Who is Impacted?
Any financial institution with an obligation to report under the Foreign Account Tax Compliance Act (FATCA) or the Common Reporting Standard (CRS) will be interested in some of the experiences and updates we have learned over the last Automatic Exchange of Information (AEoI) reporting season. According to the Australian Tax Office, they received records relating to more than 1.6 million offshore accounts holding over $100 billion and is now using data-matching and sophisticated analytics to identify foreign income that has not been reported. Reporting in this area is not only growing, governments are continually exploring ways to get smarter about reviewing and cross referencing all of the information they receive.
In this space, the more things change, the more things stay the same! If there is anything we have learned since the very first AEoI in 2015, it is that the rules evolve constantly, deadlines change, information systems are updated cause inconsistency in processes, and new countries climb aboard this train all of the time. In this article, we will highlight some items to consider now that the reporting season has ended and we have a bit of room to prepare for next year.
Update AEoI Policies and Procedures and Document New Controls
We would like to think once we document policies and procedures, they do not change for at least a few years. Not in this case. We have noticed that each year we have had to update the way we mange AEoI reporting in nearly every country. Here are just a few things that changed this year and needs updating:
Finland. Here we have updated FATCA and CRSDAC2 check processes.
- Prohibited Character combinations that are identified in the notification content include / * and & #.
- If MessageRefId initial (y-id) differs from y-id specified by SendingCompanyIN, an error message will be produced.
- Transmission will be blocked if TIN is missing EXCEPT if DocTypeIndic is 3.
- Only US is accepted as the value of the IssuedBy attribute of the TIN element. Information cannot be left blank.
Singapore. Look for a brand-new process in 2020. On July 10, 2019, the Inland Revenue Authority of Singapore (IRAS) announced that, effective beginning April 1, 2020, Reporting Singapore Financial Institutions must submit all FATCA returns, including nil returns (if applicable), electronically to IRAS via the “Submit CRS or FATCA Return” e-Service at IRAS’ myTax Portal. IRAS will no longer accept FATCA returns submitted via the International Data Exchange System (“IDES”). The requirement is applicable to all submissions of new, nil, amended, corrected or void FATCA returns, including returns relating to Reporting Years 2018 and earlier.
Schemas that Vary from Organization for Economic Cooperation and Development (OECD)
In addition to keeping up with the actual processes and rules, be sure to check on the schemas that differ from the OECD.
Ireland. Using its own Revenue Online System (ROS), Ireland schemas require additional data points not required by the standard. This includes identification numbers provided by the Ireland Tax Authorities and separate registration.
Luxembourg. Not only is the schema a bit different than the standard, filers will have to register and use one of the approved Luxembourg government providers in order to submit a FATCA or CRS report. The data transfer is done exclusively via a secure channel using only two companies that qualify as these transmitters. One is FUNDSQUARE, branch of the Luxembourg Stock Exchange with their e-File product, and the second is SIX PAYMENT SERVICES with their SOFiE product.
United Kingdom. Although the schema may be similar, filers will have to answer a set of questions related to elections and nil reporting before they are able to submit their reports via XML file.
Don’t Forget to Check your Registration and Notification Information!
When registering or notifying tax authorities in other countries that you will be reporting under FATCA or CRS, it is important to confirm the correct status of your financial institution under each regime. One mistake that confused many of our clients related to Cayman FATCA reporting. It looks like Cayman Tax Authorities noted this issue as well and published the following FAQ to help files:
Why can’t I submit CRS Reporting?
a. The FI holds an “SP” GIIN; please refer to p.4 of our User Guide.
b. You have checked the box to state that the investment entity has no financial accounts by virtue of Schedule 1 to the CRS Regulations, Section VIII.C.1.a. If this is incorrect, a Variation in Reporting Obligation can be submitted to correct this, p.13 of our User Guide can assist with this process.
The latter issue was one that popped up for a number of folks. If you registered your financial institution as an investment entity that has no financial accounts, then there would not be anything to report. This is why you are precluded from submitting a report if you have registered as such an entity. In order to correct this issue, the financial institution needs to update its notification in the Cayman AEoI Portal.
Look Out for Penalties!
That is right! More jurisdictions are publishing new rules and regulations that include penalties for various offenses relating to FATCA and CRS processes. Here are a few as of this summer:
Malta. Here, a Reporting Malta Financial Institution that signs or otherwise positively affirms a false self-certification will be liable to a penalty of five thousand euro (€5,000). Further, the FATCA Regulations set out that penalties will be applicable where a Reporting Financial Institution fails to provide the required information and where it provides inaccurate information.
Pakistan. The Federal Board of Revenue (FBR) published Finance Act, 2019, which introduced penalties for Reporting Financial Institutions that fail to furnish information required under the CRS regime. They will be liable to pay penalty of PKR 10,000 for each default, and an additional PKR 10,000 each month until they correct each default. This includes failing to comply with the Pakistani CRS rules and regulations, filing an inaccurate or incomplete CRS report, failing to obtain valid selfcertifications for new accounts or furnishes a false self-certification. Anyone who fails to furnish valid self-certification or furnishes false self-certification under CRS Rules must pay a penalty of PKR 5,000 for each default and an additional PKR 5,000 each month until the default is redressed.
How to Implement?
As always, financial institutions should consider the following:
Keep checking reportable jurisdictions and deadlines!
Confirm your systems and reporting applications are update to date!
Confirm tax reporting vendors are aware of forthcoming updates to 2019 reporting templates, schemas, formatting, and rules.
Add a reminder to your organization’s tax calendar to check for updated deadlines, portal User Guides, regulations, along with your own internal contact updates.
Update process and procedure manuals to incorporate any changes required.
Update training materials and presentations to staff.
What do you find to be the most difficult task involved in AEoI reporting? Add your insight to the comment section or email us! Best of luck to you in AEoI reporting this year!