Remember your New Reporting Obligations Under AEoI / CRS
We have previously mentioned AEoI and CRS, but we thought we would just give you all a friendly reminder, especially in the aftermath of your initial FATCA and QI reporting via the 1042-Ss. With all the noise coming from the US regarding the possibility of repealing FATCA, and 10-42 tax returns due imminently, it is easy for FIs to forget that CRS reporting may also be due in September.
AEoI / CRS Update
Since our last blog regarding AEoI/CRS, there has been quite steady progress, both in the framework and attitudes towards it, so much so that the OECD’s Automatic Exchange of Information (AEoI) framework currently has over a hundred committed signatories. AEoI itself refers to the exchange of tax information between governments. To allow for that exchange, the framework contains a Common Reporting Standard (CRS) that describes the responsibilities of financial institutions to gather and report to their host country tax authority (Competent Authority). Countries are at various stages of implementation of the required primary and secondary domestic legislation needed to create the domestic legal framework forcing financial institutions to do this.
To further illustrate the development growth that has occurred, as of May 2017 there are over 1,800 bilateral exchange relationships and 88 multilateral agreements activated (with Turkey being the latest) with respect to more than 100 jurisdictions that are all committed to CRS, with first exchanges scheduled to take place in September 2017. Yes – September, which just happens to be the same time FIs are to report to the IRS on their 1042 tax returns. So, it might be a good idea to check whether you are in a jurisdiction that needs to report and who the agreements are with so you will be able to collate the appropriate information.
But fear not, the AEoI/CRS was built around the US intergovernmental agreement (IGA) structure and reporting, so you may well be able to leverage the similarities to get yourselves up the curve faster. We have previously mentioned the new QI portal which, in addition to the separate FATCA portal, is designed to help FIs (and the IRS). Well, the OECD have followed suit and FIs should already be getting used to the AEoI portal as an aid to help them better prepare for the reporting.
The AEoI portal aims to provide FIs and Tax Authorities a comprehensive overview of the work of the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes in the area of the automatic exchange of information and the Common Reporting Standard. Oh, and don’t forget the FAQs section from OECD.
The workloads for FIs and now Tax Authorities are going to exponentially increase, so FIs may start looking at the possibility of using third parties to help them report, as well as how they can report directly to their Tax Authority and have a better understanding, at the least, of what and how the information needs to be reported.
This new regulation and its responsibilities will come with similar issues as the QI and FATCA regulations. FIs will still have to ensure accurate and secure information reporting to their Tax Authority, as well as documenting their clients. However, unlike the QI and FATCA regulations, the AEoI/CRS is focused on a global scale.
With all these moving parts and larger data files of information, cyber security is crucial and the protection of the extremely sensitive and confidential information during the transfer of information needs care attention and planning. FIs should be doing this as a matter of course, either because of the QI/FATCA, AEoI/CRS or just because it is good business practice, especially after the recent global cyber-attack that affected, amongst others, the NHS.
So, now is the time to start getting your house in order so that you can cope with the AEoI/CRS requirements efficiently and adequately when the time comes to report the required information.
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.