Against widespread speculation that the IRS might provide an additional delay to the Foreign Account Tax Compliance Act's (FATCA) withholding provisions by extending FATCA deadlines, FATCA withholding is confirmed to go into effect on July 1. Broadly, FATCA requires foreign entities to identify, document and report their U.S. account holders to the IRS or else face a 30 percent withholding tax applicable to certain U.S.-source payments made to the foreign entity. Under FATCA, each foreign entity is classified as either a Foreign Financial Institution (FFI) or a Nonfinancial Foreign Entity (NFFE). The classification determines the foreign entity's reporting, due diligence and withholding obligations with respect to its U.S. account holders.
Any FFI that is not exempt or deemed compliant must register with the IRS via an online portal by April 25 and obtain a global intermediary identification number (GIIN) to avoid withholding on post-June 30 payments of certain U.S.-source income.
All foreign trusts, foreign trustees and underlying foreign holding companies must act now to determine their FATCA classification. It is not at all uncommon for the foreign trustee, foreign trust and underlying foreign holding company each to be created in a different jurisdiction, and the presence or absence of an intergovernmental agreement (IGA) with that jurisdiction can further complicate matters. There are currently two types of IGAs, Model 1 and Model 2, and both modify the obligations of FFIs in the jurisdictions that have them.
Either registration as an FFI or self-certification as an NFFE may be required for (i) the trust; (ii) the trustee; and (iii) any underlying holding company. However, a foreign entity will be exempt from registration if it is a certified deemed-compliant FFI, such as a sponsored investment entity, a sponsored closely held investment vehicle or an owner-documented FFI, in each case by agreeing to have another entity do the FATCA reporting on its behalf.
These rules are complicated and replete with conditions and exceptions. Day Pitney is actively advising trustees regarding their ongoing compliance requirements and those for their foreign trusts and underlying holding companies. Please contact us if you have any questions.
Dina Kapur Sanna wrote a chapter entitled "Reporting Requirements for Foreign Trusts" which will be published in the February 2017 issue of the ALI CLE Estate Planning Course Materials Journal.
On January 24, Warren Whitaker will speak on "Pre-Immigration Planning Before a Move to the U.S." and "Canadian-U.S. Estate Planning" at the 6th Annual STEP Orange County Institute on Tax, Estate Planning and the Economy in Newport Beach, CA, presented in collaboration with the UCLA School of Law.
On January 23, Warren Whitaker will speak at a lunch meeting of the STEP San Diego chapter on "Coming to the U.S.: What You and Your Clients Need to Know."
On January 11, Dina Kapur Sanna spoke as part of a panel on "International Recent Developments" at the Heckerling Institute on Estate Planning, organized by the University of Miami.
Dina Kapur Sanna and Carl Merino co-authored an article, "New Filing Requirements for Foreign-Owned Disregarded Entities," for Trusts & Estates Magazine.
Tina Albright was mentioned in an article, "On the Move," in the New York Law Journal. Albright recently joined Day Pitney as a partner in its Trusts and Estates practice.
Tina Albright was mentioned in an article, "Career Tracker: Lawyers on the move," in Reuters. Albright recently joined Day Pitney as partner in the firm's trusts and estates practice in New York.
New York- May 9, 2016 - Day Pitney LLP announced today that Tina Albright has joined the firm as a partner in the Trusts and Estates Practice in the New York office. She joins from Curtis, Mallet-Prevost, Colt & Mosle LLP.
New York, NY; March 23, 2016 - Six partners in Day Pitney's International Trusts and Estates and Energy practices received recognition in Chambers Global 2016. Chambers Global covers over 190 countries across the world and also includes Region-wide and Global-wide sections.
Barbara Freedman Wand was mentioned in an article, "People on the Move," in The Boston Business Journal. Wand was recently elected as a member to Day Pitney's Executive Board, which provides guidance to the Executive Committee and serves as a liaison to the firm's partners.