Global Intermediary Identification Number (GIIN) : All You Need To Know

Planning to provide financial services in the U.S.? If yes, having an active Global Intermediary Identification Number (GIIN) can lead to success. Without a GIIN, intermediary banks can refuse to transfer money to U.S. bank accounts or automatically withhold 30 percent of the revenue.

Given that, every country across the globe upholds financial transparency, having an active GIIN can help. As such, in this article, we walk you through the details of what a GIIN is and how to obtain it.

What is a GIIN?

A Global Intermediary Identification Number is a 19-character unique identifier issued by the U.S. Internal Revenue Service (IRS). It serves as the official ‘digital signature’ for foreign entities in the U.S. to prove they are registered and compliant with the Foreign Account Tax Compliance Act (FATCA).

In the table below, we highlight what a Global Intermediary Identification Number looks like and its significance.

What are the Benefits of Obtaining a Global Intermediary Identification Number?

Some of the benefits of getting yourself a FATCA GIIN include the following:

1. Retain Your Earnings

The main benefit of a Global Intermediary Identification Number is avoiding penalties for non-compliance. Given that, the IRS applies a 30 percent withholding tax if your business is not registered for GIIN. Having it helps retain all your earnings and enables reinvestment.

2. Automated Data Exchange

The U.S. has signed an intergovernmental agreement, known as Model 1, with numerous jurisdictions, including the UK, India, and Seychelles. This agreement implements FATCA requirements and prohibits business owners from sharing their business details directly with the IRS. Thus, your country’s local authority has to share the data with the U.S. authority.

Moreover, the agreement acts as a bridge between two countries (e.g., Seychelles and the U.S.), as one country may have strict data privacy laws that prohibit local banks from sharing private citizen data with a foreign government. Under Model 1, the bank is complying with the local law by reporting to its own government, thereby bypassing those legal hurdles. On the other hand, the government of Seychelles will share these details with the IRS, as per the agreement.

3. Unrestricted Global Banking Access

International money transfers involve a complex set of steps to clear a transaction in another jurisdiction. Having an active Global Intermediary Identification Number ensures your wire transfers aren't flagged, frozen, or rejected by correspondent banks in the U.S.

4. Simplified "Know Your Customer" (KYC)

When you open bank accounts with other financial institutions, their compliance teams will perform ‘due diligence’. Providing a Global Intermediary Identification Number speeds up the process. It allows banks to instantly verify the status of your venture on the IRS website, reducing the need for mountains of extra paperwork to prove it is tax-compliant.

Who Needs a GIIN and Who Is Exempted?

Not all entities have to acquire a GIIN. Here’s the list of entities that must have a GIIN and the ones exempted.

GIIN Application- 5 Easy Steps For Your Reference

Here is how you can apply for a GIIN:

Step 1: Access the Portal

The first step to obtaining a GIIN is to log in to the IRS FATCA registration portal.

Step 2: Create FATCA Account

The next step is to create an organizational profile and appoint a responsible officer who can legally authorize compliance. Once the account is created, you will receive a 6-character alphanumeric code that serves as the FATCA ID.

Step 3: Online Registration

After creating the account, fill out the registration form by providing details such as business name, legal structure, registered address, and country of incorporation. The legal structure codes on the FATCA portal are as follows: LE (Lead/Parent company), ME (Member/Subsidiary Company), SL (Single/Independent Entity), BR (Branch), and more, depending on your organization.

Step 4: Submission of Your Application For Review

After providing the necessary information, submit the application for review by the IRS. Upon successful review, the 19-character GIIN is issued.

Step 5: GIIN Verification

After the GIIN is issued, its details will appear in the next update of the IRS Foreign Financial Institution (FFI) list.

What are the Key Considerations Before and After Applying for a GIIN?

The points mentioned below need to be considered when it comes to obtaining GIIN:

• Ensure that your jurisdiction (like Seychelles) has an agreement with the United States under Model 1. The absence of the agreement can leave you caught between local privacy laws and IRS compliance.
• Once you get the GIIN, ensure that your firm is on the IRS Foreign Financial Institution (FFI) list used by U.S. banks to white-list businesses.
• If the name, address, or tax status of your firm changes, it must be updated on the IRS portal within 30 days to ensure that the GIIN remains valid.
• Log in to the IRS portal to verify that your FATCA compliance program is active.
• If the IRS updates the FFI agreement, you must log in and renew your status; failure to do so may render the GIIN you obtained invalid.

What are the Consequences of Not Having a FATCA GIIN?

You may have to face the following consequences for not having an active GIIN in the United States:

• Failing to apply for GIIN results in a 30 percent punitive withholding tax imposed by the IRS. This tax is deducted from the gross payment, at times, completely emptying your profits.
• You may face difficulty transacting in U.S. dollars without a Global Intermediary Identification Number, as banks may label the business as a non-participating, high-risk entity.
• Banks can freeze or close your account if you are unable to produce a FATCA GIIN. Financial partners are legally obligated to identify and report non-compliant accounts.
• Owners of non-compliant entities will face personal fines from the IRS starting at $10,000 per year. The fines can go as high as $50,000 if you fail to register even after repeated notifications.

Why Choose BSW?

Navigating the U.S. tax requirements as a foreign firm can be overwhelming for anyone. Obtaining a GIIN, along with company formation, helps meet legal requirements. That's where we at Business Setup Worldwide can help you. We provide comprehensive legal guidance to help you navigate the entire setup process, along with offering relevant tax compliance services. For more details, contact us today.