08 Nov 22

Reporting requirements under FATCA and CRS

Over the past decade, there has been significant cooperation and coordination between countries across the globe who have adopted a more synchronised approach to combatting tax evasion. Two key pillars in this battle are the Foreign Account Tax Compliance Act (FATCA) and the Common Report Standard (CRS). These two regimes have introduced a number of reporting requirements for certain entities operating within relevant jurisdictions to disclose specific details on certain account holders to their country of tax residence.

FATCACRS
Full nameForeign Account Tax Compliance ActCommon Report Standard
Introduction20102012
ScopeInformation sharing agreement between US and other countries which introduces mandatory reporting on US tax residents to Internal Revenue Service (IRS)Exchange of financial information on a global level between tax authorities approved by the Organisation for Economic Cooperation and Development (OECD)
Signatories113109
FATCA jurisdictions
FATCA Regions
CRS jurisdictions
CRS Jurisdictions

Classifications

Under FATCA and CRS, entities are classified as either a:

  • Financial Institution: such as a custodial institution, depository institution, investment entity or a specified insurance company; or a

  • Non-Financial Entity: which are further classified as passive or active.

Financial Institutions are considered reporting entities under FATCA and CRS, although some exemptions may apply.

A non-financial entity is considered ‘active’ if it meets any of the following conditions:

  • less than 50% of the entity’s gross is passive income and less than 50% of assets held are assets that produce or are held for the production of passive income;

  • the entity is, or is a wholly owned entity of a government agency, international organisation, central bank or non-profit;

  • the entity acts as a holding or treasury centre of a non-financial group;

  • the entity is a start-up; or

  • the entity is liquidating or emerging from bankruptcy.

Reporting Requirements

Under the FATCA regime, reporting requirements are established for accounts held by specified US persons and passive non-financial entities with controlling persons who are specified US persons. Reporting entities are required to register with the IRS and appoint a responsible officer. The responsible officer must certify compliance of the entity and notify the IRS of any material failures or non-compliance.

Under CRS, financial institutions, as well as certain non-financial entities with controlling persons who are tax residents in countries or jurisdictions other than the jurisdiction where the entities' accounts are located, are required to report.

Entities are required to self-identify for both FATCA and CRS reporting requirements. Reporting entities must put in place policies and procedures with regards to compliance, perform due diligence on all financial account holders and submit annual reports to the relevant authority.

Required disclosures will change by jurisdiction but usually extend to the following: name, address, tax residency, taxpayer identification number, account number, type of financial account, and certain financial information.

How can we help

For further information on FATCA and CRS reporting requirements, and how Cafico International can be of assistance with respect to these requirements, please reach out to Rolando Ebuna or Kar Chun Man.