Further Information Reporting for Financial Institutions

Feb 15, 2017 | 0 comments

2017 is going to be a very interesting year for financial institutions, compliance departments and Responsible Officers with CRS, Automatic Exchange of Information (AEoI), Base Erosion and Profit Shifting (BEPS) and US Section 871(m) all coming into play in some shape or form.

We briefly covered some of the 871(m) in our blog “Notice 2016-76”and podcast “Everything you need to know about 871(m)” and how this will affect financial institutions and their compliance departments.

A Brief Catch Up

Globally in 2009, there was a major breakthrough towards more tax transparency within the financial industry which was accomplished with the information exchange upon request (EOIR) becoming the international standard. The EOIR was reviewed and following approval of the Standard for Automatic Exchange of Financial Information in Tax Matters by the OECD Council on 15 July 2014, the full Standard was endorsed by the G20 Finance Ministers at their meeting in Cairns in September 2014, as well as by G20 Leaders at their Summit in Brisbane in November 2014.

Now there are 106 jurisdictions, with The Cook Islands becoming latest to have signed up to AEoI and commit to the automatic exchange of financial accounts with other jurisdictions and tax authorities on an annual basis.

The underlying principle of it all is that jurisdictions, sign the Multilateral Convention on MutualAdministrative Assistance in Tax Matters, together with the MultilateralCompetent Authority Agreement (MCAA), the MCAA is the equivalent to the IGA in FATCA regime and is in fact based on the FATCA IGA.

AEoI & CRS are in essence FATCA but on a global scale and have collectively loosely been given the acronym GATCA (see our previous blog, GATCA is the newFATCA)

The Convention is also helping with the implementation of the BEPS framework, which was developed in the context of the OECD and G20 BEPS Project, the 15 actions in BEPS set out to equip governments with domestic and international instruments to address tax avoidance, ensuring that profits are taxed where economic activities generating the profits are performed and where value is created and again, some of the regulations for BEPS come into force from 2017.

“The Standard” consists of four key parts:

  • TThe MCAA
  • The CommonReporting Standard (CRS)
  • Commentaries
  • The XMLSchema

The new global standard on Automatic Exchange of Information (AEOI) aims to reduce the possibility for tax evasion. It provides for the exchange of non-resident financial account information with the tax authorities in the account holders’ country of residence. Participating jurisdictions that implement AEOI send and receive pre-agreed information each year, without having to send a specific request. Just like FATCA it is aimed to discover tax evasion.

The Automatic Exchange of Information (AEoI) portal provides a comprehensive overview of the work the OECD and the Global Forum onTransparency and Exchange of Information for Tax Purposes in the area of the automatic exchange of information, in particular with respect to the CommonReporting Standard.

Going Forward

So, not only do financial institutions have to report FATCA (IRC Chapter 4) and meet their QI (IRC Chapter 3) obligations, they now have to implement and report information under AEoI/CRS too and potentially 871(m) from 2017onwards, not to mention BEPS regulations.

Even though the reporting deadline for some jurisdictions (about half) is September 2017, this really is just around the corner in terms of operations and implementation timelines.While the other half only have to start their reporting in 2018 with a September deadline once again but this should not mean that operations should take a back seat regarding these jurisdictions but instead ensure they are ready to report come 2018.

The jurisdictions for 2017 reporting are: 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 and United Kingdom.

It is expected that jurisdictions will rely on the OECD recommended methodology and tools for the automatic exchange of information – the OECD Standard Transmission Format (STF 2.2) and as the older SMF format is still in use, bridging programmes between the two standards are available and regularly updated on the OECD website.

The current formats are:

STF2.2

Bridgeversion 1.3

The OECD has of course issued guidance “notes”, more like a book on reporting and implementation, which can be found via their portal website or our GATCA Library. As with all things and just like FATCA and the IRS, new documents and guidance are continually being updated and added to the OECD portal. While the OECD site obviously contains just the OECD material, our  GATCA Library contains documents for FATCA and QI as well as links to material on AEoI, CRS and BEPS from the OECD to ensure that not only are we up to date on the changes but also our clients can see the broader regulatory picture.

Want to know more? Get in touch with us via the web form, email or phone call to pick our brains.

Author

Stuart Lipo

Stuart Lipo

Subject Matter Expert

Stuart is one of the key researchers and curators of legislation within TConsult Ltd. He was born and educated in South Africa before moving to the UK. Since leaving college Stuart has worked in the financial industry for independent financial advisors. His experience helps TConsult expand our specialisms and industry knowledge. He is the curator of our GATCA Resource Library.

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