5th June 2014 – FATCA Update
US Internal Revenue Service Publishes First List of FFIs
Better late than never, they say. Originally scheduled for release on 2 December 2013, the first list of foreign financial institutions (“FFIs”) that have registered under the Foreign Account Tax Compliance Act (“FATCA”) and received a global intermediary identification number (“GIIN”) has finally been published by the IRS.
The IRS will update the FFI list on the first day of each month. The agency also released an online tool for searching and downloading the list. Users of the online search tool can conduct a search by global intermediary identification number, financial institution name, or country of FFI or branch.
The list contains more than 77,000 entities worldwide, over 700 of which are incorporated or based in Mauritius. Mauritius was the first African country to sign the FATCA intergovernmental agreement (“IGA”) with the United States on 27 December 2013. Mauritius signed the Model I IGA, meaning that entities caught by FATCA’s definition of FFIs will report directly to the Mauritius Revenue Authority (“MRA”), which will then pass the information to the IRS. However, unless they are expressly exempt under the IGA, the vast majority of FFIs are still required to register with the IRS and receive a GIIN.
This first list of FFIs includes the vast majority of banks based in Mauritius, global business companies, management companies, brokers and a number of other financial institutions.
This extensive list of Mauritius based FFIs who have registered with the IRS is an important first step towards affirming Mauritius’ commitment in being FATCA compliant and also more generally, as being a robust and tax transparent international financial centre.
Regulations implementing the Mauritius-USA FATCA IGA are expected shortly, and it is hoped that the MRA will publish detailed guidance on the implementation of the IGA. FATCA is a notoriously complex piece of legislation and it is crucial that Mauritius-based operators have access to clear guidelines so they are able to ensure that they are fully FATCA compliant.
One grey area for instance is certain “deemed compliant reporting FFIs” may not have to register with the IRS and obtain a GIIN. It is important that the domestic legislation implementing FATCA clearly defines the scope of entities falling within this exemption in order to avoid unnecessary cost or inadvertent non-compliance.
Another key area that will need to be addressed by Mauritius based FFIs is to conduct the appropriate legal due diligence to ensure that their contractual documents are robust from a FATCA perspective. Appropriate FATCA disclosure and carve-outs will need to be included in their legal documents. This will be particularly important when dealing with clients who may be located in non-IGA jurisdictions or counterparties which are non-reporting FFIs.