Upcoming Certification by the QI and FATCA Responsible Officer with the Certification Period Ending on December 31, 2020
By July 1, 2021, the Responsible Officers (ROs) of financial institutions with the certification period ending on December 31, 2020 must certify with the IRS their compliance with the QI Agreement (and sometimes FFI Agreement).
For QIs not eligible for a waiver that perform a QI Periodic Review for the third calendar year of the certification period, the due date of the certification is December 31, 2021. ROs of QIs that perform the Periodic Review for the third year please remember that they still must select the Periodic Review year in the certification by July 1, 2021. Regarding this question, and regarding more information in general, please refer to our QI Responsible Officer Certification FAQ.
Responsible Officers of Model 2 jurisdiction FFIs or participating FFIs with the certification period ending on December 31, 2020 will be required to perform a Periodic Certification on the FFI’s Compliance with the FFI Agreement by July 1, 2021. For more information regarding the FATCA Certification, please refer to our FATCA Responsible Officer Certification FAQ.
Upcoming Certification by the QI and FATCA Responsible Officer with the Certification Period Ending on December 31, 2019
For QIs and FFIs with the certification period ending on December 31, 2019, the IRS granted, in response to Covid-19, an automatic deadline extension for the submission of the certifications required for QI and FATCA purposes until December 15, 2020.
The deadline extension for the Certification of Internal Controls required under the QI Agreement concerns only QIs that performed their periodic review for calendar years 2017 or 2018, as well as QIs applying for a waiver from a periodic review requirement. For QIs that performed their periodic review for calendar year 2019 the Certification of Internal Controls is due on December 31, 2020.
QI Periodic Review
To successfully perform the Certification of Internal Controls under the QI Agreement, QIs not eligible for a QI Periodic Review waiver are required to perform a QI Periodic Review for any year of a three-year certification period. A QI with the certification period ending on December 31, 2020 may select either year 2018, 2019 or 2020 for its Periodic Review. QIs eligible for a waiver will request a waiver simultaneously with the certification of internal controls performed by the Responsible Officer by July 1, 2021.
Should the QI request and obtain a waiver and does not conduct a periodic review, the Responsible Officer must use “the other processes, certifications, or reviews that he or she determines are necessary in order to be able to make the required certification”. Therefore, QIs eligible for a waiver should perform what we call “QI Health Check”, a qualified, informal version of a QI Periodic Review (e.g. as part of a review by an internal auditor or an external reviewer).
On November 5, 2020 the IRS issued an FAQ explaining how should QIs not acting as Qualified Derivatives Dealers (QDDs) take into account the good faith standard with respect to its Section 871(m) transactions. In its FAQ, the IRS emphasized that the good faith standard applies to all withholding agents, including QIs that are not QDDs and are acting as intermediaries for payments made on Section 871(m) transactions.
Therefore, for the certification periods which include calendar years 2017 – 2023, are QIs required to disclose any section 871(m) transactions included in the periodic review which have issues, but that the QI believes should be subject to the good faith standard. This disclosure is made by uploading an attachment to the QI Application and Account Management System (QIAAMS) which includes a brief description of the issue, how the QI will address any such issue and why the good faith standard should apply.
Additionally, the IRS elaborated that QIs that are not acting as QDDs must include Section 871(m) transactions in their periodic review.
FATCA Review
To successfully perform the Certification under the FFI Agreement, a Model 2 jurisdiction FFI or participating FFI must also perform, or have performed on their behalf, a “FATCA Review”, a review of its compliance with the agreement for the certification period. The results of the review must be considered by the Responsible Officer in making the periodic certifications. Although less formalized by the FFI agreement compared to a periodic QI Periodic Review, affected FFIs should perform a review ("Health Check") of their compliance with the FFI agreement by an internal or external reviewer.
Since the IRS has not announced any deadline extensions for the certifications due in 2021, please be sure to plan for sufficient time for the QI and FATCA reviews and the subsequent healing procedures. We will inform you of any relevant announcements made by the IRS with respect to the upcoming certifications.