through entities? .......................................................................4-17

Determination by Withholding Agent of Grandfathered Treatment .............4-18

Q 4.7 How does a withholding agent determine if an obligation is subject to grandfathered treatment under FATCA? ......................4-18

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Chapter 5 Identification of Payee

Definition of “Payee”.............................................................................................5-3

Q 5.1 Who is a “payee” for purposes of FATCA? ........................................5-3Q 5.1.1 What are the exceptions to the general rule for

determining the “payee”? ........................................................5-3

Foreign Assets or Intermediaries .........................................................................5-4

Q 5.1.2 How is “payee” defined in the case of foreign agents or intermediaries? ....................................................................5-4

Foreign Flow-Through Entity .................................................................................5-4

Q 5.1.3 How is “payee” defined in the case of a foreign flow-through entity? .................................................................5-4

U.S. Intermediaries or Agents of a Foreign Person ..........................................5-5

Q 5.1.4 How is “payee” defined in the case of a U.S. intermediary or agent of a foreign person? ..........................5-5

Territory Financial Institution .................................................................................5-6

Q 5.1.5 How is “payee” defined in the case of a territory financial institution? ................................................................5-6

Disregarded Entity or Branch ...............................................................................5-6

Q 5.1.6 How is “payee” defined in the case of a disregarded entity or branch? ......................................................................5-6

U.S. Branch Treated As a U.S. Person ...............................................................5-7

Q 5.1.7 How is “payee” defined in the case of a U.S. branch treated as a U.S. person? .........................................................5-7

Foreign Branch of a U.S. Person .........................................................................5-7

Q 5.1.8 How is “payee” defined in the case of a foreign branch of a U.S. person? ..........................................................5-7

Determination of Payee’s Status ..............................................................5-8

Q 5.2 How does a withholding agent determine the FATCA status of a payee? ................................................................................5-8

Q 5.2.1 How does a withholding agent determine if a payment is received by an intermediary? .............................................5-8

Q 5.2.2 How does a withholding agent make the determination of entity type? .................................................5-9

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Q 5.2.3 How does a withholding agent determine whether a payment is made to a QI, WP, or WT? ..................................5-10

Q 5.2.4 How does a withholding agent determine whether the payee is receiving effectively connected income? .............5-10

Rules for Reliably Associating a Payment with a Withholding Certificate or Other Appropriate Documentation ............................................5-11

Q 5.3 How does a withholding agent reliably associate a payment with a withholding certificate or other appropriate documentation? .................................................................................5-11

Q 5.3.1 How does a withholding agent reliably associate a payment with documentation if a payment is made through an intermediary or flow-through entity that is not the payee? .................................................5-13

Requirements for Validity of Certificates ..........................................................5-14

Form W-9 ..............................................................................................................5-14

Q 5.3.2 What are the requirements for Form W-9? ..........................5-14

Form W-8BEN or W-8BEN-E .............................................................................5-15

Q 5.3.3 What are the requirements for a beneficial owner withholding certificate (Form W-8BEN or W-8BEN-E)? ......5-15

Form W-8IMY .......................................................................................................5-15

Q 5.3.4 What are the requirements for a withholding certificate of an intermediary, qualified intermediary, flow-through entity, or U.S. branch (Form W-8IMY)? .........5-15

Withholding Statements ......................................................................................5-20

Q 5.3.5 What is the withholding statement required as part of Form W-8IMY? ............................................................5-20

Q 5.3.6 What are the requirements for an FFI withholding statement? .........................................................5-20

Q 5.3.7 What are the requirements for a FATCA withholding statement? .........................................................5-25

Q 5.3.8 What are the requirements for an exempt beneficial owner withholding statement? .............................................5-26

Q 5.3.9 What are the requirements for an alternative withholding statement? .........................................................5-26

Failure to Provide Allocation Information .........................................................5-27

Q 5.3.10 What are the consequences if a withholding certificate fails to provide allocation information? ............5-27

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Special Rules ........................................................................................................5-27

Q 5.3.11 What are the rules applicable to a withholding certificate of a QI that assumes primary withholding responsibility under chapter 3? ...........................................5-27

Q 5.3.12 What are the rules applicable to a withholding certificate of a QI that does not assume primary withholding responsibility under chapter 3? .....................5-28

Q 5.3.13 What are the rules applicable to a withholding certificate of a territory financial institution that agrees to be treated as a U.S. person? .................................5-28

Q 5.3.14 What are the rules applicable to a withholding certificate of a territory financial institution that does not agree to be treated as a U.S. person? ..................5-28

Q 5.3.15 What are the rules applicable to a withholding certificate of a U.S. branch treated as a U.S. person? ........5-29

Exempt Status and Effectively Connected Income ...........................................5-29

Q 5.3.16 What are the requirements for a certificate for exempt status (Form W-8EXP)? ............................................5-29

Q 5.3.17 What are the requirements for a certificate for effectively connected income (Form W-8ECI)? ...................5-29

Requirements for Written Statements ................................................................5-30

Q 5.4 What are the requirements for written statements under FATCA? ................................................................................................5-30

Requirements for Documentary Evidence .........................................................5-31

Q 5.5 What are the requirements for documentary evidence under FATCA? .....................................................................................5-31

Q 5.5.1 What is acceptable documentary evidence of foreign status? ........................................................................5-31

Q 5.5.2 What is acceptable documentary evidence of FATCA status? .........................................................................5-32

Applicable Rules for Withholding Certificates, Written Statements, and Documentary Evidence ........................................................................................5-33

Who May Sign ....................................................................................................5-33

Q 5.5.3 Who may sign the withholding certificate or written statement? ...............................................................................5-332n

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Period of Validity..................................................................................................5-34

Q 5.5.4 What is the period of validity for a withholding certificate or written statement? ..........................................5-34

Q 5.5.5 What is the period of validity for a withholding certificate for effectively connected income? ....................5-38

Change in Circumstances ...................................................................................5-38

Q 5.5.6 What is the definition of “change in circumstances”? .......5-38

Record Retention Requirements ..........................................................................5-40

Q 5.6 What are the record retention requirements for withholding certificates, written statements, and documentary evidence? ........5-40

Electronic Transmission .......................................................................................5-41

Q 5.6.1 Is a withholding agent permitted to accept electronic transmission of a withholding certificate, written statement, and documentary evidence? .............................5-41

Substitute Withholding Certificates ...................................................................5-43

Q 5.6.2 What is an acceptable substitute withholding certificate? ...............................................................................5-43

Q 5.6.3 Is there a procedure to obtain electronic confirmation of a tax identification number on a withholding certificate? ...............................................................................5-44

Q 5.6.4 May a withholding agent rely upon a prior version of a withholding certificate? .................................................5-45

Curing Documentation Errors .............................................................................5-46

Q 5.7 How does a withholding agent address inconsequential errors on a withholding certificate? ................................................5-46

Q 5.8 How does a withholding agent address documentation received after the time of payment? ...............................................5-47

Documentation to Be Furnished on Account-by-Account Basis ......................5-49

Q 5.9 Is a withholding agent that is a financial institution required to obtain withholding certificates, written statements, Forms W-9, or documentary evidence on an account-by-account basis? ..................................................................................................5-49

Q 5.9.1 What are the sharing rules within single branch systems? ..................................................................................5-49

Q 5.9.2 What are the sharing rules within universal account systems? ...................................................................5-49

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Q 5.9.3 What are the sharing rules within shared account systems? ..................................................................................5-50

Q 5.9.4 What are the sharing rules for gross proceeds? ................5-51Q 5.9.5 What are the sharing rules for preexisting accounts? .........5-51

Reliance on Documentation Collected by, or Certifications Provided by, Other Persons ................................................................................5-51

Q 5.10 Is a withholding agent permitted to rely upon a shared documentation system maintained by an agent? ..........................5-51

Q 5.11 Is a withholding agent permitted to rely upon third-party data providers? ..............................................................5-52

Q 5.12 Is a withholding agent permitted to rely upon a certification provided by an introducing broker? ...............................................5-54

Q 5.13 Is a withholding agent permitted to rely upon documentation and certifications provided between principals and agents? ......................................................................5-54

Documentation Requirements to Establish FATCA Status ................................5-57

Q 5.14 Is a withholding agent permitted to rely upon documentation for accounts acquired in merger or bulk acquisition for value? ........................................................................5-57

Q 5.14.1 Is a withholding agent permitted to rely upon a pre-FATCA Form W-8? .............................................................5-58

Identification of Payee .........................................................................................5-59

Q 5.14.2 Under what circumstances must a withholding agent treat a payee as a U.S. person? .............................................5-59

Q 5.14.3 Under what circumstances may a withholding agent treat a payee as a foreign person? .......................................5-61

Q 5.14.4 Under what circumstances may a withholding agent treat a payee as a participating FFI or registered deemed-compliant FFI? ..........................................................5-62

Q 5.14.5 Under what circumstances may a withholding agent treat a payee as a sponsored investment entity or sponsored controlled foreign corporation? ........................5-64

Q 5.14.6 Under what circumstances may a withholding agent treat a payee as a certified deemed-compliant FFI? ...........5-67

Q 5.14.7 Under what circumstances may a withholding agent treat a payee as an owner-documented FFI? ......................5-68

Q 5.14.8 Is a payee permitted to provide an auditor’s or attorney’s letter in lieu of the “FFI owner reporting statement”? .............................................................................5-70

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Q 5.14.9 What is acceptable documentation for owners and debt holders of the payee?....................................................5-70

Q 5.14.10 What information is required for the “FFI owner reporting statement”? ............................................................5-71

Q 5.14.11 How is a withholding agent required to treat preexisting obligations in the context of owner-documented FFIs? ......................................................5-72

Q 5.14.12 How is a withholding agent required to treat offshore obligations in the context of owner-documented FFIs? .......5-73

Q 5.14.13 How is a withholding agent required to treat offshore obligations of $1 million or less in the context of owner-documented FFIs? ......................................................5-73

Q 5.14.14 What are a withholding agent’s obligations with respect to nonreporting IGA FFIs? .......................................5-75

Q 5.14.15 Under what circumstances is a withholding agent required to treat a payee as a nonparticipating FFI? .........5-75

Q 5.14.16 Under what circumstances may a withholding agent treat a payment made to a nonparticipating FFI as beneficially owned by an exempt beneficial owner? .........5-76

Q 5.14.17 Under what circumstances may a withholding agent treat a payee as a foreign government, government of a U.S. territory, international organization, or foreign central bank of issue? ............................................................5-76

Q 5.14.18 Under what circumstances may a withholding agent treat a payee as a retirement fund? .....................................5-78

Q 5.14.19 Under what circumstances may a withholding agent treat a payee as an entity wholly owned by an exempt beneficial owner?....................................................................5-78

Q 5.14.20 What are the rules for identifying territory financial institutions that are beneficial owners? ..............................5-79

Q 5.14.21 What are the rules for identifying territory financial institutions acting as intermediaries or that are flow-through entities? ............................................................5-79

