There are fund structures which utilize the sponsoring entity concept to comply with the U.S. Foreign Account Tax Compliance Act ("FATCA") whereby the sponsoring entity agrees to perform all required due diligence, withholding, reporting and other requirements for FATCA purposes on behalf of its sponsored entities. The sponsored entities can use the Global Intermediary Identification Number ("GIIN") of the sponsoring entity. From 1 January 2017 onwards, certain sponsored entities will no longer be able to rely on the GIIN of the sponsoring entity and the sponsoring entity will be required to obtain separate GIINs for certain of its sponsored entities.
A sponsoring entity must register its sponsored entities that are covered by a Model 1 Intergovernmental Agreement ("IGA") (i.e. Cayman Islands, BVI, etc.) by the later of 31 December 2016 or 90 days after an U.S. reportable investors is first identified. Sponsored entities domiciled in jurisdictions that are either covered by a Model 2 IGA or not covered by any IGA have to obtain a GIIN by 31 December 2016.
In order for a sponsored entity to receive an approved GIIN which is published on the IRS Foreign Financial Institution List on 1 January 2017, the application must be submitted and approved in the FATCA Online Registration System by 23 December 2016. To facilitate this requirement, the FATCA Online Registration System includes a feature to allow sponsoring entity financial institutions to add sponsored entities to its application.
Additionally, a sponsored that entity that obtains its own GIIN should update IRS Forms W-8 and self-certifications and send the updated document to all relevant counterparties for purposes of FATCA documentation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.