FATCA year-end reminders for investment funds
TAX BLOG |
The end of the year brings holidays, reunions with friends and family and, of course, deadlines associated with the twin global reporting regimes of Foreign Account Tax Compliance Act (FATCA) and common reporting standards (CRS). Somewhere amidst all of the mirth-making, private equity funds, hedge funds and other asset managers with offshore entities in their structures should make sure that they’ve addressed the following year-end action items before the rapidly approaching December 31 deadline:
Sponsored entities must register for GIINs now
Sponsored investment entities resident in FATCA Model 1 IGA jurisdictions (including the Cayman Islands) can no longer use their sponsor’s global intermediary identification number (GIIN) after Dec. 31, 2016, and must register with the IRS to obtain their own GIIN on or before that date. After obtaining their own GIIN, these organizations will also need to provide banks, brokers and other withholding agents with an updated IRS Form W-8 reflecting their new GIIN to avoid FATCA withholding on certain payments when 2017 rolls around.
CRS due diligence deadline approaches
Reporting financial institutions in early adopter jurisdictions (such as the Cayman Islands) must complete their review of all pre-existing high value individual accounts (i.e. accounts maintained by individuals with an aggregate balance or value greater than $1 million as of Dec. 31, 2015) to identify any CRS reportable accounts by Dec. 31, 2016.
New W-8s and self-certification forms needed
Asset managers should solicit new IRS W-8s and CRS self-certification forms from investors and vendors now. The IRS published a new Form W-8BEN-E in April 2016 that funds must use as of Jan. 1, 2017, to onboard new investors and when refreshing expired or pre-FATCA W-8s. Note, however, that valid Form W-8s that are already on file do not need to be replaced, however, until they expire (generally within 3 years) or if there is a change in circumstances that mandates collection of a new form.
Also, with respect to CRS, funds domiciled in CRS participating jurisdictions must begin collecting CRS self-certification forms from investors now to ensure that they are able to comply with mandatory CRS reporting that will start in 2017. Offering and subscription documents should also be reviewed and modified as needed to address CRS.
For more information, please refer to prior coverage or contact your tax advisor.