Q 5.14.22 What are the standards of knowledge applicable to a withholding agent with respect to identification of territory financial institutions? ............................................5-80

Identification of Excepted NFFEs ........................................................................5-81

Q 5.14.23 Under what circumstances may a withholding agent treat a payee as an excepted nonfinancial group entity? ......5-81

Q 5.14.24 Under what circumstances may a withholding agent treat a payee as an excepted nonfinancial start-up company? ................................................................................5-81

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Q 5.14.25 Under what circumstances may a withholding agent treat a payee as an excepted nonfinancial entity in liquidation or bankruptcy? ...................................................5-82

Q 5.14.26 Under what circumstances may a withholding agent treat a payee as a section 501(c) organization? .................5-83

Q 5.14.27 Under what circumstances may a withholding agent treat a payee as a non-profit organization? .........................5-84

Q 5.14.28 Under what circumstances may a withholding agent treat a payee as an NFFE that is a publicly traded corporation? ...........................................................................5-85

Q 5.14.29 Under what circumstances may a withholding agent treat a payee as an NFFE affiliate? ........................................5-86

Q 5.14.30 Under what circumstances may a withholding agent treat a payee as an excepted territory NFFE? .....................5-87

Q 5.14.31 Under what circumstances may a withholding agent treat a payee as an active NFFE? ..........................................5-89

Q 5.14.32 Under what circumstances may a withholding agent treat a payee as a direct reporting NFFE? ...........................5-91

Q 5.14.33 Under what circumstances may a withholding agent treat a payee as a sponsored direct reporting NFFE? ........5-92

Q 5.14.34 Under what circumstances may a withholding agent treat a payee as an excepted inter-affiliate FFI? .................5-93

Identification of Passive NFFEs ...........................................................................5-95

Q 5.15 Under what circumstances may a withholding agent treat a payee as a passive NFFE? .................................................................5-95

Standards of Knowledge ....................................................................................5-97

Q 5.15.1 When is a withholding agent deemed to be on notice that a person’s claim of FATCA compliance is incorrect? ......5-97

Q 5.15.2 What is the procedure that must be followed by a withholding agent to verify a GIIN? ......................................5-97

Q 5.15.3 What should an FFI provide to a withholding agent if the FFI has not yet received a GIIN? ...................................5-100

Q 5.15.4 When is a withholding agent deemed to know that an FFI has been removed from the published IRS FFI list? ......5-100

Q 5.15.5 What are the GIIN verification rules for reporting Model 1 FFIs?.........................................................................5-100

Q 5.15.6 What are the GIIN verification rules for direct reporting NFFEs? ..................................................................5-1012n

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Q 5.15.7 What are the GIIN verification rules for sponsored direct reporting NFFEs? .......................................................5-101

Q 5.15.8 What are the GIIN verification rules for sponsoring entities? .................................................................................5-102

Reason-to-Know Rules ........................................................................................5-103

Q 5.15.9 When is a withholding agent deemed to know that a claim of chapter 4 status is unreliable or incorrect? .......5-103

Q 5.15.10 What are the reason-to-know rules applicable to an entity’s FATCA status? ..........................................................5-103

Q 5.15.11 What are the reason-to-know rules applicable to withholding certificates? .....................................................5-104

Q 5.15.12 What are the reason-to-know rules applicable to written statements? .............................................................5-105

Q 5.15.13 What are the reason-to-know rules applicable to documentary evidence? ......................................................5-105

Q 5.15.14 What are the specific standards of knowledge applicable when the only documentary evidence is a code or classification? ......................................................5-107

U.S. Indicia for Entities......................................................................................5-107

Q 5.15.15 What are U.S. indicia for entities? ......................................5-107Q 5.15.16 What documentation is required to cure U.S. indicia

with regard to entities? ........................................................5-108

Standards of Knowledge Applicable to Intermediaries and Flow-Through Entities .........................................................................................5-109

Q 5.15.17 What are the specific standards of knowledge applicable to documentation received from intermediaries and flow-through entities? ........................5-109

Limits on Reason-to-Know Rules .......................................................................5-111

Q 5.15.18 What are the limits on the reason-to-know rules as they relate to documentation provided by participating FFIs and registered deemed-compliant FFIs that are intermediaries or flow-through entities? ....................5-111

Q 5.15.19 What is a withholding agent’s scope of review for preexisting obligations of entities? ....................................5-113

Q 5.15.20 What is a withholding agent’s obligation where there is reason to know there are U.S. indicia associated with a preexisting obligation? .............................................5-1142n

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Reasonable Explanation Supporting Claim of Foreign Status ....................5-114

Q 5.15.21 What constitutes a reasonable explanation supporting a claim of foreign status? .....................................................5-114

Conduit Financing Arrangements ....................................................................5-116

Q 5.15.22 What rules apply to determining a withholding agent’s obligations in the case of a conduit financing arrangement? .......................................................5-116

Presumptions Regarding FATCA Status of the Person Receiving the Payment in the Absence of Documentation .............................................5-116

Q 5.16 How does a withholding agent determine the FATCA status of a payee in the absence of documentation? .............................5-116

Q 5.16.1 What are the rules that a withholding agent must apply to determine whether a payee is an individual or entity? .............................................................5-116

Q 5.16.2 What are the rules that a withholding agent must apply to determine the U.S. or foreign status of the payee? .............................................................................5-117

Q 5.16.3 What are the rules that a withholding agent must apply to determine the chapter 4 status of a foreign entity? .......................................................................5-117

Q 5.16.4 What are the rules that a withholding agent must apply to determine the chapter 4 status of an intermediary?........................................................................5-119

Q 5.16.5 Under what circumstances may a withholding agent presume that a U.S. branch is the payee of a payment that is effectively connected with the conduct of a trade or business in the United States? ...............................5-119

Joint Payees ........................................................................................................5-120

Q 5.16.6 What rules must a withholding agent apply in the case of a payment to joint payees? ....................................5-120

Rebuttal of Presumptions ...................................................................................5-120

Q 5.16.7 Under what circumstances may a payee rebut the FATCA presumption rules? ..................................................5-120

Effect of Reliance on Presumptions ..................................................................5-121

Q 5.16.8 May a withholding agent be held liable for withholding if it relies upon the FATCA presumption rules? ..............................................................5-121

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Effect of Actual Knowledge or Reason to Know Otherwise ........................5-121

Q 5.16.9 What if a withholding agent applies the presumption rules but has actual knowledge of a payee’s chapter 4 status, or reason to know otherwise? ..............5-121

Chapter 6 Obligations of Participating Foreign Financial Institutions

FFI Agreement ........................................................................................................6-3

Q 6.1 What is an FFI agreement? ..................................................................6-3Q 6.2 When is an FFI agreement considered to be in effect? ...................6-4

Overview of Obligations Under FFI Agreement ................................................6-4

Q 6.3 What are the obligations of an FFI under an FFI agreement? .........6-4Q 6.3.1 Under what circumstances is a participating FFI

required to deduct and withhold tax? ...................................6-4Q 6.3.2 Under what circumstances is a participating FFI

required to identify and document its U.S. accounts? ........6-4Q 6.3.3 Under what circumstances is a participating FFI

required to report account information to the IRS? ............6-5Q 6.3.4 What are the rules for FFIs that are part of an

expanded affiliated group? ......................................................6-5Q 6.3.5 How is a participating FFI required to ensure its

compliance with the FFI agreement? .....................................6-5Q 6.3.6 What are the obligations of a participating FFI when

an event of default under an FFI agreement occurs? ...........6-6Q 6.3.7 How does a participating FFI seek a refund on

behalf of account holders for which there has been overwithholding? .....................................................................6-6

Withholding Requirements Under FFI Agreement .............................................6-6

Q 6.4 In general, what are the withholding obligations of a participating FFI? .................................................................................6-6

Q 6.4.1 How does a participating FFI determine if withholding is required? ...............................................................................6-6

Q 6.4.2 How does a participating FFI satisfy its withholding obligations? ...............................................................................6-7

Q 6.4.3 What are the obligations of a participating FFI with respect to “foreign passthru payments”? ..............................6-8

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Q 6.4.4 What is the obligation of a participating FFI with respect to withholding on limited FFIs? ................................6-9

Q 6.4.5 What is the obligation of a participating FFI to withholding on limited branches? .........................................6-9

Special Rule for Dormant Accounts ...................................................................6-10

Q 6.4.6 What is a participating FFI’s withholding obligation with respect to dormant accounts? .....................................6-10

Withholding Requirements for U.S. Branches of Participating FFIs (and Reporting Model 1 FFIs) Treated As U.S. Persons .................................6-10

Q 6.4.7 What are the withholding requirements for U.S. branches of participating FFIs treated as U.S. persons? .....6-10

Due Diligence for the Identification and Documentation of Account Holders ...................................................................................................6-11

Q 6.5 What are the obligations of a participating FFI to identify and document its account holders? ...............................................6-11

Q 6.5.1 What are the general rules for the identification and documentation of account holders and payees? ...............6-11

Standards of Knowledge Applicable to Participating FFIs ............................6-12

Q 6.5.2 What are the standards of knowledge that apply to a participating FFI? ....................................................................6-12

Q 6.5.3 What standards of knowledge apply when a participating FFI acquires certain accounts in a merger or bulk acquisition? ...........................................6-12

Change in Circumstances ...................................................................................6-14

Q 6.5.4 What is an FFI’s obligation in the event of a change in circumstances with respect to an account? .......................6-14

Q 6.5.5 What is the definition of a “change in circumstances”? ......6-14Q 6.5.6 What are the requirements following a change in

circumstances? .......................................................................6-15

Record Retention Requirements for Participating FFIs.....................................6-15

Q 6.5.7 What are the record retention obligations of a participating FFI? ....................................................................6-15

Special Rule for U.S. Branches of Participating FFIs That Are Treated As U.S. Persons ......................................................................................6-16

Q 6.5.8 What are the account due diligence obligations of U.S. branches of participating FFIs that are treated as U.S. persons? ...........................................................................6-16

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Identification and Documentation Procedure for Entity Accounts and Payees ...........................................................................................6-17

Q 6.6 What are the obligations of a participating FFI to identify and document accounts held by entities? .....................................6-17

Q 6.6.1 What is the time frame for applying identification and documentation procedures for entity accounts and payees? ............................................................6-17

Q 6.6.2 What are the due diligence obligations of a participating FFI with respect to preexisting entity accounts with balances of $250,000 or less? ......................6-18

Onboarding Requirements for New Individual Accounts ...............................6-19

Q 6.7 What are the obligations of a participating FFI to identify and document new individual accounts? .......................................6-19

Q 6.7.1 Under what circumstances may a participating FFI rely upon a third party for identification of individual accounts? ................................................................................6-20

Q 6.7.2 What is the onboarding procedure that a participating FFI must follow for cash value insurance or annuity contracts? ................................................................................6-20

