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© 2015 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
CAA versus Model 1 IGA
Consultations, Amendments, and Terms of Agreement
Terms of Agreement
■ This Section is similar to the Model 1 IGA (Article 10). Notifications are required that necessary laws are in
place (CAA) or necessary internal procedures are completed (IGA);
■ CAA allows for the suspension of the exchange of information in the event of significant non-compliance by
the other Competent Authority.
Article 4 – Application of FATCA to [FATCA Partner] FI,
Article 6 – Mutual Commitment to Continue to Enhance the
Effectiveness of Information Exchange and Transparency;
Article 7 – Consistency in the Application of FATCA to Partner
Jurisdiction; and
Article 9 – Annexes.
Consultations and Amendments
Similar to the Article 8 of the Model 1 IGA.
Section
Section
IGA Articles not included in CAA:
Interaction between FATCA and CRS and the Key Differences](https://image.slidesharecdn.com/fatcaexchangeofinformationfrontpage-150219041355-conversion-gate01/75/FATCA-Exchange-of-Information-24-2048.jpg)
FATCA & Exchange of Information
The document outlines the interaction between the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA), detailing the key differences and implications for financial institutions. It describes the implementation of CRS for automatic exchange of tax information among participating jurisdictions and emphasizes the need for compliance across various financial sectors. The document highlights the operational, legal, and reporting requirements necessary for effective implementation of CRS in comparison to FATCA.
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More from The International Business Structuring Association
FATCA & Exchange of Information
- 1. www.istructuring.com FATCA & Exchangeof Information January 27 12:00 – 12:45 GMT Ross Belhomme, Saffery Champness Peter Grant, KPMG www.istructuring.com
- 2.
- 3. CLIENT PFFI FORM 8966 FORM 8938 FBAR CROSS CHECKAND EXCEPTION REPORT • Request for information?• Request for information? www.istructuring.com
- 4. TAX COLLECTION INSTITUTION ENTERS GLOBALTAX IDENTIFICATION NUMBER “GY234320FZDF” www.istructuring.com
- 5. • ACCOUNT DETAILS •DETAILS OF INCOME • DETAILS OF GAINS • ACCESSIBLE BY COUNTRY GERMANY BASED AGENT GERMAN STEUERAMT FRANCE FISCALE FRANCE BASED AGENT SPANISH BASED AGENT SPANISH FISCALE HMRC UK BASED AGENT US BASED AGENT IRS www.istructuring.com GERMANY BASED AGENT FRANCE BASED AGENT UK BASED AGENT
- 6. www.istructuring.com ROSS BELHOMME EXECUTIVE DIRECTOR SAFFERYCHAMPNESS (SUISSE) SA 7 AVENUE PICTET-DE-ROCHEMONT, GENEVA SWITZERLAND ross.belhomme@saffery.ch www.saffery.ch https://ch.linkedin.com/pub/ross-belhomme
- 7. Common Reporting Standard (CRS) 27January 2015 Peter Grant: Operational Taxes Director peter.grant@kpmg.co.uk
- 8. 8 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Agenda 1.Background of CRS 2.Interaction between FATCA and CRS – Key Differences 3.Key Dates for CRS Implementation
- 9.
- 10. 10 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Background of CRS QI EUSD US FATCA IGA FATCA DAC, EUSD, EU Project OECD CRS Begin of an automatic exchange of information in favour of the US limited to non-US taxpayers earning US sourced income Mutual exchange of information for the domestic taxation of foreign interest income and revenues applied by EU member states (with the exception of Austria and Luxembourg) and certain non-EU member states A comprehensive automatic exchange of tax information relating to US taxpayers earning non-US sourced income Bilateral intergovernmental agreements concerning the implementation of FATCA Proposed amendments to the EU Savings Directive, the Directive on Administrative Cooperation, and EU project in order to achieve a comprehensive reporting standard within the EU analogue to FATCA G8 / G20 mandates the OECD to develop a global reporting standard to achieve a comprehensive and multilateral automatic exchange of information 2001 2005 2010 2012 2013 2013-2014
- 11. 11 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Development of CRS G-20 Calls on OECD to Develop Multilateral Standard for Automatic Exchange of Financial Account Information in September 2013 OECD Develops CRS Together with G-20 Countries ■ OECD works with the Business and Industry Advisory Committee via a special Business Advisory Group ■ February 2014: OECD releases and G-20 approves CRS ■ July 2014: OECD issues Standard for Automatic Exchange of Financial Information in Tax Matters: – Model Competent Authority Agreement (CAA) – Common Reporting Standard (CRS) – CRS Commentary ■ September 2014: G-20 calls on all financial centers to commit by October 2014 to adopt the CRS and automatic exchange of information ■ October 2014: 51 jurisdictions, 39 of which were represented at ministerial level, signed a multilateral competent authority agreement to automatically exchange information based on Article 6 of the Multilateral Convention. Background of CRS
