Participating Foreign Financial Institution (“Participating FFI”) means an FFI that has agreed to comply with the requirements of an FFI agreement with respect to all branches of the FFI, other than a branch that is a reporting Model 1 FFI.1 In addition, a Participating FFI includes an FFI described in a Model 2 IGA that has agreed to comply with all of the terms and conditions of an FFI Agreement.2
Under a Model 2 IGA, a foreign financial institution (FFI) reports information directly to the IRS. In contrast, under a Model 1 IGA, FFIs send information to their local government first, which then forwards it to the IRS.
An FFI in a Model 2 jurisdiction registers for FATCA on the IRS website and obtains a Global Intermediary Identification Number (GIIN). The Participating FFI signs the FFI Agreement, which establishes the FFI’s due diligence, withholding, information reporting, tax return filing, and other obligations as a participating FFI.
Example of Participating FFI
Company X Ltd is a hedge fund established in Bermuda. The hedge fund has U.S. account holders and needs to comply with U.S. FATCA information reporting requirements. Company X Ltd registers for FATCA, obtains a GIIN, and files its FATCA returns directly with the IRS.
More Information on U.S. FATCA
The U.S. Department of the Treasury publishes a list of countries that have entered into either the Model 1 IGA or Model 2 IGA. The IRS website provides more information on FATCA.