Q 6.7.3 What is the onboarding procedure that a participating FFI must follow for accounts held by beneficiaries of a cash value life insurance contract? .....................................6-21

Identification and Documentation Procedure for Preexisting Individual Accounts ..............................................................................................6-21

Q 6.8 What are the account holder due diligence requirements that must be employed by participating FFIs with respect to preexisting accounts? .......................................................................6-21

Q 6.8.1 What are a participating FFI’s due diligence obligations if a preexisting individual account has been previously documented as a U.S. account? ...............6-22

Q 6.8.2 What are a participating FFI’s due diligence obligations with respect to preexisting individual accounts with balances of $50,000 or less? ........................6-22

Q 6.8.3 What identification and documentation procedures must be employed by a participating FFI for preexisting individual accounts?..........................................6-23

U.S. Indicia and Relevant Documentation Rules .............................................6-24

Q 6.8.4 What are U.S. indicia for individual accounts? ...................6-24Q 6.8.5 What documentation must be retained upon

identifying U.S. indicia? .........................................................6-25

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Q 6.8.6 Under what circumstances may a participating FFI rely upon electronically searchable account holder information to locate U.S. indicia? .......................................6-27

High-Value Accounts............................................................................................6-27

Q 6.8.7 What are a participating FFI’s due diligence obligations for accounts that exceed $1 million? ...................................6-27

Exception for Preexisting Individual Accounts That a Participating FFI Has Documented As Held by Foreign Individuals for Purposes of Meeting Its Obligations Under Chapter 61 or Its QI, WP, or WT Agreement ...............6-29

Q 6.8.8 What are a participating FFI’s due diligence obligations with respect to preexisting accounts previously documented as held by foreign persons? ...........................6-29

Account Reporting Obligations of a Participating FFI .....................................6-31

Q 6.9 What account information is required to be reported to the U.S. by a participating FFI? ........................................................6-31

Q 6.9.1 Which financial institution is responsible for reporting U.S. accounts to the IRS? .......................................................6-32

Special Reporting ................................................................................................6-32

Q 6.9.2 What are the reporting obligations with respect to territory financial institutions? ............................................6-32

Q 6.9.3 What are the reporting obligations of a sponsoring entity? ......................................................................................6-33

Q 6.9.4 What are the reporting obligations of a participating FFI with respect to owner-documented FFI accounts? ......6-33

Q 6.9.5 Is a participating FFI permitted to report information to the U.S. separately by branch or line of business? .......6-34

Q 6.9.6 What are the reporting obligations of participating FFIs with respect to accounts of nonparticipating FFIs? ......6-34

Q 6.9.7 What are the reporting obligations of a participating FFI that acquires the accounts of another participating FFI? ....................................................................6-36

Special U.S. Account Reporting Rules for U.S. Payors ..................................6-36

Q 6.9.8 What are the reporting obligations for U.S. payors? .........6-36

Information Required to Be Reported ...............................................................6-38

Q 6.10 What is a participating FFI’s obligation regarding the annual reporting of accounts? ......................................................................6-38

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Q 6.10.1 What is a participating FFI’s obligation to report accounts held by specified U.S. persons? ...........................6-38

Q 6.10.2 What is a participating FFI’s obligation to report accounts held by U.S.-owned foreign entities? ...................6-38

Q 6.10.3 What is a participating FFI’s obligation to report accounts held by owner-documented FFIs? .......................6-39

Procedures for Reporting ....................................................................................6-40

Q 6.10.4 What form is used by participating FFIs to report accounts to the IRS? ...............................................................6-40

Q 6.10.5 When and how does a participating FFI file the Form 8966, FATCA Report ? ....................................................6-40

Q 6.10.6 How does a participating FFI obtain an extension of time to file Form 8966? ...........................................................6-40

Descriptions Applicable to Reporting Requirements .......................................6-41

Q 6.10.7 What is the address that must be reported with respect to a U.S. account? .....................................................6-41

Q 6.10.8 What is the account number that must be reported with respect to a U.S. account? ............................................6-41

Q 6.10.9 What is the account balance or value that must be reported with respect to a U.S. account? ............................6-41

Q 6.10.10 What information is required to be reported as to “payments made with respect to an account”? ..................6-42

Record Retention Requirements ..........................................................................6-44

Q 6.10.11 What records are required to be retained by a participating FFI? ....................................................................6-44

Election to Perform Chapter 61 Reporting .......................................................6-45

Q 6.11 Under what circumstances may a participating FFI elect to report U.S. account information pursuant to chapter 61 rather than FATCA? ...........................................................................6-45

Q 6.11.1 What additional information must be reported by a participating FFI that makes an election to perform chapter 61 reporting? ............................................................6-46

Q 6.11.2 What information regarding accounts held by owner-documented FFIs must be reported by a participating FFI that makes an election to perform chapter 61 reporting? .............................................6-47

Q 6.11.3 When and how is a participating FFI required to make an election to perform chapter 61 reporting? ....................6-47

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Q 6.11.4 What is the procedure for a participating FFI to revoke an election to perform chapter 61 reporting? .......6-48

Q 6.11.5 How does a participating FFI that has made an election to report under chapter 61 report its U.S. account information to the IRS? ...........................................6-48

Reporting on Recalcitrant Account Holders ......................................................6-48

Q 6.12 What are a participating FFI’s obligations with regard to the reporting of recalcitrant account holders? ....................................6-48

Q 6.12.1 What is a “dormant account” for FATCA purposes? ..........6-49Q 6.12.2 When does an account cease to be deemed a

“dormant account”? ...............................................................6-50Q 6.12.3 What form should be used by a participating FFI to

report recalcitrant accounts? ...............................................6-50Q 6.12.4 When must a participating FFI report regarding its

recalcitrant accounts? ...........................................................6-50Q 6.12.5 May a participating FFI seek an extension of time to

report recalcitrant accounts? ...............................................6-50Q 6.12.6 What are a participating FFI’s record retention

requirements with respect to recalcitrant accounts? .......6-51

Special Reporting Rules for 2014 and 2015 ...................................................6-51

Q 6.13 What are the special reporting rules for calendar years 2014 and 2015? ........................................................................6-51

Q 6.13.1 What information is required to be reported for the 2014 and 2015 calendar years by participating FFIs? ........6-51

Q 6.13.2 What information is required to be reported for the 2014 and 2015 calendar years by participating FFIs making an election to perform chapter 61 reporting? .......6-52

Q 6.13.3 What form should a participating FFI use to report account information for the 2014 and 2015 calendar years? .......................................................................6-53

Reporting Requirements of QIs, WPs, and WTs ...............................................6-54

Q 6.14 What are the reporting obligations of QIs, WPs, and WTs? .........6-54

Expanded Affiliated Group Requirements ........................................................6-56

Q 6.15 What are the requirements for FFIs that are part of an expanded affiliated group? ...............................................................6-562n

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Limited Branches ..................................................................................................6-56

Q 6.15.1 What if a participating FFI has branches that cannot satisfy the participating FFI requirements? ........................6-56

Q 6.15.2 What is the definition of “branch”? ......................................6-57Q 6.15.3 What is the definition of “limited branch”?.........................6-57Q 6.15.4 What are the requirements for limited branch status? .......6-58Q 6.15.5 What are the time limits applicable to limited

branch status? ........................................................................6-59Q 6.15.6 What is the “same jurisdiction” exception and how

does it apply to limited branches? .......................................6-59

Limited FFI .............................................................................................................6-60

Q 6.15.7 What if one of the FFIs in an expanded affiliated group cannot satisfy the participating FFI requirements? ...........6-60

Q 6.15.8 What is the definition of a “limited FFI”? .............................6-60Q 6.15.9 What are the conditions for limited FFI status? .................6-61Q 6.15.10 What are the time limits applicable to limited FFI status? .....6-61Q 6.15.11 Under what circumstances is a limited FFI exempt

from registering? ....................................................................6-62Q 6.15.12 What is the “same jurisdiction” exception and how

does it apply to limited FFIs? ................................................6-64

Special Rule for QIs .............................................................................................6-65

Q 6.15.13 What are the limited FFI rules in the context of a QI agreement? ..............................................................................6-65

Verification ............................................................................................................6-65

Q 6.16 What are the obligations of a participating FFI to ensure compliance with the terms of the FFI agreement? ........................6-65

Compliance Program ..........................................................................................6-65

Q 6.16.1 What is a participating FFI’s obligation to establish and implement a compliance program? ..............................6-65

Certifications of Responsible Officer .................................................................6-66

Q 6.16.2 What due diligence certifications are required to be made by a participating FFI’s responsible officer? ............6-66

Consolidated Compliance Program ..................................................................6-68

Q 6.16.3 What are the requirements for a compliance program in the context of an expanded affiliated group? .................6-682n

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Certification of Compliance ...............................................................................6-69

Q 6.16.4 What compliance certifications are required by the participating FFI’s compliance officer? ................................6-69

Q 6.16.5 What is a “certification of effective internal controls”?.......6-70Q 6.16.6 What is a “qualified certification”? .......................................6-70

Material Failures ..................................................................................................6-71

Q 6.16.7 What is a “material failure”? .................................................6-71

IRS Review of Compliance .................................................................................6-72

Q 6.16.8 How will the IRS ensure that a participating FFI is complying with the terms of its FFI agreement? ................6-72

Event of Default ....................................................................................................6-73

Q 6.17 What is the definition of an “event of default” under an FFI agreement? ...................................................................................6-73

Q 6.17.1 How does the IRS notify a participating FFI of an event of default? .....................................................................6-74

Q 6.17.2 How does a participating FFI remediate an event of default? ................................................................................6-75

Collective Credit or Refund Procedures for Overpayments ............................6-75

Q 6.18 How does a participating FFI seek a credit or refund from the IRS when there has been an overpayment of withheld taxes? ......6-75

Q 6.18.1 What are the restrictions on seeking a collective refund? .....................................................................................6-76

Q 6.18.2 For which types of payments is a collective refund permitted? ...............................................................................6-76

Q 6.18.3 Under what circumstances may a participating FFI use collective refund procedures? .......................................6-76

Legal Prohibitions on Reporting U.S. Accounts and Withholding .................6-78

Q 6.19 What is a participating FFI’s obligation if foreign law prohibits the reporting of account holder information to the IRS? .............6-78

Q 6.19.1 When is a participating FFI required to request a waiver of foreign law or close an account? .........................6-79

Q 6.19.2 What is the definition of a “valid and effective” waiver? .....................................................................................6-79

Q 6.19.3 Under what circumstances is a participating FFI required to close or transfer a U.S. account? .....................6-80

Q 6.19.4 What are a participating FFI’s obligations if foreign law prevents withholding? ....................................................6-80

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Chapter 7 Foreign Financial Institution Agreement

FFI Agreement ........................................................................................................7-2

Q 7.1 What is the FFI agreement? ................................................................7-2

Reporting Model 2 and Model 1 FFIs ..................................................................7-3

