How to determine Financial Institutions under FATCA
On this page, you will find:
How does FATCA reporting work?
Determine RFI’s
Registration of RFI’s
Due diligence and reporting of RFI’s
Financial Institutions (FI) in South Africa meeting the prescribed due diligence requirements to find reportable accounts and report the prescribed information (referred to in the FATCA IGA as Foreign Financial Institutions or FFIs), include South African banks and custodians, brokers, asset managers, private equity funds, certain investment vehicles, long-term insurers and other participants in the financial system. A Financial Institution must determine if it has a reporting obligation in terms of the FATCA IGA. To do so, an FI or its representative should ask the following questions:
Am I a Financial Institution?
Do I maintain Financial Accounts?
Are there indicators that any of the account holders are a US Person or a Specified US Person?
After applying the relevant due diligence, do I have any Reportable Accounts?
Am I a Non-Reporting Financial Institution or have accounts that are excluded from the definition of Financial Account under Annex II of the Agreement?
Certain Financial Institutions or financial accounts are specifically excluded under the FATCA IGA, such as entities which are exempt beneficial owners or deemed compliant FFIs and the accounts which are excluded from the definition of Financial Accounts described in Annexure II of the FATCA IGA.
How to determine Financial Institutions in South Africa
In South Africa, which Financial Institutions constitute FFIs is determined by the FATCA IGA and may differ from the general FATCA requirements. There are three steps that an Entity must go through in determining whether it has a reporting obligation:
Step 1: Is the Entity South African? An “Entity” is defined in the FATCA IGA as a legal person such as a company or a legal arrangement such as a trust, partnership or an association. An individual or group of individuals acting together will not be classified as an Entity. Even though a trust is not considered an entity under SA common law, it is treated as an entity for AEOI purposes. A South African Financial Institution is:
A Financial Institution resident in South Africa, excluding any branch of such Financial Institution that is located outside South Africa, and
Any branch of a Financial Institution not resident in South Africa, if the branch is located in South Africa.
For purposes of the FATCA IGA the Financial Institution will be resident in the country where the Financial Institution is located. A company not resident in South Africa may conduct its business in South Africa in its own name either through a South African branch or a South African subsidiary. These branches and subsidiaries of Financial Institutions that are located in South Africa are SA FIs.
Step 2: Is the Entity a Financial Institution? An SA FI will be a “Financial Institution” under the IGA if it falls within any one or more of the following categories:
Depository institutions (for example, banks)
Custodial institutions (for example, mutual funds)
Investment entities (for example, hedge funds or private equity funds)
Certain types of insurance companies that have cash value products or annuities
Step 3: Is the Entity an Annex II Entity?
These are entities treated as exempt beneficial owners or deemed compliant FFIs. A summary of these can be found in Annexure E of the SARS Guide on the US Foreign Account Tax Compliance Act. The FATCA regulations exempt many categories of FFIs from the requirement to register and report, including:
Most governmental entities
Most non-profit organisations
Certain small, local financial institutions
Certain retirement entities
How does FATCA RFI Registration work
FFIs must register with the IRS, irrespective of whether they receive payments directly from US sources. The following types of entities are NOT required to register:
Non-Reporting FIs as described in Annex II of the FATCA IGA (note that a Sponsored Entity does not register, but may be registered by a Sponsoring Entity)
Certified deemed-compliant foreign financial institutions (FFIs) in the Regulations
Active and Passive NFFEs (excluding direct reporting NFFEs in the Regulations).
An FFI that registers on the FATCA Registration Website, upon approval, will receive a Global Intermediary Identification Number (GIIN) from the IRS. As FATCA has been in place in South Africa since 2015, most South African FFIs have been registered with the IRS. The IRS publishes a list of registered and approved FFIs and their GIINs every month. The list of FFIs that have completed registration and obtained a global intermediary identification number (GIIN) is available using the FFI List Search and Download Tool.
How does FATCA RFI Due Diligence and Reporting work
The AEOI due diligence procedures are the procedures an RFI is required to undertake to determine whether there are any Reportable Accounts among the Financial Accounts it maintains. The general due diligence procedures that SA RFIs must comply with are described in Annex I of the FATCA IGA. Please note: A nil return must be filed by an RFI that did not maintain any reportable accounts during the relevant reporting period. See more comprehensive information by the IRS on FATCA:
