by Mark Heil, PEF Services
April is a busy time for CFOs. Hopefully, the year-end reporting has not distracted you from taking the necessary steps towards FATCA compliance. As a reminder, April 25 is the deadline for Foreign Financial Institutions (FFI) to register on the IRS portal. Registration is a time consuming process. Proof of successfully completing the FATCA registration is the assignment of a Global Intermediary Identification Number (GIIN) number. The IRS has stated that if FFIs have not finalized their registration by this date, they will not be included on the Participating Foreign Financial Institution (PFFI) list, and, starting July 1, 2014, will be subject to a 30% withholding.
All private equity funds must comply with FATCA both at the entity level and investor level. While U.S. funds and investment entities do not need to take formal steps to cooperate with FATCA’s policy objectives, they are required to document their investors as being FATCA compliant. To the extent a fund does not have FFIs; this might be as simple as maintaining a list of investors with their SSNs and TINs (be sure to keep it in a secure/confidential location). Funds with FFIs are required to check GIINs against the IRS list of PFFIs and be prepared to withhold on income from non-compliant FFIs (how about that for alphabet soup).
FATCA became law in March 2010 as an effort by the IRS to target tax non-compliance by US taxpayers with foreign accounts. The IRS’ method for forcing compliance is to focus on reporting from US taxpayers about certain foreign financial accounts and offshore assets and reporting from foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest.
If you need more information regarding FATCA, you should speak to your tax accountant or attorney … immediately!