The Internal Revenue Service (IRS) has issued revised Foreign Account Tax Compliance Act (FATCA) guidance on the requirement for foreign financial institutions (FFIs) in Model 1 jurisdictions (Model 1 FFIs) to provide a U.S. tax identification number (U.S. TIN).
As noted in our December 7, 2018 Compliance Update, a key concern of Model 1 FFIs under FATCA has been the requirement to obtain and provide U.S. TINs to the IRS. In respect of this requirement, IRS Notice 2017-46 had provided relief to pre-existing accounts that were U.S. reportable accounts for calendar years 2017, 2018, and 2019. Such accounts would not be determined to be in significant non-compliance with FATCA as a result of a failure to obtain and report a U.S. TIN, provided that the reporting Model 1 FFI:
- obtained and reported the date of birth of each account holder and controlling person whose U.S. TIN was not reported;
- required annually from each account holder any missing required U.S. TIN; and
- before reporting information which relates to calendar year 2017 to the partner jurisdiction, searched electronically searchable date maintained by the reporting Model 1 FFI for any missing required U.S. TINs.
Unless further extended, IRS Notice 2017-46 also stated all missing or invalid U.S. TINs would be considered an indication of significant non-compliance for 2020 and subsequent years. As a result, there had been concerns that as of January 1, 2020, Model 1 FFIs that did not report required U.S. TINs would be required to immediately close or withhold on accounts that did not contain a valid U.S. TIN, or be found in significant non-compliance by the IRS. 1
On October 15, 2019, 2 the IRS issued revised guidance stating that reporting Model 1 FFIs are not required to immediately close or withhold on accounts that do not contain a valid U.S. TIN as of January 1, 2020. Instead, Model 1 FFIs that enter an invalid U.S. TIN (including reporting nine "A"s or nine "0"s in the U.S. TIN field) will receive an error notice providing an additional 120 days to correct the issue. If a valid U.S. TIN is not entered within the additional 120 days, the IRS will take into account the facts and circumstances leading to the absence of the U.S. TIN, such as the reasons why the U.S. TIN could not be obtained, whether the Model 1 FFI has adequate procedures in place to obtain U.S. TINs and the efforts made by the Model 1 FFI to obtain them.
If following this review, the IRS determines that the Model 1 FFI is in significant non-compliance, it will notify the exchange partner, including the Canada Revenue Agency (CRA) in the case of Canada, and work with the exchange partner to correct the non-compliance over a period of 18 months. A Model 1 FFI would then have at least 18 months from the date of the notification of noncompliance to correct the U.S. TIN error before the IRS takes further action, such as removing the Model 1 FFI's Global Intermediary Identification Number (GIIN) from the IRS FFI List. A Model 1 FFI that no longer has a valid GIIN risks being subject to withholding on certain U.S. source payments made to the Model 1 FFI.
1 Pedro Goncalves, "FATCA could push French banks to close up to 40,000 accounts" (14 August 2019)
2 See Question 3 of 'FATCA – FAQs General' dated October 15, 2019.
