International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Tuesday, December 2, 2014

Analysis of the 2014 FATCA GIIN Registration Lists

FATCA_rollHaydon Perryman and I have sifted through the GIIN lists of June through December.  I present Part 1 initial analysis below.  Part 2 on Thursday. 

By the way, the 3rd edition of my Lexis Guide to FATCA Compliance will be out soon with substantial more analysis – 1,200 pages over 54 chapters.  Over 50 FATCA compliance experts from tier 1 institutions, former government officials, and professional firms have contributed to create this detailed and robust guide, filled with numerous practical examples and several chapters written specifically for the non-legal, compliance operations officer.  No filler pages of publicly available documents and regurgitated regulations – it’s all beef.  See the Lexis website to order a copy of this 3rd edition.

The June 2, 2014 GIIN list contained 77,353 registrations from 205 countries and jurisdictions.[1]  Of the June registrations, 74 percent were from Model 1 IGAs that had been either signed or recognized as agreed in substance by the IRS.  Approximately 20 percent of these total registrations were from Cayman Islands firms, and 37 percent of the total from the UK and its Crown dependencies and overseas territories. 

On July 1, 2014 the IRS published the second monthly GIIN list. This list contained only an additional 10,000 registrations, bringing the total to 87,993.[2]  82,994 of this total, approximately 95 percent, were from the 98 countries from by July the IRS recognized IGAs.  Only five percent (4,318) of the registrations derived from the remaining non-IGA countries upon which Chapter 4 withholding went into effect on the day of the list’s publication.

After the first month of FATCA withholding, the August 2014 GIIN list experienced an unexpected decline in registrations, with only 7,246 additional entities bringing the total to 95,239.[3]  Yet, as of this third GIIN list, the IRS recognized 101 IGAs from which 89,718 institutions (94 percent) registered although withholding will not be levied by U.S. withholding agents until January 1, 2015.[4]  Only 4,801 (approximately five percent) registered from the 143 countries and territories without an IGA, leaving multitudes of their FFIs exposed.  September’s GIIN list continued the downward trend in FFI registration and did not reach a 100,000 registration mark (99,861).[5]  Finally, the October 1, 2014 breached 100,000 registrations (104,344), albeit with a continued poor registration response. 

The November 2014 list saw a jump in registration, led by the United Kingdom, achieving a total of 116,104 FFIs and branch registrations.[6]  43 percent of all registered GIIN are from the UK and her Crown Dependencies and Overseas Territories. The final GIIN list released before submission for publication, December’s, grew by only six thousand registrations, to 122,881, of which only 6,094 were from non-IGA countries.  Such a stunted growth in FFI registration is foreboding of the remaining, significant compliance challenges. 

The IRS stated that “… the full FFI list is expected to be less than 500,000 records”.[7] Based on upon industry discussions and a review of industry literature of financial institution compliance officers, the Big 4, and upon revenue authority estimates, it is reasonable to state that approximately 500,000 entities are impacted by Chapter 4 withholding and need to register for a GIIN.  Literature and the industry actually place the range of impacted entities at a minimum half million to a maximum of one million. 

Only 5,959 of these 116,104 registrations are from the 143 countries that have not had an IGA announced with the US.  Recipients of withholdable payments in these countries and jurisdictions have thus borne the 30 percent withholding of Chapter 4 [see chapter 13 in this book]. Albeit for the many countries and jurisdictions that do not have a double tax agreement with the U.S., and considering the phase in applicability of Chapter 4 withholding upon grandfathered obligations and upon gross proceeds, the actual Chapter 4 withholding has little impact at this moment.  When Chapter 4 applies to all the portfolio interest of currently grandfathered obligations and upon gross proceeds, neither upon which Chapter 3 withholding applies, then presumably FFI GIIN registration and FATCA compliance will sharply jump.  Some analysts forecast a divestment from the U.S. by these countries.  But even if that case scenario comes to pass, the impact of such divestment relative to the size of the U.S. foreign direct investment (“FDI”) based upon U.S. liquidity, perceived stability, and investor protection, will be de minimis

Consequently, global FATCA registration compliance is as of December’s list only approximately 20 percent.  But for the Cayman Islands (21,633), FATCA registration is low in every country relative to the number of potential entities for registration.  Only 4,586 Swiss entities have registered, which when contrasted to Cayman Islands and the UK seems measly. Only 5,959 of these 116,104 registrations are from the 149 non-IGA countries.  To reach at least a 50 percent level of GIIN registration compliance by year's end, the GIIN list must double each of the remaining two months of the year.  

A Deloitte survey, published August 12, 2014 in the Wall Street Journal, of 110 CFOs of large North American companies for which knowledge of and compliance with FATCA should be at its highest found that only one-third of CFOs had begun the basic step of FATCA compliance, which is the classification of internal entities.  Only eight percent of CFOs had actually completed the necessary processes to comply with Chapter 4 withholding.  Based on the lack of local implementation regulations or guidance by most revenue authorities around the world (e.g. Turkey, India, China), it is unlikely that a goal of 50 percent GIIN registration, much less of FATCA compliance, can be achieved this year. 

Origin                          Registrations (Nov 1)    (Dec 1) 

Model 1A IGA                          66,619                          71,334

Model 1B IGA                          25,847                          27,550

Model 2 IGA                            16,902                          17,098

US & US Territories                  777                               795

Non-IGA                                  5,959                            6,094

Total                                        116,104                          122,881

GIIN List (2014)          Total Registrations

June                                         77,354

July                                         82,994

August                                    95,239

September                               99,861

October                                   104,344

November                               116,104

December                               122,881 

Lexis' FATCA chapter 1 download on SSRN  


[1] For a detailed June analysis, see http://profwilliambyrnes.com/2014/06/25/5-new-igas-with-3-business-days-to-go-until-30-fatca-withholding-on-remaining-167-countries-begins/  (accessed November 9, 2014).

[2] See http://profwilliambyrnes.com/2014/07/01/july-1st-ffi-list-analysis/  (last accessed November 9, 2014).

[3] See http://lawprofessors.typepad.com/intfinlaw/2014/08/august-fatca-giin-list-analysed-by-byrnes-and-perryman.html  (accessed November 9, 2014).

[4] See http://www.treasury.gov/resource-center/tax-policy/treaties/pages/fatca-archive.aspx  (accessed November 9, 2014).

[5] See http://lawprofessors.typepad.com/intfinlaw/2014/09/fatca-ffi-update-and-it-doesnt-look-pretty-september-did-not-break-100000.html  (accessed November 9, 2014).

[6] See http://lawprofessors.typepad.com/intfinlaw/2014/11/novembers-published-fatca-giin-list-analysis.html (accessed November 9, 2014).

[7] IRS FFI List FAQs, FFI List Q7. Available at http://www.irs.gov/Businesses/Corporations/IRS-FFI-List-FAQs (accessed November 9, 2014).

https://lawprofessors.typepad.com/intfinlaw/2014/12/analysis-of-the-2014-fatca-giin-registration-lists.html

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