While your colleagues are making their way through a complex list of to dos on the sale of a subsidiary or of a multi-tiered structure, make sure they include FATCA on their checklist. Your mergers and acquisitions (M&A) colleagues may focus on revenue streams, profit margins, litigation risks, creditors and other aspects of the deal, but it is your responsibility to make sure they also get into the weeds of FATCA GIINs and IRS FATCA registrations.
What Is FATCA?
The U.S. Foreign Account Tax Compliance Act (FATCA) requires that Financial Institutions (FIs) establish a compliance program consistent with the U.S. Internal Revenue Service’s (IRS) goal of detecting U.S. tax evaders who maintain Financial Accounts either directly in offshore accounts and investments or indirectly through ownership of foreign entities. FATCA is an information reporting regime.
What Is a GIIN?
A Global Intermediary Identification Number (GIIN) is the identification number that the IRS assigns to an FI once the entity’s FATCA registration in the IRS FATCA portal has been approved. The GIIN serves the purpose of identifying the registered entity to withholding agents and tax administrators for FATCA reporting purposes.
Where Is My Company’s FATCA Account?
An FI’s IRS FATCA account is located in the IRS FATCA portal: https://sa.www4.irs.gov/fatca-rup/reg/login/userLogin.do To access the account, it is necessary to input the “FATCA ID” and “Access Code” for the particular account. Once you are in the account, you will see information relevant to the deal due diligence such as if the FI is required to submit certifications, whether the IRS has cancelled the account for failure to submit FATCA certifications, who the Responsible Officer is, etc.
The FI may have also been required to register in a FATCA portal in the jurisdiction in which it is organized.
What Is the FATCA Action Item Prior to the Sale?
In addition to the buyer reviewing the status of the account as part of the due diligence, the buyer and seller should determine whether the buyer will be acquiring the GIIN. Potential scenarios include the following:
Buyer acquires the GIIN. Action items include updating the IRS FATCA account and the portal in the FI’s organization jurisdiction to remove the names of seller’s employees and third-party service providers and change passwords.
Buyer obtains a new GIIN. Action items include the seller deregistering the FI in the IRS FATCA portal, submitting RO certifications if required, and buyer registering the FI in the IRS FATCA portal. Although the seller has six months to complete its RO certifications after deregistration, it should be done immediately upon deregistration to avoid any issues with the buyer registering the FI for a new GIIN.
The FI is dissolved as part of the acquisition. This scenario is likely when a private equity company has completed its task of turning around an operating company. The buyer is interested in the operating company and neither the private equity company nor the buyer require the existing investment platform tiers. Action items include the deregistration of the FI in the IRS FATCA portal and in the FI’s organization jurisdiction portal. If RO certifications are due, they should be done immediately upon registration to avoid the task being forgotten.
Annual Reporting
Timing is everything in life. The timing of the acquisition, deregistration, potential new registration all play into who will be responsible for FATCA reporting. Do not overlook a final reporting or a continuation of annual reporting.
For assistance, please contact me via my contact page or at elizabeth@elizabethmcmorrowlaw.com.