General FATCA withholding requirements
Foreign Financial Institutions (FFIs) that enter into an agreement with the IRS to comply with FATCA (or who are otherwise compliant with FATCA pursuant to domestic FATCA legislation introduced pursuant to FATCA inter-governmental agreements) may be required to withhold 30 percent on certain payments to payees if such payees do not comply with FATCA or do not provide suitable identifying documentation as required under FATCA.
To avoid being withheld upon, FFIs should, where applicable, comply with FATCA, for example by registering with the IRS.
FATCA regulations exempt many categories of FFIs from the requirement to register, including most governmental entities, most non-profit organisations, as well as certain small, local financial institutions.
HSBC’s FATCA withholding requirements
HSBC is committed to becoming fully FATCA compliant in all countries where we operate. Existing client entities, who hold an in-scope product with HSBC and who are either non-participating with FATCA or who are unable to provide HSBC with information in relation to their FATCA classification by 30 June 2016, where requested (including their Global Intermediary Identification Number or GIIN), may be subject to the 30 percent withholding tax on all US sourced income.
HSBC expects many non-US financial entities to register with the IRS in order to minimise any potential withholding liability.
How are FFIs defined?
The IRS states that FFIs include, but are not limited to:
- Depository institutions (e.g. banks)
- Custodial institutions (e.g. entities that provide custody services)
- Investment entities (e.g. investment funds, including hedge funds or private equity funds)
- Certain types of insurance companies with cash value products or annuities
Unless otherwise exempt, FFIs that do comply with the appropriate procedures to become FATCA compliant, including registration with the IRS, if applicable, face a 30 percent withholding tax on certain US-source payments made to them.
An FFI that registers on the ‘FATCA Registration Website’ (the Registration Resources page provides registration instructions, a user guide, FAQs, etc.) will, upon approval, receive a GIIN from the IRS, unless the FFI is treated as a Limited FFIi.
NB. The IRS publishes a list of registered and approved FFIs and their GIINs every month. A FFI uses its GIIN to identify that it is registered and approved to both withholding agents and the IRS (so-called ‘W’ forms are also used for this purpose).