Q 7.2 Does the final FFI agreement apply to reporting Model 2 FFIs? .......7-3Q 7.3 Does the final FFI agreement apply to reporting Model 1 FFIs? .......7-3

Terms of FFI Agreement .........................................................................................7-4

Q 7.4 What are the terms of the FFI agreement? .......................................7-4

Updated FFI Agreement ......................................................................................7-60

Q 7.5 What is the updated FFI agreement? ...............................................7-60Q 7.6 How does an FFI register to become a participating FFI? ............7-60Q 7.7 How does a participating FFI renew its FFI agreement? ...............7-60Q 7.8 What is the scope of the updated FFI agreement? ..........................7-61Q 7.9 What changes are contained in the updated FFI agreement? ........7-62

Terms of Updated FFI Agreement.......................................................................7-66

Q 7.10 What are the terms of the updated FFI agreement? ......................7-66

Chapter 8 Exempt Beneficial Owners

Foreign Government/Political Subdivision of a Foreign Government ............8-2

Q 8.1 What is the definition of a “foreign government” and “any political subdivision of a foreign government” under FATCA? ......8-2

Q 8.1.1 What is an “integral part” of a foreign sovereign? ...............8-2Q 8.1.2 What is a “controlled entity”? .................................................8-3Q 8.1.3 What is the definition of “inurement to the benefit of

private persons”? .....................................................................8-3

International Organization or Any Wholly Owned Agency or Instrumentality Thereof .........................................................................................8-4

Q 8.2 What is the definition of an “international organization” under FATCA? .......................................................................................8-42n

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Foreign Central Bank of Issue ..............................................................................8-4

Q 8.3 What is the definition of a “foreign central bank of issue” under FATCA? .......................................................................................8-4

Q 8.3.1 Under what circumstances may a foreign central bank of issue include an instrumentality? ......................................8-4

Q 8.3.2 How does FATCA classify the Bank for International Settlements? ..............................................................................8-5

Q 8.3.3 How does FATCA treat income on certain collateral held by a foreign central bank of issue? ................................8-5

Governments of U.S. Territories ...........................................................................8-5

Q 8.4 Under what circumstances does a person or entity constitute a government of a U.S. territory? ...................................8-5

Exempt Foreign Retirement Funds .......................................................................8-5

Q 8.5 What types of foreign retirement funds are deemed exempt beneficial owners? ...............................................................................8-5

Q 8.5.1 What is a treaty-qualified retirement fund? ..........................8-6Q 8.5.2 What is a broad participation retirement fund? ...................8-6Q 8.5.3 What is a narrow participation retirement fund? .................8-7Q 8.5.4 What is a fund formed pursuant to a plan similar to a

section 401(a) plan? .................................................................8-7Q 8.5.5 What is an investment vehicle exclusively for

retirement funds? .....................................................................8-8Q 8.5.6 What is a pension fund of an exempt beneficial owner? .....8-8

Entities Wholly Owned by Exempt Beneficial Owners .....................................8-9

Q 8.6 What is an entity wholly owned by an exempt beneficial owner? ..................................................................................................8-9

Exception for Commercial Activities ....................................................................8-9

Q 8.7 What if an otherwise exempt beneficial owner engages in commercial activity? ...........................................................................8-9

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Chapter 9 Withholding Obligations on Payments to Nonfinancial Foreign Entities

Definition of NFFE ..................................................................................................9-2

Q 9.1 What is an NFFE? .................................................................................9-2

Withholdable Payments Made to an NFFE .........................................................9-2

Q 9.2 When is a withholding agent required to withhold on a payment to an NFFE? ..........................................................................9-2

Exceptions to Withholding Requirement .............................................................9-3

Q 9.3 What exceptions apply to the rule requiring withholding on payments to an NFFE? ...................................................................9-3

Q 9.3.1 What is the definition of “publicly traded corporation”? .......9-4Q 9.3.2 What is the definition of “certain affiliated entities

related to a publicly traded corporation”? ...........................9-6Q 9.3.3 What is the definition of “certain territory entities”? ..........9-6Q 9.3.4 What is the definition of “active NFFE”? ................................9-7Q 9.3.5 What is the definition of “excepted nonfinancial

entities”? ....................................................................................9-9Q 9.3.6 What is a “nonfinancial group”? ...........................................9-10Q 9.3.7 What is a “holding company”? ..............................................9-10Q 9.3.8 What is a “treasury center”? .................................................9-11Q 9.3.9 What is a “captive finance company”? ................................9-12Q 9.3.10 What are “excepted nonfinancial start-up companies

or companies entering a new line of business”? ................9-12Q 9.3.11 What are “excepted nonfinancial entities in

liquidation or bankruptcy”? ..................................................9-13Q 9.3.12 What is an “excepted inter-affiliate FFI”? ............................9-13Q 9.3.13 What is an excluded “section 501(c) entity”? .....................9-13Q 9.3.14 What is an excluded “nonprofit organization”? ..................9-13

Direct Reporting NFFE.........................................................................................9-14

Q 9.3.15 What is the definition of a “direct reporting NFFE”? ..........9-14Q 9.3.16 How does an NFFE elect to be treated as a direct

reporting NFFE? ......................................................................9-18Q 9.3.17 How does an NFFE revoke its election to be treated

as a direct reporting NFFE? ...................................................9-182nd

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Q 9.3.18 May the IRS revoke an NFFE’s election to be treated as a direct reporting NFFE? ...................................................9-19

Q 9.3.19 What is an event of default for a direct reporting NFFE? .......................................................................................9-19

Sponsored Direct Reporting NFFE.....................................................................9-20

Q 9.3.20 What is the definition of a “sponsored direct reporting NFFE”? ....................................................................9-20

Q 9.3.21 Under what circumstances may the IRS revoke an entity’s status as a sponsoring entity? ................................9-21

Q 9.3.22 What is the liability of the sponsoring entity for any failure to comply with FATCA’s obligations? .......................9-21

Payments Made to a WP, WT, or an Exempt Beneficial Owner ..................9-21

Q 9.3.23 Is withholding required on payments made to a WP, WT, or an exempt beneficial owner? ....................................9-21

Rules for Determining Payee and Beneficial Owner .......................................9-22

Q 9.4 Under what circumstances may a withholding agent treat a withholdable payment as beneficially owned by an excepted NFFE? ..................................................................................9-22

Q 9.4.1 Under what circumstances may a withholding agent treat a payee as a QI, WP, or WT? .........................................9-22

Q 9.4.2 Under what circumstances may a withholding agent treat a partner or beneficiary of an NFFE that is an NWP or NWT as the payee of a withholding payment? .....9-22

Q 9.4.3 Under what circumstances may a withholding agent treat the beneficial owner of a withholdable payment as an NFFE that does not have any substantial U.S. owners or that has identified all of its substantial U.S. owners?....................................................................................9-23

Q 9.4.4 What is a withholding agent’s obligation in the absence of valid documentation? ........................................9-23

Information Reporting Requirements ................................................................9-23

Q 9.5 What are the information reporting requirements imposed upon a withholding agent with respect to payments to NFFEs? .................................................................................................9-23

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Chapter 10 Obligations of Withholding Agents to Withhold Tax and File Returns

Withholding Agent Liability ................................................................................10-2

Q 10.1 What is the extent of a withholding agent’s liability for failure to either withhold or to deposit any tax withheld? ..........10-2

Q 10.1.1 May a withholding agent utilize an agent to fulfill its obligations under FATCA? .....................................................10-3

Q 10.1.2 What is a withholding agent’s liability for failure to obtain proper documentation or to follow applicable presumptions? ........................................................................10-4

Payment of Withheld Tax ....................................................................................10-5

Q 10.2 What is the procedure for a withholding agent to deposit the withheld tax? ...............................................................................10-5

Q 10.2.1 What is the procedure for a withholding agent to deposit tax withheld on foreign passthru payments and payments of gross proceeds? ........................................10-5

Income Tax Returns ..............................................................................................10-5

Q 10.3 What is the obligation of a withholding agent to file an income tax return? ............................................................................10-5

Q 10.3.1 What income tax return must be filed by a participating FFI, a registered deemed-compliant FFI, and a U.S. branch treated as a U.S. person? .......................10-6

Q 10.3.2 What is the process for filing an amended return? ............10-6

Information Returns for Payment Reporting ....................................................10-6

Q 10.4 What is the obligation of a withholding agent to file an information return? ...........................................................................10-6

Q 10.4.1 What is the definition of “recipient” for FATCA withholding purposes? ..........................................................10-7

Q 10.4.2 Which persons are excluded from the definition of “recipient”?..............................................................................10-9

Q 10.4.3 What is the definition of “chapter 4 reportable amount”? ...............................................................................10-10

Q 10.4.4 What information is required to be included on Form 1042-S? .........................................................................10-112n

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Method of Reporting .........................................................................................10-12

Q 10.5 How do U.S. withholding agents report payments to recipients? ........................................................................................10-12

Q 10.5.1 How do withholding agents report payments to certain entities that are not recipients? ............................10-15

Q 10.5.2 What are the reporting obligations of participating FFIs and deemed-compliant FFIs (including QIs, WPs, WTs, and U.S. branches of FFIs not treated as U.S. persons)? ...............................................................................10-16

Q 10.5.3 What are the reporting obligations of territory financial institutions? ...........................................................10-17

Q 10.5.4 What are the reporting obligations of nonparticipating FFIs? .........................................................10-17

Q 10.5.5 What are the reporting obligations of other withholding agents? .............................................................10-18

Q 10.5.6 Under what circumstances is combined Form 1042-S reporting permitted? ............................................................10-18

Magnetic Media Reporting ...............................................................................10-18

Q 10.6 In what format is a withholding agent required to file Form 1042-S? ....................................................................................10-18

Indemnification of Withholding Agents ..........................................................10-19

Q 10.7 Under what circumstances is a withholding agent entitled to be indemnified? ...........................................................................10-19

Extensions of Time to File Forms 1042 and 1042-S .....................................10-19

Q 10.8 Under what circumstances may a withholding agent seek an extension of time to file Forms 1042 and 1042-S? ...................10-19

Penalties ..............................................................................................................10-19

Q 10.9 What penalties are applicable if a withholding agent fails to file Forms 1042 or 1042-S? ..........................................................10-19

Additional Reporting Requirements with Respect to U.S.-Owned Foreign Entities and Owner-Documented FFIs ...............................................10-20

Q 10.10 What is the reporting obligation of a withholding agent with respect to owner-documented FFIs? ....................................10-20

Q 10.10.1 What is the reporting obligation of a withholding agent with respect to U.S.-owned foreign entities that are passive NFFEs? .......................................................10-22

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Extensions of Time to File Form 8966 .............................................................10-24

Q 10.10.2 What is the procedure for obtaining an extension of time to file Form 8966? .........................................................10-24

Adjustments for Overwithholding of Tax ........................................................10-25

