IRS Seeks Comment on New FATCA Forms; ISDA Announces FATCA-Driven Change to Master Agreement

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Explore:  Compliance FATCA FFI ISDA

[author: Jay R. Nanavati]

The IRS issued a request for comment on two new proposed FATCA-related forms on August 15, 2012.  The first is Form 8956, Application for Foreign Account Tax Compliance Act (FATCA) Individual Identification Number.  Each participating Foreign Financial Institution ("FFI") must designate in individual to sign its FFI Agreement.  In most cases, this will be the FFI's FATCA Responsible Officer.  The signer of the FFI Agreement must indicate his or her FATCA Individual Identification Number on the FFI Agreement.  The signer, typically the FATCA Responsible Officer, will use proposed Form 8956 to apply for the issuance of a FATCA Individual Identification Number.

The second proposed form is Form 8957, Registration for Participating, Limited, or Registered Deemed Compliant Foreign Financial Institution Status.  This is the form on which an FFI will register its FATCA status as a Participating FFI, Limited FFI, or Registered Deemed Compliant FFI.  A Participating FFI would still need to sign an FFI Agreement in the absence of an intergovernmental agreement to the contrary.  The IRS has not yet released a draft FFI Agreement but has promised a draft by the end of the summer.

Separately, the International Swaps and Derivatives Association (ISDA) announced on August 16, 2012, that it has launched a protocol that allows market participants to efficiently amend the ISDA Master Agreement tax provisions to address the effects of the Foreign Account Tax Compliance Act (FATCA), which may impose a withholding tax on payments under derivatives transactions.  The ISDA 2012 FATCA Protocol puts the FATCA withholding tax burden on the recipient of the payment. It eliminates the tax from the definition of “Indemnifiable Tax” in the ISDA Master Agreement. ISDA said: “The rationale is that the recipient is the sole party that has the ability to avoid the withholding tax by complying with the FATCA rules; therefore, the recipient should be the party burdened with the FATCA withholding tax if it chooses to not comply.” The protocol became active on 15 August and it is open to ISDA members and non-members.
 

Topics:  Compliance, FATCA, FFI, ISDA

Published In: Administrative Agency Updates, Finance & Banking Updates, International Trade Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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