Foreign Financial Institution (FFI) is any foreign entity that:
- Accepts deposits in the ordinary course of a banking or similar business (banks, credit unions),
- Holds financial assets for the account of others as a substantial portion of its business (brokerages, custodians),or
- Is engaged (or holding itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest (including a futures or forward contract or option) in such securities, partnership interests, or commodities (mutual funds, private equity funds, hedge funds).
Under the terms of the Model 1 IGA a professional trust company will generally be either a Custodian Institution or an Investment Entity (where more than 50% or more of the trust’s gross income is attributable to trading in money market instruments, administration of funds etc.) An entity which is professional managed would be regarded as an Investment Entity. A trust primarily investing in a company would be classed as an FFI under point 3.
Non-Financial Foreign Entity: (NFFE) a foreign entity that is not a FFI and NFFE maybe active or passive.
An Active NFFE is an NFFE which meets ONE of the following criteria:
- Less than 50 per cent of the NFFE’s gross income for the preceding calendar year or other appropriate reporting period is passive income and less than 50 per cent of the assets held by the NFFE during the preceding calendar year or other appropriate reporting period are assets that produce or are held for the production of passive income.
- The stock of the NFFE is regularly traded on an established securities market.
- Substantially all of the activities of the NFFE consist of holding (in whole or in part) the outstanding stock of, or providing financing and services to, one or more subsidiaries that engage in trades or businesses other than the business of a Financial Institution.
- The NFFE primarily engages in financing and hedging transactions with, or for related entities that are not Financial Institutions, and does not provide financing or hedging services to any entity that is not a Related Entity. Provided that the group is primarily engaged in a business other than that of a Financial Institution.
A Passive NFFE is an NFFE which is not an Active NFFE.
Global Intermediary Identification Number (GIIN) is assigned to an entity (usually FFI) which has registered for FATCA.