Q 10.11 What happens if a withholding agent overwithholds tax? .........10-25Q 10.11.1 What is the definition of “overwithholding”? ...................10-25Q 10.11.2 What is the procedure for reimbursement of

overwithheld tax? .................................................................10-25Q 10.11.3 What records are required to be maintained by a

withholding agent that utilizes the reimbursement procedure for overwithheld tax? .......................................10-26

Q 10.11.4 What is the set-off procedure? ............................................10-26Q 10.11.5 What are the procedures to be utilized by a

withholding agent when underwithholding occurs? .......10-28

Withheld Tax As Credit to Beneficial Owner of Income ................................10-29

Q 10.12 What is the U.S. tax treatment of a payment to which withholding occurs? ........................................................................10-29

Q 10.12.1 What is the U.S. tax treatment of a payment made to a person other than the beneficial owner? .......................10-29

Tax Paid Only Once ...........................................................................................10-30

Q 10.13 If the FATCA withholding tax is paid by the payee, beneficial owner, or withholding agent, may it be collected from any other person? ...................................................................................10-30

Refunds or Credits ..............................................................................................10-30

Q 10.14 What is the procedure to obtain a refund or credit of tax which has been withheld under FATCA? ......................................10-30

Tax Repaid to Payee ..........................................................................................10-31

Q 10.14.1 What is the treatment of an amount of tax withheld under FATCA and then repaid to the beneficial owner? .......10-31

Coordination of Chapter 4 with Other Withholding Provisions ..................10-32

Q 10.15 How do the FATCA withholding regulations coordinate with other withholding provisions under the Internal Revenue Code and regulations? ....................................................................10-32

Q 10.15.1 What are a withholding agent’s obligations with respect to an amount subject to withholding under both FATCA and section 1441, 1442, or 1443? ...................10-32

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Q 10.15.2 What are a withholding agent’s obligations with respect to an amount subject to withholding under both FATCA and section 1445? ............................................10-33

Q 10.15.3 What are a withholding agent’s obligations with respect to an amount subject to withholding under both FATCA and section 1446? ............................................10-34

Q 10.15.4 What is the withholding obligation of a participating FFI that makes a withholdable payment to a recalcitrant account holder? ..............................................10-35

Confidentiality of Information ..........................................................................10-35

Q 10.16 What confidentiality rules apply with respect to account information reported by participating FFIs pursuant to FATCA? ..............................................................................................10-35

Required Use of Magnetic Media for Financial Institutions Filing Form 1042-S or Form 8966 .............................................................................10-36

Q 10.17 Are financial institutions filing Form 1042-S or Form 8966 required to use magnetic media? ..................................................10-36

Q 10.17.1 May a financial institution seek a waiver of the magnetic media filing requirements? .................................10-37

Q 10.17.2 What are the consequences to a financial institution that fails to file using magnetic media? .............................10-37

Q 10.17.3 What is the effective date of the magnetic media filing requirements? .............................................................10-37

Chapter 11 FATCA Responsible Officers and Compliance Programs

FATCA Responsible Officer..................................................................................11-2

Q 11.1 What is a FATCA Responsible Officer? ............................................11-2

Designating the FATCA RO .................................................................................11-3

Q 11.2 How does a participating FFI or registered deemed-compliant FFI designate its FATCA RO? .............................................................11-3

FATCA RO Duties—Participating FFI ..................................................................11-4

Q 11.3 What is the FATCA RO’s obligation regarding a participating FFI’s identification procedures for preexisting accounts? ...........11-4

Q 11.3.1 What is a participating FFI’s obligation to establish and implement a compliance program? ..............................11-6

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Q 11.3.2 What are the requirements for a compliance program in the context of an expanded affiliated group? .................11-7

Q 11.3.3 What compliance certifications are required by the participating FFI’s compliance officer? ................................11-8

Q 11.3.4 What is a “certification of effective internal controls”? ........11-8Q 11.3.5 What is a “qualified certification”? .......................................11-8Q 11.3.6 What is a “material failure”? .................................................11-9

FATCA RO Duties—Registered Deemed-Compliant FFIs................................11-10

Q 11.4 What is a registered deemed-compliant FFI’s obligation to establish and implement a compliance program? ......................11-10

Compliance Certifications by Local FFIs and Restricted Funds .....................11-10

Q 11.5 What compliance certifications are required by Local FFIs and Restricted Funds? ....................................................................11-10

IRS Verification of Compliance .........................................................................11-11

Q 11.6 How will the IRS ensure that a participating FFI is complying with the terms of its FFI Agreement? .........................11-11

Chapter 12 FATCA Implementation: 2014 and 2015 As Transition Years

Transitional Rules .................................................................................................12-2

Q 12.1 How does the IRS plan to enforce FATCA’s requirements during the 2014 and 2015 “transition period”? ..............................12-2

Treatment of Certain Entity Obligations Issued, Opened, or Executed on or After July 1, 2014 ....................................................................12-3

Q 12.2 How are entity obligations issued, opened, or executed on or after July 1, 2014, treated under Notice 2014-33? .....................12-3

Intergovernmental Agreements ..........................................................................12-6

Q 12.3 How are the Intergovernmental Agreements (IGAs) affected by Notice 2014-33? .............................................................................12-6

Modification of the Standards of Knowledge Rules Under Chapter 3..........12-7

Q 12.4 How are the standards of knowledge rules under chapter 3 affected by Notice 2014-33? ..............................................................12-7

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Revision of the Definition of “Reasonable Statement” Under Chapter 4 .....12-9

Q 12.5 How is the definition of “reasonable statement” under chapter 4 affected by Notice 2014-33? ............................................12-9

Limited FFIs and Limited Branches ...................................................................12-10

Q 12.6 How are limited FFIs and limited branches affected by Notice 2014-33? ................................................................................12-10

Chapter 13 Intergovernmental Agreements

History of IGAs .....................................................................................................13-2

Q 13.1 What led Treasury to seek to implement FATCA using IGAs? ........13-2

Model 1 IGA .........................................................................................................13-6

Q 13.2 What is a Model 1 IGA? .....................................................................13-6

Model 2 IGA .........................................................................................................13-7

Q 13.3 What is a Model 2 IGA? .....................................................................13-7

Status of IGA Negotiations .................................................................................13-8

Q 13.4 What is the status of IGA negotiations? ..........................................13-8Q 13.4.1 Which countries have signed Model 1 IGAs to date? ........13-10Q 13.4.2 Which countries have signed Model 2 IGAs to date? ........13-12

Chapter 14 Frequently Asked Questions and Answers About FATCA Registration, Withholding, and Reporting

Introduction to FATCA Registration ....................................................................14-3

Q 14.1 How does an FFI register using the FATCA online portal? ............14-3

Special Registration Rules ...................................................................................14-3

Q 14.2 Are there any special FATCA registration rules? ...........................14-3

Eligibility for FATCA Registration .......................................................................14-5

Q 14.3 What types of entities are eligible to register on the FATCA website? ..............................................................................................14-5

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Registration Steps ................................................................................................14-7

Q 14.4 How does a financial institution create a FATCA account? ..........14-7Q 14.5 How does a financial institution complete the FATCA

registration form? ..............................................................................14-8Q 14.5.1 How does a financial institution register as a Single FI? .......14-9Q 14.5.2 How does a financial institution register as a Lead FI? ......14-10Q 14.5.3 How does a financial institution register as a Member

FFI? .........................................................................................14-10Q 14.5.4 How does a financial institution register as a

Sponsoring Entity? ...............................................................14-11Q 14.5.5 How does a financial institution obtain approval for

its FATCA registration form? ...............................................14-12

GIIN .....................................................................................................................14-12

Q 14.6 What is a GIIN? .................................................................................14-12Q 14.6.1 What is the format or composition of a GIIN? ..................14-12

Table 14-1: Global Intermediary Identification Number (GIIN) Composition ..............................................................................14-14

Q 14.6.2 Are the period (.) separators in the GIIN required? .........14-15Q 14.6.3 Will Limited FFIs and Limited Branches be

issued GIINs? .........................................................................14-15Q 14.6.4 How are branch GIINs assigned? ........................................14-15Q 14.6.5 How does a financial institution locate its GIIN? ..............14-15Q 14.6.6 If a financial institution is in approved status and has

been issued a GIIN, will it lose its GIIN if the financial institution edits its registration? ........................................14-15

QI/WP/WT .........................................................................................................14-16

Q 14.7 How does a financial institution that is not currently a QI, a WP, or a WT register to become one? ...........................................14-16

Q 14.7.1 How do financial institutions that are currently QIs, WPs, or WTs renew their agreements? ..............................14-16

Q 14.7.2 Can a QI/WP/WT use the LB&I registration portal to register for FATCA and become a new QI/WP/WT? ..........14-16

Q 14.7.3 Must a financial institution become a QI/WP/WT in order to register under FATCA? ..........................................14-17

Q 14.7.4 If an FFI has a QI/WP/WT agreement in place, does the Responsible Party for purposes of the QI/WP/WT agreement also have to serve as the FFI’s Responsible Officer? ............................................................14-172n

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Q 14.7.5 If a member of the EAG is a QI/WT/WP, does the Lead FI renew the QI/WT/WP agreement on behalf of the member or does the member renew its own agreement? ............................................................................14-17

Q 14.7.6 How will WPs and WTs renew their WP and WT agreements if the revised WP and WT agreements will not be published before June 30, 2014? .....................14-18

Q 14.7.7 When will the terms of the revised QI agreement set forth in Revenue Procedure 2014-39 be effective for (a) entities seeking QI status; and (b) entities seeking renewal of their QI agreements? .........................................14-19

Q 14.7.8 If an entity submits an application for WP or WT status on or after April 1 and is approved for such status, what will be the effective date of its WP or WT agreement? .........................................................14-20

IGA Registration .................................................................................................14-20

Q 14.8 Which jurisdictions are treated as having in effect a Model 1 or Model 2 IGA? ...............................................................................14-20

Q 14.8.1 How do FFIs in Model 1 jurisdictions register on the FATCA registration website? ...............................................14-21

Q 14.8.2 How do FFIs in Model 2 jurisdictions register on the FATCA registration website? ...............................................14-21

Q 14.8.3 How should an FFI register if it is located in a country that has not signed an IGA, and the local laws of which do not permit the reporting of U.S. accounts or withholding of tax? ..........................................................14-21

Q 14.8.4 In a Model 1 IGA jurisdiction, does the FFI need to fill out Question 10 about Responsible Officers? .............14-21

Q 14.8.5 Does an FFI in a Model 1 IGA jurisdiction need to register before July 1, 2014, if the FFI is part of an EAG? ..................................................................................14-22

Q 14.8.6 Does an entity in a Model 1 jurisdiction that, relying on the definition of a nonreporting financial institution under the applicable IGA, qualifies as a deemed-compliant FFI or an exempt beneficial owner, need to register on the FATCA registration website? ........14-22

Q 14.8.7 Given the additional time provided by Announcement 2014-38 to sign the IGA, does a reporting Model 1 FFI in such a jurisdiction need to register and obtain a GIIN before January 1, 2015? ...............................................14-232n

