What are the definitions or characteristics of the various FATCA classifications?

FFI - Reporting Model 1 IGA FFI

A Reporting Model 1 IGA FFI (Foreign Financial Institution) is a financial institution that agrees to comply with FATCA reporting requirements by:

• Identifying U.S. account holders or entities with substantial U.S. ownership
• Reporting relevant account information to their local tax authority (under Model 1 IGA)
• Withholding on certain payments, if required

FFI - Participating or Reporting Model 2 IGA FFI

A Reporting Model 2 IGA FFI (Foreign Financial Institution) is a financial institution that agrees to comply with FATCA reporting requirements by:

• Identifying U.S. account holders or entities with substantial U.S. ownership
• Reporting relevant account information to the IRS (under Model 2 IGA)
• Withholding on certain payments, if required

FFI - Sponsored FFI

A Sponsored FFI (Foreign Financial Institution) is a financial institution that:

• Does not register directly with the IRS for FATCA compliance
• Relies on a Sponsoring FFI to fulfill all FATCA obligations on its behalf

Key Features:

• The Sponsoring FFI performs:
• Due diligence
• Reporting of U.S. account holders
• Withholding (if applicable)

The Sponsored FFI may be:

• A Sponsored Investment Entity
• A Sponsored Controlled Foreign Corporation (CFC)

FFI - Sponsored Closely Held Investment Vehicle

A Sponsored Closely Held Investment Vehicle (CHIV) is a specific type of Sponsored FFI under FATCA, defined as:

• A non-U.S. investment entity that is closely held (owned by no more than 20 individuals) and has a sponsoring entity that performs all FATCA-related compliance duties on its behalf.

Key Characteristics:

• Closely held: 20 or fewer individuals own all the equity interests.
• Does not register with the IRS: Instead, the Sponsoring Entity registers and obtains a GIIN.
• FATCA compliance (e.g., due diligence, reporting, withholding) is handled by the Sponsoring Entity.

Active NFFE - Publicly Traded or a related entity of a Publicly Traded Entity

An Active NFFE (Non-Financial Foreign Entity) that is publicly traded or a related entity of a publicly traded entity is a classification under FATCA for non-U.S. entities that are not financial institutions and meet specific criteria.

Definition:

An entity qualifies as an Active NFFE – Publicly Traded or Related Entity if it meets either of the following:

1. Publicly Traded Entity: Its stock is regularly traded on one or more established securities markets (as defined by the IRS).

Example: A non-U.S. corporation listed on the London Stock Exchange.

OR

2. Related Entity of a Publicly Traded Entity: It is a member of the same expanded affiliated group ( ≥50% ownership) as a publicly traded entity described above.

Active NFFE - Government entity or wholly owned by one or more government entities

An Active NFFE – Government Entity or Wholly Owned by One or More Government Entities is a classification under FATCA for certain non-U.S. entities that are not financial institutions and are either:

1. Government Entities

Entities that are arms, departments, or agencies of:

• A foreign government
• Any political subdivision (e.g., a province, state, or city)
• Any wholly owned agency or instrumentality of such a government

OR

2. Wholly Owned by Government Entities

Entities that are:

• Directly or indirectly wholly owned by one or more foreign governments
• Engaged exclusively in governmental functions (not commercial activities)

Active NFFE - International Organisation

An Active NFFE – International Organisation is a category under FATCA for non-U.S. entities that are not financial institutions and meet specific criteria as international organizations.

Definition:

An International Organisation under FATCA is an entity that:

• Is established by a treaty or other formal agreement between two or more countries, and
• Is recognized as an international organization, such as by the U.S. or under international law.

Active NFFE - Central Bank or entity wholly owned by one or more central banks

An Active NFFE – Central Bank or Entity Wholly Owned by One or More Central Banks is a classification under FATCA for non-U.S. entities that are not financial institutions and are either central banks or entirely owned by them.

Definition:

This category includes:

1. Central Banks:

• Institutions that function as the primary monetary authority of a country or group of countries.
• Responsible for issuing currency, regulating monetary policy, and maintaining financial stability.

OR

2. Entities Wholly Owned by Central Banks:

• Non-commercial entities that are 100% owned (directly or indirectly) by one or more central banks.
• Must be engaged exclusively in central banking activities or other governmental functions, not commercial activities.

Active NFFE - Other

Active NFFE – Other is a category under FATCA for non-U.S. entities that are not financial institutions and qualify as Active NFFEs but do not fall into the specific subcategories like:

• Publicly traded entities
• Government entities
• International organizations
• Central banks or their wholly owned entities

Definition:

• An entity qualifies as an Active NFFE – Other if it meets the general Active NFFE test, which includes:
• Less than 50% of its gross income is passive income (e.g., interest, dividends, rent, etc.), and
• Less than 50% of its assets produce or are held for producing passive income
• The entity is not a financial institution

Passive NFFE

A Passive NFFE (Non-Financial Foreign Entity) is a non-U.S. entity that:

• Is not a financial institution, and
• Does not qualify as an Active NFFE under FATCA rules

Key Characteristics:

A Passive NFFE is generally:

• An entity where 50% or more of its gross income is passive income (e.g., interest, dividends, rents, royalties), or
• 50% or more of its assets produce (or are held for producing) passive income