The Common Reporting Standard has arrived… Are you ready to comply?

August 26, 2016

The Common Reporting Standard “CRS” was developed by the OECD in response to a G20 request, to develop a new single standard for automatic exchange of information, to better fight tax evasion and ensure tax compliance and it was approved by the OECD Council on 15 July 2014. The CRS calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. The CRS draws extensively upon the earlier work of the OECD in the area of automatic exchange of information, and the Intergovernmental Agreement implementation of FATCA. It was presented to G20 Finance Ministers at their September 2014 meeting for approval.

Under these arrangements many more jurisdictions are putting FATCA style agreements in place, and the first of these became effective from 1 January 2016. For those entities which have been classified as Financial Institutions (FIs) under the US FATCA regulations, the CRS poses a further challenge as there will be a need to respond to each of these agreements too. It will be beneficial to consider now how the remaining deliverables from any current FATCA compliance programme can be developed to ease the burden of implementation of the CRS as it is rolled out globally.

As with US FATCA the first question an entity should ask itself is “Am I a Financial Institution?” and the resultant obligations will flow from that response. With the definition of Financial Institution covering such a broad range of entities, many are surprised to find that they are within the scope of the regulation and in some cases simply because some of their assets are managed by another party which is a Financial Institution.

Whilst there are many similarities between FATCA and the CRS there are some key differences and committed jurisdictions will have a number of options which they can adopt individually so it is vital to understand how these regulations are being implemented in your home jurisdiction. You should bear in mind that the US FATCA regime will continue, as is, and consequently you will need to respond appropriately to both the US and CRS regimes.

The United Kingdom and its Crown Dependencies and Overseas Territories are all early adopters of the CRS, so for clients in those jurisdictions which were affected by UK FATCA it is important to note that this is a “transition” year which does impact the CRS due diligence and reporting obligations differently in those jurisdictions.

There are now 101 jurisdictions which are committed to implement the Standard.

The first group, currently of 54 jurisdictions, are running to an ambitious but realistic timetable as follows:-

Pre-existing accounts are those that were open on 31 December 2015 and new accounts are those opened from 1 January 2016. Hence, new account opening procedures to record tax residence needed to be in place from 1 January 2016.

The due diligence procedures for identifying high-value pre-existing individual accounts will be required to be completed by 31 December 2016, while the due diligence for low-value pre-existing individual accounts and for entity accounts will be required to be completed by 31 December 2017.

The first exchange of information in relation to new accounts and pre-existing individual high-value accounts will take place by the end of September 2017. Information about pre-existing individual low-value accounts and entity accounts will either first be exchanged by the end of September 2017 or September 2018 depending on when financial institutions identify them as reportable accounts.

The current status of commitments to AEOI and the CRS is:

JURISDICTIONS UNDERTAKING FIRST EXCHANGES BY 2017 (54)
Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, United Kingdom

JURISDICTIONS UNDERTAKING FIRST EXCHANGES BY 2018 (47)
Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Bahrain, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Dominica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Lebanon, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Turkey, United Arab Emirates, Uruguay, Vanuatu

The work we have done at Elian to implement the FATCA regime makes us well placed to implement the additional requirements imposed by the CRS. In anticipation of this global initiative we have tried to future proof our systems and routines to accommodate the new regulations as they become effective. As the regulations and implementation plans are being made available in each participating jurisdiction it is clear that we still have some work to do but for those clients we have been working with already, we would expect to be able to minimise the impact.

Full details of the Common Reporting Standard, surrounding commentary, and the supporting agreement (Competent Authority Agreement “CAA”) and more useful material can be found here: http://www.oecd.org/tax/automatic-exchange/

If you are unsure as to how the CRS will impact upon you, or if you still require some support or guidance on any aspect of FATCA, Elian has developed a client support strategy with a view to helping our clients understand the regime and to help them plan and execute their own FATCA, and CRS, compliance programmes where necessary.

The responsibility for compliance with these International Tax Compliance regulations will remain with clients even when certain obligations are delegated. However, Elian would be happy to help our clients by either sharing our own experiences or even by executing some of the required elements more directly, with, or for our clients. In some cases Elian may be able to undertake all of the required work on behalf of the client.

If you are directly affected by FATCA and the CRS and in need of support then we can help. The extent of what we can do to assist may depend upon what services we currently provide to you and how much information/material we already have to support you but we are able to help any client in determining the impact that these regulations have on them.

We would be pleased to discuss your needs and if you would like to know more you should first contact your usual Elian point of contact. Fees will apply to the support we can give and will depend on the level of involvement required. Formal engagement terms will be agreed prior to the commencement of any Elian FATCA support services.

ADDITIONAL CONTACT DETAILS

Bob Jackson
FATCA/CRS Programme Manager
T +44 1534 504242
E bob.jackson@elian.com

Kristian Walton
Group Director, Compliance & Risk
T +44 1534 504386
E kristian.walton@elian.com