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Expanded Affiliated Group (EAG) ...................................................................14-23

Q 14.9 For registration purposes, can an EAG with a Lead FI and two Member FIs be divided into (1) a group with a Lead FI and a Member FI; and (2) a Member FI that will register as a Single FI? ...................................................................................14-23

Q 14.9.1 What is required for an entity to be a Lead FI? ................14-24Q 14.9.2 Can a Member FI complete its FATCA registration and

obtain a GIIN if the Lead FI for that Member FI has not yet registered? ...............................................................14-24

Q 14.9.3 Is a Limited FFI that is a member of an EAG subject to FATCA withholding? .........................................................14-24

Q 14.9.4 If a Lead FFI of an Expanded Affiliated Group registers and lists each Member on Part 2 of the registration, does each member of the EAG still need to separately register? ..............................................................14-24

Q 14.9.5 Once the Lead FI has its FATCA ID, will it be possible for each of the member Expanded Affiliated Group entities to log on at the same time to register? ................14-25

Q 14.9.6 Does a Member FI need to wait until the Lead FI has obtained a GIIN before it registers or obtains a GIIN? .......14-25

Q 14.9.7 If an EAG decides to designate more than one Lead FI for its group, how are additional leads added to the registration? ..........................................................................14-25

Q 14.9.8 How does the Lead FI access its Member FI accounts? ..............................................................................14-25

Sponsoring/Sponsored Entities ........................................................................14-26

Q 14.10 What is the process by which a Sponsoring Entity may register its Sponsored Entities? .....................................................14-26

Responsible Officers and Points of Contact ....................................................14-26

Q 14.11 What is a Point of Contact (POC)? ................................................14-26Q 14.11.1 Is the Responsible Officer required to be the same

person for all lines on Form 8957 or the online registration? ..........................................................................14-27

Q 14.11.2 What does it mean for an RO to have the authority to “establish the statuses of the financial institution’s home office and branches” as indicated on the registration form? .................................................................14-29

Q 14.11.3 Is a financial institution permitted to employ an outside organization (or individual) solely for the purpose of assisting with the registration process? ........14-29

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Q 14.11.4 What type of individual may serve as a Responsible Officer for purposes of Part 1, Question 10 of the FATCA registration in the case of a participating FFI, participating FFI that elects to be part of a consolidated compliance program, registered deemed-compliant FFI, reporting Model 1 FFI, Limited FFI, and U.S. financial institution? ........................14-30

Q 14.11.5 May the Part 4 certification be broken down into two separate declarations of the RO?................................14-31

Q 14.11.6 How do the certifications in Part 4 apply to financial institutions treated as reporting Model 1 FFIs? ................14-32

U.S. Financial Institutions ..................................................................................14-33

Q 14.12 Are U.S. financial institutions required to register under FATCA? ..............................................................................................14-33

FFIs and EINS ......................................................................................................14-33

Q 14.13 Is an FFI required to obtain an employee identification number (EIN)? ..................................................................................14-33

Q 14.13.1 How does an FFI apply for a EIN if it does not already have one?...............................................................................14-34

Exempt Beneficial Owners ................................................................................14-34

Q 14.14 Is a foreign central bank of issue subject to FATCA withholding if it does not register? ...............................................14-34

Q 14.14.1 Is a foreign pension plan subject to FATCA withholding if it does not register? ....................................14-34

Registering Direct Reporting NFFEs .................................................................14-35

Q 14.15 How should an entity seeking the FATCA status of “direct reporting NFFE” (other than a sponsored direct reporting NFFE) register for this status to obtain a GIIN in order to avoid FATCA withholding? ..............................................................14-35

Q 14.15.1 How should a sponsor of a sponsored direct reporting NFFE register itself for this status and obtain a GIIN? .......14-37

Q 14.15.2 How does a direct reporting NFFE register as a Member FI? ............................................................................14-38

Q 14.15.3 Does a direct reporting NFFE have to separately register its branches when it completes its FATCA registration? ..........................................................................14-382n

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Registration Updates .........................................................................................14-38

Q 14.16 What happens when an FFI’s registration is placed in “Registration Incomplete” status? .................................................14-38

Q 14.16.1 What is the impact of completing Part 4 of the FATCA registration for each of the FATCA classifications? ..........14-39

Q 14.16.2 How do trustees of Trustee-Documented Trusts register? .................................................................................14-41

Q 14.16.3 What should be done if an FFI’s FATCA account status is placed in “Registration Under Review” status? ....................................................................................14-41

Q 14.16.4 Does an FFI registering to become a participating FFI (including a reporting Model 2 FFI) need to complete a paper version of the FFI agreement? .............14-42

Q 14.16.5 What action should a FATCA registrant take if it improperly completes multiple FATCA registrations? .......14-42

Q 14.16.6 How does a financial institution update its FATCA registration? ..........................................................................14-43

Q 14.16.7 How can the access code for the FATCA account be changed?................................................................................14-43

Q 14.16.8 How can a financial institution change the FI type in question 1 of the registration? ............................................14-44

Q 14.16.9 How can the Responsible Officer or Points of Contact be changed?............................................................14-44

Q 14.16.10 Can a financial institution that is a Limited FFI change to a participating FFI? ..........................................................14-44

Q 14.16.11 How does a financial institution edit its registration information after submitting the registration form? .......14-45

Q 14.16.12 What does it mean if a financial institution’s registration status is “Registration Incomplete”? ............14-45

Q 14.16.13 How does a financial institution delete its FATCA registration? ..........................................................................14-46

OFAC Issues ........................................................................................................14-46

Q 14.17 Is an entity listed on the Office of Foreign Asset Control’s Specially Designated Nationals list eligible to register and receive a GIIN? .................................................................................14-46

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FFI/EAG Changes ...............................................................................................14-47

Q 14.18 If a common parent of an EAG sells its interest in a wholly owned FFI that is registered as a Member FI, what impact will the sale have on the Member FI’s FATCA registration? .......14-47

Q 14.18.1 Can a FATCA registrant change its FI type, which is selected at the beginning of the FATCA registration process, without reregistering? ....................14-47

Q 14.18.2 If a registrant has changed its name but not its FI type, does it need to reregister? .........................................14-47

Q 14.18.3 How can an FFI that is registered as a Single FI change its FATCA registration to become a Lead FI? ....................14-48

Q 14.18.4 How can an FFI that is registered as a Lead FI of an EAG change its FATCA registration to become a Single FI? .............................................................................14-48

Q 14.18.5 What steps does a registrant need to complete if it has dissolved? ......................................................................14-48

Branch/Disregarded Entity ...............................................................................14-48

Q 14.19 How does a disregarded entity (DE) in a Model 1 IGA jurisdiction satisfy its FATCA registration requirements? ..........14-48

Q 14.19.1 How does a branch in a Model 1 IGA jurisdiction satisfy its FATCA registration requirements? ....................14-49

Q 14.19.2 How does a branch or a DE in a jurisdiction that does not have an IGA, or that is in a Model 2 IGA jurisdiction, satisfy its FATCA registration requirements? .......................................................................14-49

Q 14.19.3 How can a withholding agent find the name and GIIN of a branch on the FFI list? ..................................................14-50

Q 14.19.4 How does a branch that has registered as a separate entity rather than as a branch of its owner correct its registration? .....................................................................14-50

General Compliance ..........................................................................................14-51

Q 14.20 How will certified deemed-compliant FFIs, owner-documented FFIs, or excepted FFIs certify to U.S. withholding agents that they are not subject to FATCA withholding in light of the fact that they are not required to register with the IRS? ............14-51

Q 14.20.1 Is an FFI in a non-IGA country subject to FATCA withholding if it does not register with the IRS? ..............14-51

Q 14.20.2 What are the consequences of terminating the FFI agreement for a participating FFI? .....................................14-52

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Q 14.20.3 What happens if an FFI has not registered by May 5, 2014? ..........................................................................14-52

Q 14.20.4 Are Forms W-8 still required to be renewed by the appropriate beneficial owners? ..........................................14-53

Q 14.20.5 What should a withholding agent do if an entity account holder indicates that box 9a of Form W-8BEN-E is too small to accommodate the entity’s GIIN? .......................................................................................14-53

Q 14.20.6 Notice 2014-33 provides that a withholding agent or FFI may treat an obligation as a preexisting obligation if the obligation (i) is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015; and (ii) is held by an entity. How does this provision apply when the recipient of a payment made under the obligation is a flow-through entity or intermediary? .......14-54

Q 14.20.7 Annex I of the IGA provides that, for certain purposes, a self-certification may be made on an IRS Form W-8 or other “similar agreed form.” What would be considered a similar agreed form? .....................................14-55

Q 14.20.8 What is an acceptable self-certification for purposes of the Annex I due diligence procedures for preexisting and new accounts? Does the self-certification form have to be agreed upon by the IGA jurisdiction and the United States? ......................14-57

Q 14.20.9 If a Reporting Model 1 FFI or a Reporting Model 2 FFI that is applying the due diligence procedures in section III, paragraph B, of Annex I of the 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 U.S. Reportable Account? ........................14-58

Q 14.20.10 Under what circumstances is a scanned version of a Form W-8 considered to have been received electronically by a withholding agent? ..............................14-58

Q 14.20.11 What is the physical mailing address for Forms 8966 and Form 1042? .....................................................................14-59

Q 14.20.12 Must U.S. citizens living abroad comply with requests from foreign banks for their Social Security numbers? .....14-59

Q 14.20.13 What is the procedure for submitting a request for an initial or additional extension of time to file Forms 8966? ..........................................................................14-59

Q 14.20.14 What is the procedure to submit a request to waive the requirement to file Forms 8966 electronically? .........14-60

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Q 14.20.15 What title should the RO include when indicating business title in the RO information section of the registration? ..........................................................................14-61

Q 14.20.16 How many GIINs should a Single FI have? .........................14-61Q 14.20.17 What are the registration and GIIN requirements

for bulk acquisition and merger events? ...........................14-61

Reporting ............................................................................................................14-62

Q 14.21 Are filers of Form 8966 required to file a NIL report? .................14-62Q 14.22 When is Form 8966 due for reporting with respect to

calendar year 2014 for participating FFIs and Reporting Model 2 FFIs? ....................................................................................14-62

Registration System Resource Materials .........................................................14-63

Q 14.23 What training is available for the FATCA registration system? .............................................................................................14-63

Q 14.23.1 What help is available for the FATCA registration system? ..................................................................................14-63

General System Questions ................................................................................14-63

Q 14.24 In what languages is the FATCA registration system available? ..........................................................................................14-63

Q 14.24.1 Is there a mechanism to upload registration data in bulk? .......................................................................................14-63

Q 14.24.2 Does the system have certain mandatory fields or are they all mandatory? .......................................................14-64

Q 14.24.3 Is there an automatic check of legal names against a database to prevent misspellings or to provide consistent formatting? .........................................................14-64

