William Byrnes' Tax, Wealth, and Risk Intelligence

47 countries and major financial centers on May 6, 2014 committed to automatic exchange of information between their jurisdictions, announced the OECD.  All 34 OECD member countries, as well as Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa  endorsed the Declaration on Automatic Exchange of Information in Tax Matters that was released at the May 6-7, 2014 Meeting of the OECD at a Ministerial Level.

The Declaration commits countries to implement a new single global standard on automatic exchange of information (“CRS” or “GATCA”).  The OECD stated that it will deliver a detailed Commentary on the new standard, as well as technical solutions to implement the actual information exchanges, during a meeting of G20 finance ministers in September 2014.  The Declaration contains the following statements:

“2. CONFIRM that automatic exchange of financial account information will further these objectives particularly if the new single global standard, including full transparency on ownership interests, is implemented among all financial centres;

3. ACKNOWLEDGE that information exchanged on the basis of the new single global standard is subject to appropriate safeguards including certain confidentiality requirements and the requirement that information may be used only for the purposes foreseen by the legal instrument pursuant to which it is exchanged;

4. ARE DETERMINED to implement the new single global standard swiftly, on a reciprocal basis. We will translate the standard into domestic law, including to ensure that information on beneficial ownership of legal persons and arrangements is effectively collected and exchanged in accordance with the standard;”

Global Forum Peer Reviews and Monitoring

G20 governments have mandated the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes to monitor and review implementation of the standard.  More than 60 countries and jurisdictions of the 121 Global Forum membershave now committed to early adoption of the standard, and additional members are expected to join this group in the coming months. See the link for Country Peer Reviews and the Global Forum list of ratings chart.

Common Reporting and Due Diligence Standards (“CRS”)

February 13 the OECD released the Standard for Automatic Exchange of Financial Account Information Common Reporting Standard.

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 that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. Part I of the report gives an overview of the standard. Part II contains the text of the Model Competent Authority Agreement (CAA) and the Common Reporting and Due Diligence Standards (CRS) that together make up the standard.

Presenting the new standard back in February 2014, OECD Secretary-General Angel Gurría said: “This is a real game changer. Globalisation of the world’s financial system has made it increasingly simple for people to make, hold and manage investments outside their country of residence. This new standard on automatic exchange of information will ramp up international tax co-operation, putting governments back on a more even footing as they seek to protect the integrity of their tax systems and fight tax evasion.”

What are the main differences between the CRS (“GATCA”) and FATCA?

The CRS is also informally called “GATCA”, referring to the “globalization” of FATCA.

The CRS consists of a fully reciprocal automatic exchange system from which US specificities have been removed. For instance, it is based on residence and unlike FATCA does not refer to citizenship. Terms, concepts and approaches have been standardized allowing countries to use the system without having to negotiate individual Annexes.

Unlike FATCA the CRS does not provide for thresholds for pre-existing individual accounts, but it includes a residence address test building on the EU savings directive. The CRS also provides for a simplified indicia search for such accounts. Finally, it has special rules dealing with certain investment entities where they are based in jurisdictions that do not participate in the automatic exchange under the standard.

Single Global Standard for Automatic Exchange (“GATCA”)

Under GATCA jurisdictions obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. Part I of this report gives an overview of the standard. Part II contains the text of the Model Competent Authority Agreement (CAA) and the Common Reporting and Due Diligence Standards (CRS) that together make up the standard.

The Report sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.

To prevent taxpayers from circumventing the CRS it is specifically designed with a broad scope across three dimensions:

1. The financial information to be reported with respect to reportable accounts includes all types of investment income (including interest, dividends, income from certain insurance contracts and other similar types of income) but also account balances and sales proceeds from financial assets.
2. The financial institutions that are required to report under the CRS do not only include banks and custodians but also other financial institutions such as brokers, certain collective investment vehicles and certain insurance companies.
3. Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the standard includes a requirement to look through passive entities to report on the individuals that ultimately control these entities.

The CRS also describes the due diligence procedures that must be followed by financial institutions to identify reportable accounts.

Lexis Guide to FATCA Compliance – 2015 Edition 

1,200 pages of analysis of the compliance challenges, over 54 chapters by 70 FATCA contributing experts from over 30 countries.  Besides in-depth, practical analysis, the 2015 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers.   The Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments.  No filler of forms and regs – it’s all beef !  See Lexis’ order site and request a copy of the forthcoming 2015 edition – http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327

A free download of the first of the 34 chapters is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671

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If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

• Chapter 1 Background and Current Status of FATCA
• Chapter 1A The International Financial System and FATCA
• Chapter 2 Practical Considerations for Developing a FATCA Compliance Program
• Chapter 2A FATCA Internal Policy
• Chapter 3 FATCA Compliance and Integration of Information Technology
• Chapter 4 Financial Institution Account Remediation
• Chapter 4A FATCA Customer Outreach
• Chapter 5 FBAR and Form 8938 Reporting and List of International Taxpayer IRS Forms
• Chapter 6 Determining U.S. Ownership of Foreign Entities
• Chapter 7 Foreign Financial Institutions
• Chapter 7A Account reporting under FATCA
• Chapter 8 Non-Financial Foreign Entities
• Chapter 9 FATCA and the Offshore Trust Industry
• Chapter 10 FATCA and the Insurance Industry
• Chapter 11 Withholding and Qualified Intermediary
• Chapter 12 FATCA Withholding Compliance
• Chapter 13 “Withholdable” Payments
• Chapter 13A Reporting Payments
• Chapter 14 Determining and Documenting the Payee
• Chapter 14A W8 Equivalents
• Chapter 15 Framework of Intergovernmental Agreements
• Chapter 16 Analysis of Current Intergovernmental Agreements
• Chapter 17 European Union Cross Border Information Reporting
• Chapter 18 The OECD Role in Exchange of Information: The Trace Project, FATCA, and Beyond
• Chapter 19 Germany
• Chapter 20 Ireland
• Chapter 21 Japan
• Chapter 22 Mexico
• Chapter 23 Switzerland
• Chapter 24 United Kingdom
• Chapter 25 Brazil
• Chapter 26 British Virgin Islands
• Chapter 27 Canada
• Chapter 28 Spain
• Chapter 29 China
• Chapter 30 Netherlands
• Chapter 31 Luxembourg
• Chapter 32 Russia
• Chapter 33 Turkey
• Chapter 34 India
• Chapter 35 Argentina
• Chapter 36 Aruba
• Chapter 37 Australia
• Chapter 38 Bermuda
• Chapter 39 Colombia
• Chapter 40 Cyprus
• Chapter 41 Hong Kong
• Chapter 42 Macau
• Chapter 43 Portugal
• Chapter 44 South Africa
• Chapter 45 France
• Chapter 46 Gibraltar
• Chapter 47 Guernsey
• Chapter 48 Italy

If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”