- 12. 12 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. OECD Report to the G8, June 2013 ■ Scope of financial institutions required to report: banks, brokers, collective investment vehicles, insurance companies. ■ Scope of financial information reported investment income covered: interest, dividends, similar types of income. Requiring information about account balances. ■ Scope of accountholders subject to reporting subject to reporting: individuals and entities. ■ Robust due diligence procedures: identify reportable accounts, obtain the accountholder identifying information that is required to be reported for such accounts. ■ Legal ability to collect the information required for due diligence. ■ Legal basis for reporting obligation will typically be included in domestic tax legislation. ■ Legal basis upon which exchange of information could take place: – Bilateral treaties – Nordic Convention – EU directives ■ Adequate level of data protection – OECD Guide “Keeping it Safe” ■ Technical reporting formats must be standardised for quick and efficient processing in a cost efficient manner. ■ Methods of transmission and encryption of data must be in place. This can be based on existing methods, e.g. “point-to- point” portal, CCN Network. A common schema is being developed for the standardised model as well as recommendations on transmission and encryption. Common agreement on the scope Legal and operational basis Common or comparable technical solutions Basis for a standardised multilateral automatic exchange model on financial information Main success factors for effective automatic exchange of financial information Background of CRS
- 13. 13 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Background of CRS • A unified ‘big-bang’ of 50+ countries is expected to be followed by the addition of 40+ countries • CRS impacts the information gathered from every investor and account holder • Customer information for non-resident investors will be reported locally and then shared with relevant tax authorities around the world • Account holder information will be exposed to increased data security risks • Financial institutions are likely to face increased pressure to demonstrate compliance • Implementation requires a strategic and flexible approach • CRS will be implemented across the European Union by way of Directive under the Directive on Administrative Cooperation (commonly known as “DACII”)
- 14. 14 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Background of CRS Albania Andorra Anguilla Antigua and Barbuda Argentina Aruba Austria The Bahamas Barbados Belgium Belize Bermuda Brazil British Virgin Islands Brunei Darussalam Canada Cayman Islands Chile China Colombia Costa Rica Croatia Curacao Cyprus Czech Republic Denmark Dominica Estonia Faroe Islands Finland France Germany Gibraltar Greece Granada Guernsey Hong Kong Hungary Iceland India Indonesia Ireland Isle of Man Israel Italy Japan Jersey Korea Latvia Liechtenstein Lithuania Luxembourg Malta Macao Marshall Islands Mauritius Mexico Montserrat Netherlands New Zealand Niue Norway Poland Portugal Qatar Romania Russia Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Samoa San Marino Saudi Arabia Seychelles Singapore Sint Maarten Slovak Republic Slovakia Slovenia South Africa Spain Sweden Switzerland Trinidad & Tobago Turkey Turks & Caicos United Kingdom United Arab Emirates Uruguay Jurisdictions Committed to CRS
- 15. 15 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CRS Popular Myths CRS Myths This is a tax project Not true. Despite the fact that tax legislation is driving the need for change, the real impact will be seen in each business lines from Fund Administration to Custody and in areas such as account opening, customer documentation, operations and technology. Tax specialists should be advisors to the project, but not the driving force. This doesn’t apply to us CRS will apply to any entity in a Participating Jurisdiction that is classified as a Reporting Financial Institution. There are no deemed-compliant statuses under the CRS. Readiness and implementation will be easy We have heard the comment that CRS is FATCA on steroids and that it will be reasonably easy to get compliant. The truth is that CRS is far more wide-reaching than FATCA and will require a cohesive, multi- disciplinary effort to ensure readiness. Since the rules aren’t final, we can wait to address CRS While it is true that the rules aren’t final, KPMG understands the time devoted to developing business requirements, IT builds, and testing can take 18 months to 2 years. It is critical to work now with the limited tax guidance available to make a preliminary assessment of its ability to comply with the CRS framework that currently exists. Background of CRS
- 16. Interaction between FATCA and CRSand the Most Important Key Differences
- 17. 17 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Country A Bank Country A US US Account Holder Country B Bank US Account Holder Country B Model 1 IGA reporting Model 1 IGA exchanges Leveraging on Model 1 IGA implementation to develop standardised automatic exchange in a multilateral context Account Holder US Bank 1 7 Country B Account Holder Country A Account Holder Interaction between FATCA and CRS and the Key Differences
- 18. 18 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Country A Bank Country A Country B Account Holder Bank Country A Account Holder Country B Reporting of information based on Common Reporting and Due Diligence Standard (CRS) implemented via domestic law 18 Automatic exchange of information based on bilateral treaty, TIEA, or MAC, & CAA Reporting of information based on Common Reporting and Due Diligence Standard (CRS) implemented via domestic law Automatic exchange standard Basic approach - CRS + CAA = exchange standard Interaction between FATCA and CRS and the Key Differences
