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Investment Funds Update: FATCA Registration and Reporting
AUTHOR(S): Michael Jackson, Joe Beashel, Anne-Marie Bohan, Gavin Coleman, Liam Collins, Dualta Counihan, Elizabeth Grace, Tara Doyle, Philip Lovegrove, Shay Lydon
PRACTICE AREA GROUP: Asset Management and Investment Funds
Irish domiciled funds are generally now subject to FATCA, a United States (“US”) reporting and withholding tax regime. Ireland has actively engaged with the US to ensure that the FATCA reporting obligations for Irish financial entities, including Irish domiciled funds, are as straightforward and streamlined as possible.
FATCA is designed to ensure increased tax compliance by US taxpayers with respect to accounts held in non-US financial entities. FATCA seeks to achieve this compliance by imposing a 30% US withholding tax on certain US source payments to non-US financial entities that do not facilitate reporting of their US accountholders to the US Internal Revenue Service (“IRS”).
This note is intended to outline some of the key practical steps which need to be considered with respect to FATCA registration and reporting requirements for Irish domiciled investment funds.
Irish FATCA Reporting
The Irish government has signed an intergovernmental agreement with the US in relation to FATCA (the “IGA”). The IGA simplifies FATCA reporting obligations for Irish entities that are subject to FATCA and minimises the risk of FATCA withholding tax applying.
On 1 July 2014, the implementing regulations for FATCA in Ireland came into operation. These regulations introduced a domestic Irish FATCA reporting regime, in accordance with the IGA. Under the new reporting regime, Irish entities that are subject to FATCA are required to report details of their US accountholders to the Irish Revenue Commissioners. These details will subsequently be shared with the IRS in accordance with the IGA.
Irish domiciled funds are generally subject to FATCA and consequently are required to comply with the newly introduced Irish FATCA reporting regime. Broadly, this means that Irish domiciled funds (and other Irish entities that are subject to FATCA) must:
- Register with the IRS by 31 December 2014.
- Report annually, to the Irish Revenue Commissioners, information relating to investors that are US persons or that are controlled (25% or more) by US persons. The first report containing this information is required by 30 June 2015.
- Report to the Irish Revenue Commissioners details of payments in 2015 and 2016 to financial institutions that are treated as “Non-participating Financial Institutions” for FATCA purposes. The first report containing this information is required by 30 June 2016.
Certain Irish domiciled funds may be able to benefit from exemptions from some or all of these FATCA obligations. In particular, exchange traded funds should generally be able to claim exemptions from the FATCA reporting obligations. Other exemptions may also be available depending on the profile and investor base of an Irish domiciled fund, and whether an Irish domiciled fund is “sponsored” by another entity for FATCA purposes.
Getting Ready for FATCA Reporting
Now that FATCA is in operation in Ireland, Irish domiciled funds need to prepare for Irish FATCA reporting. The key action points are as follows:
- All Irish domiciled funds need to confirm their FATCA status and determine what their reporting obligations (if any) will be under Ireland’s FATCA reporting regime. In particular, each Irish domiciled fund will need to consider if any exemptions from FATCA obligations could apply. Matheson can assist Irish domiciled funds in determining their FATCA status and what FATCA obligations may apply.
- All Irish domiciled funds that are required to register with the IRS under FATCA must do so before 31 December 2014. On registration, the Irish domiciled fund will receive a “Global Intermediary Identification Number” (a “GIIN”). From 1 January 2015, US withholding tax agents will generally require a GIIN as evidence that US FATCA withholding tax does not have to be applied to US source payments to Irish domiciled funds.
- Subscription forms for Irish domiciled funds required to undertake FATCA reporting should be updated to include a FATCA self-certification from each investor which confirms the investor’s FATCA status for reporting purposes. Matheson can assist in updating investor subscription forms to capture all of the information that is required under Ireland’s FATCA reporting regime.
- Irish domiciled funds required to undertake FATCA reporting should ensure that the necessary processes are in place to identify and report all required information to the Irish Revenue Commissioners. This will generally require an engagement between an Irish domiciled fund and its administrator to ensure that the administrator’s duties extend to the operation of the relevant FATCA compliance processes. Matheson can assist Irish domiciled funds in reviewing their existing legal agreements with administrators and in updating these, where appropriate, to include FATCA reporting services.
Ireland's Pro-active Approach
Ireland has been pro-active in preparing for FATCA. In particular, Ireland was one of the first countries to sign an IGA with the US, in 2012. The Irish Funds Industry Association (“IFIA”) and its members, including Matheson, have engaged in a productive consultation process with the Irish Revenue Commissioners to ensure that Irish FATCA guidance notes will provide helpful and practical guidance on the application of FATCA to Irish domiciled funds. The IFIA has also prepared comprehensive FATCA declarations which can be used by Irish domiciled funds to identify the FATCA status of their investors for reporting purposes. As a result of Ireland's pro-active approach, it is expected that FATCA reporting should be a straightforward and streamlined process for Irish domiciled funds.
If you require more detailed information or legal advice with respect to the implications of FATCA for Irish domiciled funds, please get in touch with me or any of your usual asset management contacts.