On September 18, 2015, the Internal Revenue Service (IRS)
2015-66 announcing its intention to amend certain
of the regulations under Chapter 4 of the Code (the
"FATCA regulations"), to extend the period of time that
certain of the Foreign Account Tax Compliance
Act (FATCA) transitional rules will apply,
including the deadline for a sponsoring entity to register
its sponsored entities and re-document the entities with
Under the current provisions of the FATCA regulations, provided
certain conditions are met, a sponsoring entity can agree to
perform on behalf of one or more eligible sponsored entities all
due diligence, withholding, reporting, and other requirements that
such sponsored entities would have been required to perform as
if they were Participating Foreign Financial Institutions
(also known as PFFIs).
As a transitional procedural matter, sponsoring entities are
required to register as such to obtain their own Global
Intermediary Identification Number (GIIN) as sponsoring
To date, however, the IRS is yet to finalize the
development of a procedure for sponsoring entities to
separately register their sponsored entities and receive the
requisite GIINs. The existing FATCA regulations provide that
for payments made prior to January 1,
2016, a U.S. withholding agent making a payment to a
sponsored entity may rely on a withholding certificate (e.g., Form
W-8BEN-E) that includes only the GIIN of the sponsoring entity. In
the context of the Canada-US IGA, many Canadian financial
institutions such as portfolio managers and investment fund
managers, for example, are able to register as a "sponsoring
entity" for one or more of their Canadian funds and
obtain a GIIN that they can generally be used for said
funds until December 31, 2015.
On August 20, 2015, the IRS updated its website with information
about a new feature, to be finalized, that will allow a sponsoring
entity to be able to register their sponsored entities by
submitting a file through the FATCA Online Registration
System. This file will contain a record for each
sponsored entity for whom a GIIN is requested.
Considering however that the IRS is still developing this
streamlined process, and to allow for a longer transitional period,
Notice 2015-66 indicates that the FATCA regulations are to be
amended such that:
Sponsoring entities will be granted a
one-year extension to register their sponsored entities by
January 1, 2017
For payments made prior to January 1,
2017, U.S. withholding agents making payments to a sponsored entity
may continue to rely on withholding certificates (e.g. Form
W-8BEN-E) containing only its sponsoring entity's GIIN;
For payments made on or after January
1, 2017, U.S. withholding agents will be required to obtain the
payee-sponsored entity's GIIN.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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