April 11, 2022 What to do when submitting FATCA or CRS reports without taxpayer identification numbers With deadlines for reporting under the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) fast approaching, reporting financial institutions need to determine how to submit FATCA and CRS reports if they do not have an account holder's taxpayer identification number (TIN). The absence of TINs from recent FATCA and CRS reports prompted tax authorities in multiple jurisdictions to issue error notifications to reporting financial institutions. The number of countries issuing these notifications is expected to increase in the coming reporting cycles. To assist reporting financial institutions that may not have TINs for all their account holders, this Alert reviews recent US guidance on filing FATCA reports without TINs and reports on how other countries are addressing missing TIN matters, based on unofficial guidance from their tax authorities. The Alert also reviews CRS reporting requirements, exceptions to those requirements and how reporting financial institutions can verify that those exceptions apply. FATCA requirements Reporting US investors' US TINs In Notice 2017-46, the IRS announced that it would not consider a reporting financial institution to be in substantial noncompliance with an intergovernmental agreement (IGA) if it reported US accounts for calendar years 2017, 2018, and 2019 without valid US TINs. At the end of this transition period, reporting financial institutions were expected to close accounts for which they could not obtain a valid US TIN from the account holder. In a 2019 frequently asked question (FAQ), the IRS addressed the treatment of preexisting accounts of Model 1 reporting financial institutions with missing US TINs for tax year 2020 and future years. The FAQ states that Model 1 IGA reporting financial institutions that do not report US TINs, or report invalid US TINs, would not be required to immediately close or withhold on those accounts. Instead, those reporting financial institutions would receive an error notice from the exchange-partner jurisdiction and would be required to correct their FATCA report within 120 days. Latest IRS guidance On May 13, 2021, the IRS updated its FAQs with new guidance on codes that Model 1 reporting financial institutions should use on FATCA reports if they have been unable to obtain an account holder's US TIN. New Reporting FAQ 6 lists optional codes that a reporting financial institution may use when a US TIN is unavailable. Use of these codes, however, will not protect a reporting financial institution from being found significantly non-compliant due to a failure to report each required US TIN. The codes are as follows:
EY observes: These codes are limited only to specific situations and do not address all potential scenarios a reporting financial institution may encounter. For example, a reporting financial institution could encounter a scenario in which a new account holder has no US indicia, but the self-certification was not valid. Reporting passive NFFEs Passive NFFE investors often do not possess US TINs because they are not US persons. Reporting financial institutions that have reported these account holders and their controlling persons have left the TIN fields blank or populated them with nine zeroes (i.e., 000000000). In some jurisdictions, this practice triggered error notifications. In an April 2021 FAQ, the IRS stated: "If a filer has confirmed that the Account Holder is not required to have a US TIN in the agreed upon format the filer should enter their own country code in the TIN Issued by element and include "NA" (indicating "Not Available") for the TIN element." Another FAQ seemingly contradicts this approach by requiring, if available, the foreign TIN (FTIN, with the "TIN Issued by" element populated with the issuing country code) to be reported and allowing "NA" to be used only if no FTIN was available. EY observes: The applicable guidance (i.e., US Treasury Regulations, Model 1 IGA, or Model 2 IGA) does not include a specific FATCA requirement to report a passive NFFE investor's FTIN. In fact, reporting financial institutions could face data privacy issues if they populate the TIN field with a passive NFFE investor's FTIN, as IGAS do not require a TIN to be provided for passive NFFE investors. Reporting financial institutions should consider whether they may provide this information under applicable data privacy rules, as these laws must take priority. If local law would prohibit reporting an FTIN or the passive NFFE's residence of tax jurisdiction does not issue TINs, this field should be populated with "NA," indicating that the TIN is not available. For Model 1 IGA jurisdictions, reporting financial institutions should defer to their local tax authority to determine the expected practice. For a more detailed discussion on the recommended approach for specific Model 1 IGA jurisdictions, see the following discussion on "Jurisdiction-specific error notifications." Jurisdiction-specific error notifications Canada - FATCA The Canada Revenue Agency (CRA) has been issuing Part XVIII Error Notifications for calendar-year 2020 Part XVIII (FATCA) information returns, which reporting financial institutions can access via "My Business Account." The vast majority of errors flagged appear to relate to invalid or missing TINs for accounts reported (including accounts reported with either nine zeros or nine 'A's). Reporting financial institutions receiving these error notifications have 30 days to either provide valid TINs for the account holders or a written submission explaining why the record could not be corrected. The written submission should also include the Document Reference Identifier (DocRefID), the error code and supporting documentation used to obtain the information. Reporting financial institutions may request an extension to respond beyond the initial 30 days by emailing the CRA at CRSIGAG@cra-arc.gc.ca. According to the CRA, reporting financial institutions may ignore