Q 14.24.4 What is the maximum number of characters allowed for name fields? ....................................................................14-64

Q 14.24.5 How should an FI enter the FI legal name in question 2 or the Member FI legal name in question 12 (for Lead FIs) if the FI legal name is longer than what the system allows, or has characters that the system does not allow? .....................................................................................14-64

Q 14.24.6 How can a financial institution register an entity in a newly created country? .......................................................14-65

Q 14.24.7 Does the system have the capability to show the questions and responses before the registration is submitted?.............................................................................14-652n

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Q 14.24.8 Does the FATCA registration system support multiple tabs or windows? .................................................................14-66

Q 14.24.9 Can the FI registration information be downloaded? ......14-66

FATCA Account Creation and Access ...............................................................14-66

Q 14.25 What is the maximum number of points of contact allowed on the registration form? ................................................................14-66

Q 14.26 What is the maximum number of users that can access a FATCA account at one time?...........................................................14-66

Q 14.26.1 What are the password requirements for FATCA accounts? ..................................................................14-67

Q 14.26.2 Does the FATCA registration system use challenge questions?............................................................14-67

Q 14.26.3 Can a member of an EAG create its own FATCA account? ................................................................................14-68

Q 14.26.4 What is the time lapse between the creation of the FATCA ID for the Lead FFI and the FATCA IDs for the Member FFIs? ........................................................................14-68

Registration Status and Account Notifications ...............................................14-68

Q 14.27 What type of notifications will the FATCA registration system provide? ..............................................................................14-68

Q 14.27.1 How does a financial institution check its message board? ....................................................................................14-69

Q 14.27.2 How can a financial institution check the status of its registration? ..........................................................................14-69

Q 14.27.3 Can the Responsible Officer list more than one email address on the registration system? ..................................14-69

Q 14.27.4 Can the change of status email notifications go to the Responsible Officer and the Points of Contact? ...............14-69

Q 14.27.5 What information will be in the notification email the RO receives?..........................................................................14-69

Q 14.27.6 Why is the RO not receiving FATCA notification emails regarding the FI’s status and account updates? ...............14-70

Sponsoring Entity ...............................................................................................14-70

Q 14.28 How does a Sponsoring Entity add Sponsored Entities in the FATCA registration process? ..........................................................14-70

Q 14.28.1 What is the process for adding multiple sponsored entity registration data? ......................................................14-70

Q 14.28.2 Does a sponsored entity have a FATCA ID and a GIIN? .......14-70

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Q 14.28.3 Can the sponsoring entity edit sponsored entities and sponsored subsidiary branches? ...............................14-71

Q 14.28.4 What is the procedure to download or print a list of sponsored entities and sponsored subsidiary branches? ..............................................................................14-71

Paper Registrations ............................................................................................14-71

Q 14.29 Is there an alternative to registering electronically? ..................14-71Q 14.29.1 How long will it take to process paper registrations? .......14-72

IRS FFI List............................................................................................................14-72

Q 14.30 What is the FFI list? .........................................................................14-72Q 14.31 How do you access the FFI list? .....................................................14-73Q 14.32 What training is available for the FFI List Search and

Download Tool? ...............................................................................14-73

FFI List Fields .......................................................................................................14-73

Q 14.32.1 What fields are contained on the FFI list? .........................14-73Q 14.32.2 What are the maximum lengths of each field? ..................14-73

FFI List Updates ..................................................................................................14-74

Q 14.32.3 Will the monthly update to the FFI list contain just the additions and deletions from the prior month after the initial list is published? .................................................14-74

Q 14.32.4 Will an archive of previously released versions of the monthly FFI list be available for viewing and download on the IRS website? ............................................14-74

Q 14.32.5 How frequently will the FFI list file be updated? ..............14-74Q 14.32.6 Which financial institutions and branches are

included on the FFI list?.......................................................14-74Q 14.32.7 In what languages will the FFI list be published? .............14-75Q 14.32.8 Is there anything in the format of the FFI list that

indicates that an FFI is a participating FFI or registered deemed-compliant FFI? .....................................14-75

Q 14.32.9 How many records are expected in the full FFI list? ........14-75

Downloading the FFI List ...................................................................................14-75

Q 14.32.10 What are the available FFI list file formats for download? .............................................................................14-75

Q 14.32.11 Do you need to be a registered user with a login and password to access the FFI List Search and Download Tool, and download the FFI list? ......................14-76

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Q 14.32.12 Will there be a web service where FFIs can automatically download the latest version of the FFI list? ........................................................................14-76

Q 14.32.13 Is the FFI list file available via FTP?....................................14-76

Searching the FFI List .........................................................................................14-76

Q 14.32.14 Is a search tool available for the FFI list? ..........................14-76Q 14.32.15 Why is a financial institution not in the downloaded

FFI list in CSV format, while it appears in the search results? ..................................................................................14-76

Q 14.32.16 Why are there two different GIINs associated with a financial institution (same FI name and same country)? ...............................................................................14-77

Q 14.32.17 Why is there more than one branch with the same GIIN? .............................................................................14-77

Legal Entity Name .............................................................................................14-77

Q 14.32.18 Will legal entity names be standardized in any way, such as “Bank Corp.” vs. “Bank Corporation” or “Chairs Ltd.” vs. “Chairs Limited” vs. “Chairs LTD.”? ......14-77

Q 14.32.19 How do I find the legal entity name of the branches in the FFI list? ........................................................................14-77

Q 14.32.20 Are there any other special names similar to “branch” that might appear on the list? ............................................14-78

Q 14.32.21 Can a financial institution’s legal name be changed once it appears on the FFI list? ...........................................14-78

XML/CSV Files ...................................................................................................14-78

Q 14.32.22 Will the final FATCA FFI xml file contain a file date/production time identifier/tag? ..........................................14-78

Q 14.32.23 Will the CSV format file contain a trailer record identifying the number of records or a simple end marker? ..................................................................................14-78

Q 14.32.24 How is the CSV file formatted for the FFI list? ..................14-78

International Data Exchange Service (IDES) System .....................................14-79

Q 14.33 What is the International Data Exchange Service (IDES) system? .............................................................................................14-79

Q 14.33.1 What is the International Compliance Management Model (ICMM) system? ........................................................14-79

Q 14.33.2 What is the frequency of the IRS request for information on recalcitrant accounts? ..............................14-79

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Q 14.33.3 What is the IRS expectation for HCTA response to requests for information on recalcitrant accounts? ........14-79

Q 14.33.4 What are the IRS standards for HCTA data validation on recalcitrant accounts through the FATCA XML schema? .................................................................................14-80

Q 14.33.5 How can HCTA and FFI obtain information as to system development progress and status? ......................14-80

Q 14.33.6 What types of technical support will be present during integration testing? How will the HCTAs and FFIs report issues with integration testing back to the IRS? ..................................................................................14-80

Q 14.33.7 What is the protocol for HCTAs to contact the IRS with technical issues or questions regarding IDES? ........14-80

Q 14.33.8 What is the protocol for HCTAs to contact the IRS with issues or questions regarding reporting requirements? .......................................................................14-80

Q 14.33.9 When can users enroll in IDES? ..........................................14-81Q 14.33.10 Does an HCTA need to obtain a GIIN? ................................14-81Q 14.33.11 Can a third party prepare and submit Form 8966 data

on behalf of a financial institution? If so, how does it enroll in IDES?....................................................................14-81

Q 14.33.12 Will an API or standalone application be available to assist with data preparation? .........................................14-81

System Availability and Design .......................................................................14-82

Q 14.33.13 When will the IDES system be accessible for HCTA and/or FFI use? .....................................................................14-82

Q 14.33.14 What methods of file transfer are available for the IDES system? .........................................................................14-82

Q 14.33.15 Is the IDES system IPv6 compatible? .................................14-82Q 14.33.16 What information will be contained in the IDES alerts? ......14-82Q 14.33.17 What information will be contained in the ICMM

notifications?.........................................................................14-82Q 14.33.18 How does an entity enroll for a testing window? .............14-82Q 14.33.19 When will the IDES system be accessible for User

Acceptance Testing? ............................................................14-83

Data Format and Structure ...............................................................................14-83

Q 14.33.20 In what format should data be provided for the FATCA Report? ......................................................................14-83

Q 14.33.21 Is there a naming convention for files pertaining to IRS requests for information on recalcitrant accounts? ........14-83

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Q 14.33.22 When will a template pertaining to the request for information on recalcitrant accounts be provided? ........14-83

Q 14.33.23 When will sample XML files related to FATCA submissions be available? ...................................................14-83

Q 14.33.24 What is the format for sending metadata for file transfers to IDES? .................................................................14-83

Q 14.33.25 Is the XML data based on UTF-8 character encoding? Are there any restrictions on the range of characters that can be used? .................................................................14-84

Q 14.33.26 Is there a “not to exceed limit” on the size of the transmitted data file? Is there a method to associate and/or merge files if transmission split due to size restrictions? ..........................................................................14-84

Q 14.33.27 Within the XML schema, is the Sending CompanyIN data element used to determine the origin of the file? ......14-84

Q 14.33.28 How will the DocTypeIndics reserved for testing purposes be used in production and test environments? ......................................................................14-84

Q 14.33.29 How will the IRS handle updates to the XML schema? Will the system still be able to accept older versions of the schema or will prior years’ files need to be updated to the current schema version? ..........................14-85

Q 14.33.30 If an individual has only received certain payment types, should the other payment types be listed with a zero amount or should they be omitted from the report for that individual? ...................................................14-85

Q 14.33.31 What is the procedure for FFIs, direct reporting NFFEs, and HCTAs to verify test data prior to the launch of IDES? .....................................................................14-85

Q 14.33.32 Can an HCTA create its own standard numbering format for the MessageRefID in the 8966 XML Schema for its financial institutions to use? .....................14-85

Q 14.33.33 When submitting a file with amended or corrected entries, what should be included in the MessageRefId field? .......................................................................................14-86

Q 14.33.34 Are there any characters that are not allowed due to XML syntax rules and should be avoided in submitted XML documents? ...............................................14-86

Q 14.33.35 Are there any characters that pose a security threat and should be avoided in submitted XML documents? ...........................................................................14-862n

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Q 14.33.36 Are there any other characters where the IRS recommends replacement with XML entity references? ............................................................................14-86

Q 14.33.37 Is there any element-specific XML guidance? ...................14-87Q 14.33.38 Which users are permitted to submit pooled reports?

