FATCA responsibilities for Romanian financial institutions

KPMG Romania press release:

The United States tax authorities (Internal Revenue Service – IRS) opened a registration portal for the purpose of the Foreign Account Tax Compliance Act (FATCA) on 19 August, after it was delayed from mid-July. At the same time, the deadlines applicable to companies in the financial services industry were extended.

The website will be used by financial institutions across the world to register and submit information with respect to their status within FATCA to the IRS. To achieve FATCA compliance, financial institutions in Romania which have reporting or withholding obligations under FATCA (banks, insurance companies, investment funds, brokers etc.) need to register on the website and assign responsibilities.

Within a secure environment, the website that was launched by the IRS enables financial institutions to undertake the following actions to become FATCA-compliant:
Establish online accounts.
Customize home pages to manage their accounts.
Designate up to five “points of contact” to handle registration-related activities.
Oversee member and/or branch information.
Receive automatic notifications of changes in the institution’s FATCA status.

The FATCA portal, live starting 19 August 2013, has allowed simulated registration with the IRS from the moment it went online. However, according to the information released by the IRS giving details of this registration website, information entered into the system before 1 January 2014 (even if submitted as final by the user) will not be regarded as a final submission. Confirming the information filled-in as definitive will only be possible on or after 1 January 2014.

Consequently, the IRS recommends that financial institutions (FIs) use the remainder of 2013 to become familiar with the FATCA registration website, to input preliminary information, and to refine that information, with the aim of preparing to finalize registration during the first half of next year. Starting 1 January 2014, each FI will be expected to finalize its registration information by logging into its online account on the FATCA portal, making any necessary additional changes, and submitting the information as final. Simulating the registration process is important, as each FI is required to certify that the information provided in the FATCA Registration Form is accurate and complete and to confirm that it will comply with its FATCA obligations in accordance with the status or statuses for which it has registered itself or any of its branches (if applicable).

After registration is finalized and approved in 2014, registering FIs will receive a notice of registration acceptance and will be issued a global intermediary identification number (GIIN). The IRS will electronically post the first IRS list containing foreign financial institutions (FFIs) and their allocated GIINs by 2 June 2014. The list will be updated on a monthly basis with newly-registered FFIs. To be included in the June 2014 IRS FFI list, an FI will need to finalize its registration by 25 April 2014.

“The instructions for registration portal users emphasize that registration is also mandatory for FFIs from countries which sign intergovernmental agreements (IGAs) with the United States Department of the Treasury,” states Ramona Jurubiță, Deputy Head of Taxation Services, KPMG in Romania.

This guideline clarifies that all FIs, even those whose FATCA compliance burden will be simplified by an IGA agreement, will have responsibilities within FATCA, such as registration on the IRS portal to obtain a valid GIIN and designating one or more “points of contact”. (The responsibilities of these FIs had not been clearly defined prior to this guideline). Romania has notified its intention to initiate negotiations to sign an intergovernmental treaty with the U.S.A. However, as Ionuț Măstăcăneanu, Senior Manager at KPMG Romania, comments; “This will not bring exemption from FATCA responsibilities for Romanian financial institutions.”

The IRS has announced that it will also accept registrations that are made on paper forms, although using the online registration process is strongly encouraged starting August 2013.  Paper registration forms will not be processed until January 2014 and FIs may experience a delay in receiving notice of registration acceptance and obtaining the GIIN needed to demonstrate FATCA compliance.

FATCA represents a series of information reporting and withholding tax provisions published on 18 March 2010 by the IRS as part of the HIRE (Hiring Incentives to Restore Employment) Act, adding new clauses to the United States’ Internal Revenue Code. According to FATCA, FFIs are required to report to the IRS certain information with respect to U.S. accounts or accounts held by entities with substantial U.S. ownership. Recalcitrant individuals and FFIs not participating in FATCA will be penalized by having 30 percent of certain U.S.-source payments made to them withheld. During recent months, the IRS has published instructions for the implementation of FATCA. The most notable change was made by Notice 2013-43 on 12 July 2013, which provided a six-month postponement of the start of FATCA withholding and also delayed the deadline for finalization of registration on the portal opened in August, allowing an additional preparation period for FIs to implement FATCA requirements.