Note: The following terms relate to the Foreign Account Tax Compliance Act (FATCA) and are provided as a guide only. Investors should seek their own advice in connection with their FACTA reporting and compliance obligations.
Financial institution (also referred to as Foreign financial institution or “FFI” under FATCA) – an entity created or organised outside of the U.S. and includes:
- Depository institution – entity that accepts deposits in the ordinary course of banking or similar business (banks, credit unions), or
- Custodial institution – entity that holds financial assets for the account of others as a substantial portion of its business (brokers, custodians), or
- Investments entity – means any entity that conducts as a business (or is managed by an entity that conducts as a business) one or more of the following activities or operations for or on behalf of a customer:
- trading in money market instruments (cheques, bills, certificates of deposit, derivatives, etc.); foreign exchange; exchange; interest rate and index instruments; transferable securities; or commodity futures trading;
- individual and collective portfolio management; or
- otherwise investing, administering, or managing funds or money on behalf of other persons.
None Financial Foreign Entity (NFFE)
Any non-U.S. entity that is not a financial institution. NFFE can be either Active NFFE or Passive NFFE (refer below for more details).
U.S Citizen or U.S Resident for Tax Purposes
U.S. citizen or U.S. resident for tax purposes includes:
- anyone born in the U.S. (who hasn’t renounced their citizenship)
- anyone living in the U.S.
- a green card holder
- U.S. passport holder (including dual or multiple citizens)
- U.S. companies, trusts or partnerships
Controlling persons means the natural persons who exercise control over an Entity. In the case of a trust, such term means the settlor, the trustees, the protector (if any), the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate effective control over the trust, and in the case of a legal arrangement other than a trust, such term means persons in equivalent or similar positions.
Global Intermediary Identification Number is an IRS registration number for financial institutions.
TIN is U.S. Taxpayer Identification Number and may include Social Security Number (SSN) or Employer Identification Number (EIN).
Agreement between the Government of Australia and the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA.
Australian Retirement Fund
- Any plan, scheme, fund, trust, or other arrangement operated principally to administer or provide pension, retirement, superannuation, or death benefits that is a superannuation entity or public sector superannuation scheme (including an exempt public sector superannuation scheme) as defined in the Superannuation Industry (Supervision) Act 1993, or a constitutionally protected fund as defined in the Income Tax Assessment Act 1997.
- A pooled superannuation trust as defined in the Income Tax Assessment Act 1997.
- Any Entity that is wholly owned by, and conducts investment activities, accepts deposits from, or holds financial assets exclusively for or on behalf of, one or more plans, schemes, funds, trusts, or other arrangements referred to in subparagraphs (1) or (2) of this paragraph.
- Foreign government; or
- International organisation; or
- Foreign Central Bank of Issue; or
- Any other specifically identified class of entities, including those posing a low risk of tax evasion, as determined by the IRS (e.g. start-up entities, entities in liquidation, not-for profit entities etc eg Australian registered charity)
FATCA status refers to entity classification under FATCA and may include:
1. Active NFFE – any NFFE that meets the criteria in paragraph 4. B. VI of Annex 1 of the IGA including:
- NFFE where less than 50% of gross income is passive income (i.e. dividends, interest, annuities etc.) and less than 50% of its assets produce passive income; or
- Entity’s stock is regularly traded on established securities market (e.g. entity listed on ASX) or affiliated group of such entity (eg a listed public company); or
- Entity organised in U.S. Territory and wholly owned U.S. its residents; or
2. Passive NFFE with controlling U.S. persons – any NFFE that is not an Active NFFE or is not a withholding foreign partnership or trust and has controlling U.S. persons.
3. Passive NFFE with no controlling U.S. persons – any NFFE that is not an Active NFFE or is not a withholding foreign partnership or trust and where none of the entity’s controlling persons are U.S. persons.
4. Participating FFI – an FFI that enters into an agreement with the IRS to undertake certain due diligence, withholding and reporting requirements for U.S. account holders in accordance with FATCA and is generally able to provide GIIN.
5. Exempt Beneficial Owner – this is non-reporting entity under FATCA and may include:
- the Australian Government, State and local governments and local authorities and their wholly owned agencies or instrumentalities, including certain named entities;
- International organisation or wholly owned agency or instrumentality, intergovernmental organization (including supranational organisation) the income of which does not inure to the beneficial of private persons, and that has singed a headquarters agreement with the Government of Australia;
- Reserve Bank of Australia and its subsidiaries;
- Complying Australian superannuation funds (including self- managed super funds);
- Investment entity wholly owned by exempt beneficial owners;
6. Non-Reporting IGA FFI – this is non-reporting entity (certified or egistered deemed-compliant FFI) under FATCA and may include:
- Financial institution with Australian client base (must satisfy all condition listed in paragraph III. A of Annex II of the IGA, including at least 98% of the U.S. dollar value of all account balances must be held by Australian or New Zealand residents);
- Small local banks that meet criteria listed in paragraph III. B of Annex 11 of the IGA;
- Financial Institution that is not an Investment Entity with only Low- Value Accounts (i.e. value of U.S.$ 50,000 or less) and with total assets of no more than U.S.$50 million;
- Qualified credit card issuer (generally with customer deposits (overpayment) of U.S.$50,000 or less);
- Trustee-Documented Trust – A trust established under the laws of Australia to the extent that the trustee of the trust is a Reporting U.S. Financial Institution, Reporting Model 1 FFI, or Participating FFI and reports all information required to be reported pursuant to the Agreement with respect to all U.S. Reportable Accounts of the trust;
- Sponsored investment entity – an investment entity established in
- Australia that has a compliant Sponsoring entity;
- Certain Investment Managers and Investment Advisers;
- Certain Collective Investment Vehicles that meet criteria listed in paragraph E. IV of Annex of the IGA.
7. Non-Participating FFI – an entity that does not comply with FATCA and generally will not fall into any of the below categories:
- Participating IGA FFI; or
- Reporting IGA FFI; or
- Exempt Beneficial Owner