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HMRC internal manual

International Exchange of Information Manual

HM Revenue & Customs
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NRFI: FATCA Only: Sponsored Closely Held Investment Vehicles

NRFI: FATCA Only: Sponsored Closely Held Investment Vehicles

Sponsored closely held investment vehicles can be treated as Non-Reporting Financial Institutions by virtue of the US regulations at §1471-5-(f)(2)(iii).

This category of deemed compliant is very similar to a Sponsored Investment Entity under the Registered Deemed Compliant Financial Institution category. The requirements to qualify are as follows.

•              The Financial Institution must be an Investment Entity that is not a US qualified intermediary, withholding foreign partnership or withholding foreign trust.

•              The Financial Institution is required to have a contractual arrangement with a sponsoring entity that is a Participating Financial Institution, Reporting Model 1 Financial Institution or US Financial Institution that is authorised to manage the Financial Institution and enter into contracts on its behalf under which the sponsoring entity agrees to all due diligence, withholding and reporting responsibilities that the Financial Institution would have if it were a Reporting Financial Institution.

•              The sponsored vehicle does not hold itself out as an investment vehicle for unrelated parties; and the sponsored vehicle has 20 or fewer individuals that own its debt and equity interests (disregarding interests owned by Participating Financial Institutions, Deemed Compliant Financial Institutions and an equity interest owned by an entity that is 100% owner and itself a sponsored closely held investment vehicle).

•              The sponsoring entity will have to register with the IRS as a sponsoring entity (it doesn’t need to register the sponsored entities) and perform the duties of a Participating or Model 1 Reporting Financial Institution with respect to the sponsored entity.