Irish Revenue releases updated Guidance Notes on the Implementation of FATCA in Ireland
A further significant FATCA milestone was reached on 1 October 2014, when Irish Revenue published the first non-draft edition of their Guidance Notes on the Implementation of FATCA in Ireland (“Guidance Notes”), superseding the last draft version of 16 January 2014. The notes are available at:
Notwithstanding that the “draft” designation has been removed, the Guidance is expected to be amended further from time to time, as additional queries and clarifications will inevitably arise from ongoing implementation. This would mirror the approach adopted by HMRC in the UK, where full updates of the initial Guidance from August 2013 were published in February and August 2014.
Current status of FATCA obligations
FATCA came into effect on 1 July 2014, with due diligence required on new financial accounts from that date onwards. The first annual report to Revenue under FATCA, in relation to 2014, is due to be submitted by 30 June 2015. In addition, financial institutions are beginning to deal with the mandatory due diligence on financial accounts maintained at 30 June 2014 (“pre-existing accounts”). This due diligence must be completed by 30 June 2015 for high value individual accounts and by 30 June 2016 for all others.
The Guidance Notes
This tax alert discusses the most significant changes in the new Guidance Notes from the last draft released in January 2014.
Two New Categories of Financial Institutions
Consistent with changes in the Regulations finalised in late June, the Guidance includes comment on two new categories of Financial Institution: Relevant Holding Company and Relevant Treasury Company. Also covered for this purpose is the definition of a Financial Group, which is a group of entities that includes at least one Custodial Institution, Depository Institution, Investment Entity, or Specified Insurance Company.
The Guidance does not modify in any way the impact of the Regulations in relation to these new types of FI. In summary, Relevant Holding Companies and Relevant Treasury Companies that are members of a Financial Group or provide services to, or are related to, an Investment Entity, will be Financial Institutions within scope of FATCA (with limited exceptions in the case of Relevant Holding Companies).
The addition of these two categories brings the definition of a Financial Institution in Ireland in line with major jurisdictions such as the US and UK. However it now differs in this respect from many other IGA jurisdictions that have not expanded their categories of Financial Institution as yet.
Investment Managers and Advisers
Similar to the updates in the US regulations and UK Guidance notes, Investment Managers and Investment Advisers now receive beneficial treatment under the Guidance Notes. Where they manage or administer customers’ funds they will be a Deemed Compliant Financial Institution on condition that the customer’s assets are deposited in the customer’s name with another Financial Institution. Investment Advisers that solely render investment advice and do not manage or administer customers’ funds or maintain financial accounts are likely to be treated as a Non-Financial Foreign Entity.
The Guidance Notes confirm that where a placing agent holds shares/cash as a nominee for an underlying investor for a short period (2 – 3 days), such accounts will not be considered Financial Accounts subject to various conditions.
Debt or Equity Interests in Investment Vehicles – “Regularly Traded” Condition
Generally, a debt/equity interest in an Investment Entity will be considered a Financial Account except for a debt/equity interest that is “regularly traded on an established securities market”. In the last draft Guidance Notes, it was stated that where a debt/equity was listed on a recognised stock exchange, it would be considered “regularly traded” and there would be no need to check annually if any transactions were undertaken. (No concession would be made however where the securities were listed solely to avoid FATCA reporting.)
The updated Guidance Notes tighten the conditions to be met to be considered as “regularly traded” and state that should the debt/equity be “listed solely for regulatory or similar purposes where there is clearly no intention to trade”, the debt/equity would not be considered “regularly traded” and therefore should be considered a Financial Account.
The Guidance includes commentary on the “Limited Life Debt Investment Entity” category of Deemed Compliant Financial Institution, encompassing the definition of this category as expanded in the US Treasury Regulations in early 2014. Notwithstanding this expansion, many Irish securitisation vehicles may find difficulty in meeting clearly all conditions to fall within this category.
Additional Comments on Funds as Investment Entities
The section discussing Investment Entities has been expanded providing further comment on a number of topics including the following:
Transfer Agents in respect of Irish Funds
Transfer Agents that are appointed as a FATCA service provider for multiple Irish collective investment schemes are no longer required to obtain due diligence documentation for multiple accounts that are held by the same investor relating to Irish funds. Care should be exercised by transfer agents who act on behalf of both Irish and non-Irish funds, as Irish Revenue would not be in a position to grant concessions in relation to FATCA compliance obligations of non-Irish funds.
A number of practical areas in terms of reporting of information to Revenue have been clarified, including:
Validity of Documentation
The Guidance now helpfully states that all documentary evidence, including self-certifications, will remain valid until a change in the Account Holder’s status arising from a change in circumstances or knowledge.
Controlling Persons of a Passive Non-Financial Foreign Entity
It is confirmed that the identification of Controlling Persons of a Passive NFFE must be carried out through the Anti-Money Laundering process required under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010.
Responsible Officers in Ireland
The updated Guidance Notes also provide clarity on the obligations of FATCA Responsible Officers in Ireland. The US regulations, applicable for non-IGA country Financial Institutions, lay out certain requirements for Responsible Officers that include making periodic certifications to the IRS. The Guidance notes clarify that in Ireland and other Model 1 IGA jurisdictions, the Responsible Officer is only used for the purpose of registering with the IRS to obtain a Global Intermediary Identification Number and to authorise one or more Points of Contact. In Ireland the “Responsible Officer” will not have the same obligations as a Responsible Officer described in the US Regulations.
Finally, a number of other updates have been included in the Guidance Notes. These include:
Following the entry into force, on 1 July 2014, of the first FATCA obligations (new account due diligence), it was important that Revenue would reflect the wide range of developments and issues since the turn of the year, in an update to the Guidance. As stated above, it is to be expected that further clarifications and fact patterns will have to be covered in future updates to the Guidance, especially as new issues are identified in implementation of reporting and pre-existing customer due diligence obligations.
Ireland is expected to sign up to the first OECD Common Reporting Standard (CRS) agreements with a number of other early adopter countries in a matter of weeks, with those obligations set to commence on 1 January 2016. With this in mind, it is even more important that financial institutions digest fully Irish Revenue’s FATCA Guidance and move rapidly to complete implementation of the remaining FATCA obligations.
EY FATCA Support for Financial Institutions
Please get in touch with the below contacts or your usual EY contact for any further FATCA information or assistance.