What is the procedure for submission of these reports? .......................................................................14-87

Data Transmission ..............................................................................................14-87

Q 14.33.39 What are the procedures for sending files to IDES and/or ICMM systems? ........................................................14-87

Q 14.33.40 What are the procedures for sending metadata for files to IDES? ..........................................................................14-87

Q 14.33.41 Will requests from the IRS for information on non-consenting U.S. accounts and non-consenting nonparticipating FFIs be transmitted via email? ..............14-88

Q 14.33.42 Will IDES be used for transmitting the ICMM notifications?.........................................................................14-88

Q 14.33.43 How will reciprocal data from the IRS be sent to an HCTA and in what format? ..................................................14-88

Q 14.33.44 How will the HCTA notify IDES of outages of their systems that will be receiving data? ..................................14-88

Q 14.33.45 What is the procedure for sending corrected and/ or amended data to receiving HCTA? Will the resubmission need to include only the corrected/ amended entries or will the entire report need to be resubmitted? .........................................................................14-88

Q 14.33.46 What required data validation should be done on the FATCA report data prior to being submitted to IDES? .......14-89

Data Encryption and Security ..........................................................................14-89

Q 14.33.47 What type of data encryption should be used prior to XML data transmission? .................................................14-89

Q 14.33.48 What encryption standard will be implemented on the transmission path? ........................................................14-89

Q 14.33.49 How will passwords and keys be controlled for data transmission? ........................................................................14-89

Q 14.33.50 Who is responsible for data transmission security via encryption? .....................................................................14-90

Q 14.33.51 What type of data encryption is used for reciprocal data sent to an HCTA? ..........................................................14-902n

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Q 14.33.52 What are the requirements for digital certificates? .........14-90Q 14.33.53 Can the AES 256 key be reused for subsequent data

transmissions or does the key have to be different each time? .............................................................................14-90

Q 14.33.54 Who is required to obtain a digital certificate? ................14-90Q 14.33.55 Can a digital certificate be shared by multiple

organizations? .......................................................................14-90Q 14.33.56 May an SSL certificate be used in the manner

intended by the IRS? ............................................................14-91Q 14.33.57 How does an organization obtain a Secure Socket

Layer (SSL) certificate if it does not have a Fully Qualified Domain Name (FQDN)? .......................................14-91

Q 14.33.58 Is the use of ides-gateway.com or ides-support. com an acceptable FQDN for obtaining a digital certificate for IDES? ................................................................................14-91

Q 14.33.59 How current are the encryption standards being used for FATCA data? ...........................................................14-91

Appendix A Form 1042 .........................................................................App. A-1

Appendix B Form 8966 .........................................................................App. B-1

Appendix C Form W-8BEN ...................................................................App. C-1

Appendix D Form W-8BEN-E ...............................................................App. D-1

Appendix E Form W-8ECI ..................................................................... App. E-1

Appendix F Form W-8EXP ................................................................... App. F-1

Appendix G Form W-8IMY ...................................................................App. G-1

Appendix H Form W-9 ..........................................................................App. H-1

Appendix I Form 8809-I ....................................................................... App. I-1

Index ........................................................................................................................I-1

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Acknowledgments

I would like to thank my col leagues, especially Ian M. Comisky, for sup-porting my efforts while writing this book. I would also like to thank Practising Law Institute for its foresight and willingness to publish a Foreign Account Tax Compliance Act Answer Book. I am particularly grateful to my family, Elinor, Campbell, Ross, and Nolan, for their unwa- vering support, dedication, and patience during this lengthy process. Finally, I dedicate this book to my mother, Joyce Lee, a lifelong educa-tor who instilled in me a passion for writing from an early age.

Matthew D. LeeFox Rothschild LLPJuly 2016

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Introduction

For decades, Swiss banks catered to the rich, offering numbered bank accounts and other discreet services to their clientele, all the while protected by the most stringent bank secrecy laws in the world. Starting in 2008, however, the U.S. government undertook an aggressive effort to dismantle those historic laws in the hopes of discovering the identities of those who were evading U.S. taxes. The Internal Revenue Service and Justice Department initially trained their sights on UBS, the country’s largest bank. After a UBS banker provided information to the IRS on his bank’s practices (and eventually received a $104 million whistleblower reward), UBS admitted that it helped U.S. account hold-ers hide money using secret accounts, offshore corporations, foun-dations, and other structures designed to conceal the true identity of account holders. The United States also discovered that the sheer number of accounts held by U.S. taxpayers at UBS was staggering— estimated in one Justice Department court filing to exceed 52,000.

UBS ultimately avoided criminal prosecution in the United States by paying $780 million in fines and penalties and by turning over the names of U.S. customers of the bank who were suspected of committing tax fraud. Under the enormous diplomatic pressure from the U.S. gov-ernment that ensued, Swiss legislators subsequently voted to weaken the country’s bank secrecy laws, paving the way for thousands of additional names to be turned over to the U.S. authorities. This result prompted the Justice Department to proclaim on its website that “fabled Swiss bank secrecy” had been dealt “a devastating blow.”

The U.S. government’s victory over UBS was not the end of the story, however. After UBS, the IRS and Justice Department focused their attention on other Swiss banks as well as institutions in other so-called “tax haven” jurisdictions, such as Israel, India, and Carib-bean countries. While there is nothing illegal about a U.S. taxpayer maintaining a bank account or investing in a foreign country, even in so-called “bank secrecy” countries such as Switzerland, the Cayman Islands, and Singapore, anyone having such an account is required to report on his or her personal income tax return all income (inter-est, dividends, and capital gains) earned in that account and answer

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“yes” to a question on Schedule B of the return, which asks whether the person filing the return has a foreign bank account. Account hold-ers are also required annually to file a form called “Report of Foreign Bank and Financial Accounts” (commonly known as the FBAR) with the Treasury Department on June 30 of each year. The failure to file the FBAR and to report income from a foreign account can subject the account holder (and spouse, if a joint tax return is filed) to criminal charges, including tax evasion, as well as substantial civil penalties.

In 2009, shortly after UBS executed its deferred-prosecution agree-ment and the Swiss government started divulging the identities of holders of secret accounts, the IRS announced a special amnesty pro-gram (called the Offshore Voluntary Disclosure Program) for offshore bank accounts. It was prompted by the recognition that not everyone with a Swiss bank account was a tax cheat; indeed, many U.S. tax-payers inherited bank accounts in Switzerland (for example, from ancestors who fled pre-war Germany) or maintained Swiss accounts for wholly legitimate reasons. Amnesty was only available, however, if the account holder came forward before the IRS obtained the indi-vidual’s account information; once the IRS learned of the taxpayer’s noncompliance, the voluntary disclosure program was no longer an option. Individuals who took advantage of that program were required to pay back taxes and substantial civil penalties but were able to avoid criminal prosecution. This special amnesty program (which lasted only six months) was such a huge success, with over 15,000 individu-als coming forward to confess that they had unreported bank accounts, that the IRS re-opened the program in 2011 and again in 2012. To date, more than 50,000 individuals have taken advantage of the IRS amnesty programs for offshore accounts, generating more than $7 billion in addi-tional revenue for the U.S. Treasury.

Despite the large numbers of individuals who have participated in these amnesty programs, the IRS believes that many more U.S. taxpay-ers holding offshore accounts have failed to “come in from the cold,” largely because of the belief that the U.S. government would never discover the existence of their accounts. Many of these account holders presumably believe that they are protected by the bank secrecy laws of the countries where they maintain accounts or that those jurisdic-tions would never willingly give up the names of account depositors. 2n

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But that all changed, as a controversial new U.S. law—the Foreign Account Tax Compliance Act (FATCA)—became effective starting on July 1, 2014.

FATCA was originally enacted by Congress in 2010, but its imple-mentation was delayed to provide the Treasury Department and the IRS with sufficient time to solicit comments and publish implementing regulations. The primary focus of FATCA is to identify noncompliance by U.S. taxpayers using offshore accounts. FATCA requires foreign financial institutions (a broadly defined term, which encompasses traditional banks and a broad array of nonbank financial institutions, including hedge funds and investment advisors) to disclose information annu-ally about accounts held by U.S. individuals, or foreign companies in which U.S. individuals hold a substantial ownership interest. Foreign financial institutions (FFIs) that refuse to provide such information to the United States will face a stringent financial penalty: withholding of 30% of all U.S.-source payments of interest, dividends, and the like. While nominally a voluntary compliance regime, FATCA effectively forces foreign banks to cooperate if they wish to have access to U.S. capital markets and will substantially penalize institutions that refuse to participate.

FATCA also has dramatic and far-reaching implications for the investment community both in the United States and abroad. Non-U.S. mutual funds, hedge funds, private equity funds, and other off-shore investment vehicles are considered FFIs and must comply with FATCA’s reporting and/or withholding regime. These funds are required to conduct due diligence on existing investors to determine if any are U.S. persons, and to implement procedures for analyzing whether new investors are U.S. persons. Offshore funds are also required to annually disclose the names of their U.S. investors or face the 30% withholding tax on U.S.-source payments of interest and dividends and gains from sales of U.S. securities.

On the U.S. side, domestic financial institutions and investment funds will also be required to comply with FATCA, by conducting due diligence to determine their U.S. investors, and withholding 30% of offshore payments made to investors who are not compliant with the FATCA regime. In part, this will require due diligence to determine the identity of the ultimate beneficiary of U.S. payments that are going offshore.

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The arrival of FATCA heralds a new era with respect to offshore banking and investing by U.S. taxpayers and arms the U.S. government with a powerful new tool to detect offshore tax evasion. U.S. taxpay-ers with undeclared foreign accounts can no longer assume that they will remain undetected or protected by foreign banking secrecy laws. Starting in March 2015, the IRS will begin receiving a wealth of infor-mation from overseas financial institutions, and it is widely expected that both the IRS and Justice Department will use this treasure trove of FATCA data to aggressively pursue civil and criminal enforcement actions against noncompliant taxpayers.

While certain countries initially resisted implementation of the FATCA regime, the global financial community has largely embraced FATCA and its goals. To date, more than 155,000 FFIs have registered with the IRS and entered into agreements to comply with FATCA. In addition, over 100 countries have signed, or indicated their willing-ness to sign, bilateral tax treaties with the United States (called Inter-governmental Agreements) to facilitate the efficient implementation of FATCA. Only time will tell if the massive effort required to comply with FATCA will reap the benefits sought by the U.S. government, but the initial indicators are that FATCA will lead to greater global trans-parency in tax matters and diminished opportunities for international tax evasion.

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Frequently Used Terms

AML Anti-money laundering

EIN Employer identification number

FATCA Foreign Account Tax Compliance Act

FDAP Fixed or determinable annual or periodic income

FI Financial institution

FFI Foreign financial institution

GIIN Global Intermediary Identification Number

HCTA Host Country Tax Authority

ICMM International Compliance Management Model

IDES International Data Exchange Service

IGA Intergovernmental Agreement

IRS Internal Revenue Service

ITIN Individual taxpayer identification number

NFFE Non-financial foreign entity

NQI Nonqualified intermediary

NWP Nonwithholding partnership

NWT Nonwithholding trust

OID Original issue discount

ODFFI Owner-documented foreign financial institution

PFFI Participating foreign financial institution

QI Qualified intermediary

RDCFFI Registered deemed-compliant foreign financial institution

SSN Social Security number

TIN Taxpayer identification number

USFI United States financial institution

USWA United States withholding agent

WP Withholding foreign partnership

WT Withholding foreign trust

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