Law Office of Charles W. Cope, PLLC | IRS Issues Draft FFI Agreement Implementing FATCA
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  • IRS Issues Draft FFI Agreement Implementing FATCA
    October 2013

     
    On October 30, 2013 the IRS issued Notice 2013–69,[1] which includes a draft model FFI[2] agreement for participating FFIs and reporting Model 2 FFIs.[3] Under FATCA, an FFI generally must enter into an FFI agreement with the U.S. Treasury, and comply with that agreement, in order to avoid FATCA withholding.[4]
     
    In order to be FATCA compliant, an FFI also must register with the IRS at the government's recently opened FATCA registration website (www.irs.gov/fatca) or complete Form 8957 (Foreign Account Tax Compliance Act Registration).[5] The IRS has a strong preference that FFIs register online.
     
    The draft model FFI agreement described in the notice generally follows Reg. § 1.1471-4, which sets out the terms of an FFI agreement. The draft agreement has 13 sections, including sections dealing with due diligence requirements, withholding requirements, deposit requirements, information reporting and tax return obligations, and compliance procedures and adjustments for over withholding and under withholding. The agreement generally expires on December 31, 2016.
     
    Although the model FFI agreement is between two parties, the U.S. Treasury and the particular FFI, the U.S. Treasury will not sign the agreement and return a copy to the signing FFI.  Moreover, section 12.02 of the FFI agreement permits the IRS to unilaterally modify the agreement. However, the IRS agrees to do so only through published guidance, and any such modifications will be prospective only. The draft model FFI agreement is expected to be finalized later this year.
     
    [1] The notice will be published in IRB 2013-46
    [2] An FFI is a foreign financial institution.
    [3] That is an FFI that is subject to a Model 2 IGA (Inter Governmental Agreement). See our column dated January 2013 for a discussion of model IGA's. In November of 2012 the United States Treasury announced that it is “working to explore options” for intergovernmental agreements with various countries, including India. There has been no public word on how such discussions have been going.
    [4] See section 1471(a) and (b).
    [5] We discussed FATCA registration in our post of April 2013.
    KEYWORD: FATCA