error notifications for missing or invalid TINs for passive NFFEs with reportedly one or more controlling persons, provided valid US TINs have been reported for the controlling persons. India FATCA The Indian Tax Authority has issued notices to reporting financial institutions about FATCA filings for accounts with missing US TINs. As the notices reference IRS FAQ6, India seems to be asking reporting financial institutions to treat the FAQ's optional default codes as mandatory. The codes may not, however, fit all the potential situations for an account missing a US TIN. Luxembourg FATCA Luxembourg has issued error notices to reporting financial institutions that reported missing or invalid TINs for passive NFFEs with one or more US controlling persons. Since these types of entities are not required to obtain US TINs (as the passive NFFE is foreign), these errors should have been suppressed. According to the IRS, reporting financial institutions may ignore these error notifications, as long as the entity or controlling person's record is supported by a valid US TIN. Ideally, the US TIN tag should be omitted when a passive NFFE's account is reported. Because the IRS made this a mandatory field, however, the FI must enter nine zeroes (i.e., 000000000) or a default value. Spain FATCA Spain published updated FATCA guidance (Oct 15 and Nov 10, 2021) on TIN reporting. Reporting financial institutions have received errors for FATCA filings with foreign passive NFFEs missing a US TIN. Based on the notice, the Spanish Tax Authority expects reporting financial institutions to provide a FTIN and identify the foreign country that issued the FTIN for each passive NFFE. The deadline for submitting the updated filing was December 15, 2021. CRS requirements New accounts (financial accounts that are maintained by a reporting financial institution and were opened on or after January 1, 2016) Reporting TINs CRS requires reporting financial institutions to report a TIN, or functional equivalent, for all new accounts, as a TIN must be collected via self-certification upon account opening. The only exceptions are when: (i) a TIN or functional equivalent is not issued by the relevant reportable jurisdiction; or (ii) the domestic law of the relevant reportable jurisdiction does not require the collection of a TIN or the jurisdiction's functional equivalent. If an account holder claims that one of these exceptions applies, the reporting financial institution should check this claim against the information on the OECD's Automatic Exchange Portal or another reliable source that explains whether the relevant reportable jurisdiction issues TINs or functional equivalents and requires them to be collected. The OECD's portal also contains information on the structure of the TIN or functional equivalent in each reportable jurisdiction, which the reporting financial institution can use to confirm the reasonableness of the self-certification. Reporting date of birth CRS requires reporting financial institutions to report the date of birth (DOB) for all new accounts of reportable persons, as the DOB must be collected via self-certification upon account opening. A reportable person's self-certification is not considered to be valid if it does not contain a DOB. No exceptions exist. Pre-existing accounts (financial accounts maintained by a reporting financial institution as of December 31, 2015) Reporting TINs For pre-existing accounts, CRS requires reporting financial institutions to report a TIN, or functional equivalent, if the TIN is in the institution's records. If the TIN is not in its records, the reporting financial institution must use reasonable efforts to obtain a TIN by the end of the second calendar year following the year in which the account was identified as a reportable account. The exceptions for new accounts apply to preexisting accounts, except the reporting financial institution is only excused from using reasonable efforts to obtain a TIN or functional equivalent where "reasonable efforts," meaning genuine attempts to acquire a TIN, are made at least once per year, starting from the identification of the account as a reportable account. Reporting date of birth For pre-existing accounts, CRS requires the DOB to be reported if it is in the records of the reporting financial institution or local law requires the DOB to be collected. The DOB generally must be collected as part of identifying information in the course of conducting customer due diligence under anti-money laundering regulations. Reporting financial institutions that do not have the DOB in their records and are not required to collect it under local law must use reasonable efforts to obtain the DOB by the end of the second calendar year following the year in which an account was identified as a reportable account. "Reasonable efforts" means genuine attempts to acquire the DOB, made at least once per year, starting from the identification of the account as a reportable account. Cayman Islands — CRS The Department for International Tax Cooperation (DITC) identified a significant number of CRS reports as including accounts with missing TINs and/or dates of birth (even though DITC guidance does not require these fields to be completed on an FATCA or CRS filing if the data are not available) and accounts that were incorrectly reported as undocumented. The DITC is advising reporting financial institutions to submit a corrected return via the DITC portal and update these missing or incorrect items. The DITC stated it will contact reporting financial institutions in the upcoming months about submitted reports with either of these compliance issues. Conclusion Reporting financial institutions should regularly check local FATCA and CRS portals and monitor emails and inboxes to check for notices from the local tax authorities. When a US TIN is unavailable, these institutions should review their reporting process to incorporate the TIN coding previously described. ———————————————
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