As noted in our previous updates on the Foreign Account Tax Compliance Act (FATCA) and the related intergovernmental agreement between Canada and the United States for the enhanced exchange of tax information (the IGA), many Canadian financial institutions such as IFMs, portfolio managers, exempt market dealers and investment funds were required to register with the IRS for a global intermediary identification number (GIIN) by January 1, 2015. 

On September 18, 2015, the IRS issued Notice 2015-66 (the Notice) which states that it intends to amend the FATCA regulations to grant a one-year extension to the deadline by which certain “sponsored entities” must register and obtain a GIIN, in order to provide sufficient time for sponsored entity registration and for withholding agents to collect the GIIN of the sponsored entity. The revised deadline is now December 31, 2016. 

In order to streamline FATCA compliance obligations, an IFM can register with the IRS as a “sponsoring entity” of one or more funds that it manages. As a sponsoring entity, the manager agrees to perform all due diligence, withholding, reporting and other FATCA requirements on behalf of each of its sponsored entities. Under the original transitional rule, a sponsored entity would have been required to register for its own GIIN by December 31, 2015. Until such time, sponsored entities could provide the GIIN of their sponsoring entity to withholding agents and when reporting any information to the IRS. In fact, the IRS FATCA online registration system does not yet contain a mechanism to facilitate the registration of sponsored entities.

According to the Notice, the IRS is developing a streamlined process for sponsoring entities to register their sponsored entities on the FATCA registration website, and anticipates that the registration process will be available in the coming months.

As of January 1, 2017, sponsoring entities must use the GIIN of the sponsored entity when reporting with respect to the sponsored entity and must provide the GIIN of the sponsored entity to withholding agents making payments to the sponsored entity.  Please note that sponsored entities are required to have a GIIN by the later of December 31, 2016, and the date that is 90 days after a U.S. reportable account is first identified.