On May 27, the IRS updated the technical FAQs for the International Data Exchange Service (IDES) used by foreign financial institutions (FFIs) and other organizations to file information returns required by the Foreign Account Tax Compliance Act.  Among other changes, the IRS provided a work-around for direct-reporting non-financial foreign entities (direct reporting NFFEs) that must register with the IRS and file annual FATCA reports disclosing certain information regarding their substantial U.S. owners. In general, passive NFFEs provide information on their substantial U.S. owners to withholding agents on Form W-8BEN-E.  However, a passive NFFE may register as a direct reporting NFFE and receive a global intermediary identification number (GIIN)  from the IRS.  A direct reporting NFFE provides information on its substantial U.S. owners to the IRS and provides its GIIN on Form W-8BEN-E rather than providing the information on its substantial U.S. owners to withholding agents. Because FFIs in Model 1 IGA jurisdictions report information on their U.S. account holders to local tax authorities who then exchange the information with the IRS via IDES, the IDES system does not accept registrations from entities in Model 1 IGA jurisdictions.  This is a problem for direct-reporting NFFEs in Model 1 IGA jurisdictions that must use IDES to file Form 8966 (FATCA Report).  As a workaround, FAQ A17 instructs such direct-reporting NFFEs to register using "Other" as their country of tax residence in Question 3A, provide its country of jurisdiction/tax residence tax identification number in question 3B, and select "None of the Above" for the entity's FATCA Classification in its country of jurisdiction/tax residence. Other updates included the addition of FAQ B11 regarding which issues were corrected in an April 2016 maintenance release, an update to FAQ E21 regarding the exchange of the initialization vector as part of CBC cipher mode, and the addition of FAQ E22 regarding the effect on recently uploaded files of updating the public key certificate.

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