In order to comply with the U.S. Foreign Account Tax Compliance Act (“FATCA”), certain investment managers chose to sponsor their non-U.S. investment funds, whereby the investment manager (or an affiliate) agreed to perform all FATCA due diligence, withholding, reporting and other requirements on behalf of its sponsored funds. To date, sponsored funds were permitted to rely on the registration of their sponsor and to utilize the Global Intermediary Identification Number (“GIIN”) of their sponsor. Going forward, investment managers acting as “sponsoring entities” will have to register certain of their sponsored entities with the U.S. Internal Revenue Service (“IRS”) and receive a separate GIIN for each sponsored entity.
Sponsored entities resident in jurisdictions that have entered into a Model 1 intergovernmental agreement (“IGA”) with the United States (e.g., the Cayman Islands) are required to obtain a GIIN by year-end if they have (or have had) reportable investors. Sponsored entities in these jurisdictions that do not currently have (and have not had) reportable investors do not need to obtain a GIIN by the end of the year but will need to obtain a GIIN within 90 days of admitting or otherwise determining that they have a reportable investor.
A sponsored entity that does not benefit from a Model 1 IGA (i.e., a sponsored entity that either benefits from a Model 2 IGA or does not benefit from any IGA) will have to obtain a GIIN by year-end even if it does not have (and has not had) reportable investors.
Each sponsored entity that requires a GIIN should, upon obtaining a GIIN, send updated IRS Forms W-8 and, as applicable, self-certification forms that include its GIIN to its banks, prime brokers and counterparties in order to avoid unnecessary FATCA withholding.
All Investment Funds Should Obtain Updated FATCA Certifications From Investors That Are Sponsored Entities
All investment funds should speak with their internal and external FATCA service providers to determine if any investor is a sponsored entity. Investment funds with investors that are sponsored entities should reach out to each such investor for an updated certification that includes the investor’s GIIN or otherwise obtain comfort that such investor does not require a GIIN.