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Participating foreign financial institution

The IRS describes a participating foreign financial institution as an FFI with FATCA reporting and withholding responsibilities.

Meaning in the IRS instructions

The IRS Form W-9 instructions describe a participating foreign financial institution as an FFI that reports U.S. account holders who are specified U.S. persons under FATCA.[6]

Under these rules, a PFFI requests Form W-9 from an account holder who is a U.S. person. For a jointly held account, the request applies to each U.S. person who holds it.[6]

Form W-9 identifies a U.S. person for federal tax purposes, including a U.S. citizen or resident alien. The instructions describe Form W-9 as a way to request a taxpayer identification number and certain certifications or exemption claims.[6]

The IRS FATCA summary describes participating status through three institutional duties: due diligence on account holders, annual reporting to the IRS about U.S. persons and certain foreign entities, and withholding on specified payments in stated circumstances.[4]

The IRS FATCA summary describes withholding on payments to nonparticipating FFIs, individual account holders who do not provide enough information to determine U.S. status, and foreign entity account holders who do not provide enough information about substantial U.S. owners. The rate is 30 percent for those payments.[4]

The Form W-9 instructions define a recalcitrant account holder as a person who is not an FFI and fails to comply with an FFI's documentation or information requests. The final regulations require U.S. withholding agents to withhold 30 percent on certain payments to nonparticipating FFIs and certain NFFEs that do not provide specified information about their substantial U.S. owners.[6]

Participating status concerns an institution's FATCA role; it does not itself describe a U.S. citizen's separate filing duties. The IRS FATCA summary says certain U.S. taxpayers with foreign financial assets above an aggregate value threshold report information on Form 8938 attached to their annual tax return.[4]

The Treasury describes two compliance paths for FFIs: direct IRS registration under FATCA regulations, with an FFI agreement if applicable, or compliance with an intergovernmental agreement treated as in effect in the jurisdiction. The Treasury publishes a list of FATCA agreements and related understandings by jurisdiction.[5]

The IRS W-9 instructions explain that a PFFI reporting a jointly held U.S. account on Form 8966 files a separate report for each U.S. person holder.[6]

Questions and answers

What does the term PFFI mean?

The IRS uses PFFI as an abbreviation for participating foreign financial institution.

What information may a PFFI request from a U.S. citizen account holder?

A PFFI requests Form W-9 from a U.S. person who holds an account. If there are joint holders, each holder who is a U.S. person is included in the request.[6]

What does the IRS call a recalcitrant account holder?

The instructions describe a recalcitrant account holder as someone who is not an FFI and does not comply with an FFI's documentation or information requests. The final regulations require withholding of 30 percent on certain payments to nonparticipating FFIs and certain NFFEs that do not provide specified information about their substantial U.S. owners.[6]

How can an FFI comply with FATCA?

The Treasury describes direct registration with the IRS under FATCA regulations, with an FFI agreement if applicable. It also describes compliance with an intergovernmental agreement treated as in effect in the jurisdiction.[5]

Does a PFFI report a joint U.S. account once for all holders?

The IRS Form W-9 instructions state that a PFFI reporting a jointly held U.S. account on Form 8966 files a separate report for each U.S. person holder.[6]

  • Withholdable payment: A withholdable payment is covered by chapter 4 rules. An agent may withhold when a foreign entity does not provide required documentation or certification.
  • FATCA: FATCA requires certain U.S. taxpayers to report foreign assets and financial institutions to report accounts to the IRS. Form 8938 may apply at thresholds.
  • Intergovernmental agreement: An intergovernmental agreement appears in FATCA rules for foreign financial institutions. Form 8938 instructions also use the term for certain foreign accounts.

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Sources and data notes
  1. Internal Revenue Service, Instructions for Form 8938. https://www.irs.gov/instructions/i8938. Retrieved .
  2. FinCEN, Report foreign bank and financial accounts. https://www.fincen.gov/report-foreign-bank-and-financial-accounts. Retrieved .
  3. U.S. Government, 31 CFR 1010.350. https://ecfr.io/Title-31/Section-1010.350. Retrieved .
  4. Internal Revenue Service, FATCA summary. https://www.irs.gov/businesses/corporations/summary-of-key-fatca-provisions. Retrieved .
  5. U.S. Department of the Treasury, FATCA: agreements by jurisdiction. https://home.treasury.gov/policy-issues/tax-policy/foreign-account-tax-compliance-act. Retrieved .
  6. Internal Revenue Service, 26 CFR 1.1471-4. https://www.irs.gov/instructions/iw9. Retrieved .

Dates in this block record when each source was read for this page.