June 6, 2012: IRS Announces Details on the FATCA Foreign Financial Institutions Registration Process
On June 6th the Internal Revenue Service (IRS) gave participants of the Executive Enterprise Institute’s 24th Annual International Tax Withholding Conference a detailed look into the FATCA registration process for Foreign Financial Institutions (FFIs). As expected, the system will involve an online registration site where FFIs will register and enter into FFI agreements. As per the proposed regulations, each FFI must select a responsible officer who will be signing the agreement and making certain other certifications. Using the online system, the FFI will need to identify a responsible officer. The system will also require at least one point of contact for the FFI (up to five can be identified) who will be appointed by the responsible officer (the responsible officer can also be the point of contact). The point of contact may also include third party individuals that can be U.S. or local (e.g., service providers, affiliate employees, etc.).
The responsible officer will have the ability to execute a full power of attorney (including signing) to another individual in the organization, or if the registration responsibilities prove unworkable for the responsible officer or other internal individual, the responsible officer can execute the power of attorney in favor of certain U.S.-licensed tax professionals, subject to the IRS’s regulatory oversight. This power of attorney must be filed and available upon request. The person delegated signing responsibility is known as the FFI’s Authorized Third Party (ATP). Whomever is ultimately responsible for signing and managing the system, he or she will be required to edit and update the registration as changes occur (e.g., new FFIs in a group to register, update contact information, update authorized users, etc.).
To sign the FFI agreement, the responsible officer or ATP must affirmatively certify that he or she has authority to act on behalf of the FFI and must provide identification which the IRS will verify. Probably to some, a surprising aspect of the new system is that electronic ID verification requires the responsible officer or ATP to have and provide a U.S. social security number or taxpayer identification number. Understandably, many individuals will be uneasy providing their personalidentification information to the IRS for this purpose. However, alternate procedures exist for individuals that do not have the number (or do not want to provide it), but the alternate procedure involves a paper form that may take longer to process.
Another option for responsible officers or internal ATPs wishing to take advantage of the electronic option, but not wanting to or unable to provide an SSN or TIN, is to outsource the responsibility to a U.S. tax professional that is able and willing to take on the responsibility. Although not specified by the IRS, it is likely that U.S. tax professionals will only have to undergo ID verification once; enabling them to provide tax services to multiple clients without having to slow down the process.
Once the IRS completes ID verification successfully, it will issue the individual a FATCA Individual Identification Number (FIIN) which is required to complete the registration and signing process. The IRS also stated that the registration and account creation process will be closely monitored on an ongoing basis.