- 19. © 2015 KPMGLLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Overview of Key Differences Between CRS and FATCA 19 Individuals • Residence (not including citizenship) • No thresholds • Residence address test for pre-existing accounts building on EU Savings Directive • Simplified indicia search Entities • Look-through for Reportable Entities that are Passive NFEs • Look-through for investment entities in non-participating jurisdictions Low risk FIs and products • General exclusion for country specific low-risk reporting financial institutions and accounts 19 No Withholding
- 20. 20 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Model Competent Authority Agreement (“CAA”) and Model 1 IGA (“IGA”) – Structure 1. Model CAA and Common Reporting Standard – 7 Sections. 2. Annex – Common Standard on Reporting and Due Diligence for Financial Account Information (“Common Reporting Standard”, “CRS”) – 9 Sections. 1. Agreement between the government of the US and the government of FATCA Partner – 10 Articles. 2. Annex I – Due diligence obligations for identifying and reporting on US Reportable Accounts and on payments to certain Nonparticipating Financial Institutions. 3. Annex II – Entities treated as Exempt Beneficial Owners or Deemed-Compliant Foreign Financial Institutions and accounts excluded from Financial Accounts. Model CAA consists of Model 1 IGA(a) consists of Note: (a) Model 1 IGA updated on 4 November 2013. Interaction between FATCA and CRS and the Key Differences
- 21. 21 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CAA versus Model 1 IGA Definitions Definitions The Section includes limited definitions that are relevant for the exchange of information between the jurisdictions. The remaining definitions are included in the CRS. The definition of a Jurisdiction FI under the CAA, similar to IGA, is based on place of residence or branch location. In IGA FATCA Partner FI may also be identified based on the place of organization. The definition of a Jurisdiction Person refers to the resident of the Jurisdiction, pursuant to of the due diligence procedures or an estate of a decedent that was a resident in the Jurisdiction. A Reportable Jurisdiction Person definition focuses on the tax residency under the law of a jurisdiction rather than citizenship of the account holder. Where the term is not otherwise defined in the CAA, the meaning under the law of the jurisdiction applying the CAA should be used. The CAA envisages consistency of the meaning of the jurisdiction's law with the meaning set forth in the CRS. Section Interaction between FATCA and CRS and the Key Differences
- 22. 22 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CAA versus Model 1 IGA Obligations to Exchange of Information and Time and Manner ■ The exchange of information is based on similar legal basis, the Income Tax Convention or the Convention on Mutual Administrative Assistance in Tax Matters. IGA additionally refers to the Tax Information Exchange Agreement, whilst CAA allows for the possibility of using other applicable legal Instrument. ■ The information required to be exchanged are similar to those provided in the Model 1 IGA. Furthermore, the CAA requires additional information to be exchanged: – Date of birth; – Place of birth. ■ The Reporting FI does not have to report the balance or value of the account that has been closed during the year or the reporting period. However, the FI has to report the closure of the account. Section 3 differ from that in Article 3 of the IGA as laid out below: ■ CAA limits the exchange of information to the tax years where both jurisdictions have reporting, consistent with the CRS legislation in effect; ■ Information is exchanged in a common reporting standard schema in Extensible Mark-up Language, while IGA requires entering into additional agreement or arrangement to establish rules and procedures for the automatic exchange; Exchange of Information with Respect to Reportable Accounts Time and Manner of Exchange of Information Section Section Interaction between FATCA and CRS and the Key Differences
- 23. 23 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CAA versus Model 1 IGA Compliance, Enforcement, Confidentiality, and Data Safeguards The CAA is different from the Model 1 IGA, in that; ■ No distinction is made between minor and administrative errors and significant non-compliance; ■ A Financial Institution could not be treated as Nonparticipating Financial Institution under CAA; ■ Reliance of third-party service providers is included in Section II.D of the CRS. ■ The confidentiality and data safeguards rules are similar to the Model 1 IGA, whereby all information exchanged will be subject to confidentiality rules and other safeguards, including the provisions limiting the use of the information exchanged. Additionally, safeguards required under the domestic law may be specified by the supplying Competent Authority; ■ IGA requires providing written notifications by Competent Authorities that appropriate safeguards and the infrastructure for an effective exchange relationship are in place. There is a possibility of IGA termination on 30 September 2015 if written notifications are not provided. Such written notifications are not required under CAA. Collaboration on Compliance and Enforcement Confidentiality and Data Safeguards Section Section Interaction between FATCA and CRS and the Key Differences
- 24. 24 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CAA versus Model 1 IGA Consultations, Amendments, and Terms of Agreement Terms of Agreement ■ This Section is similar to the Model 1 IGA (Article 10). Notifications are required that necessary laws are in place (CAA) or necessary internal procedures are completed (IGA); ■ CAA allows for the suspension of the exchange of information in the event of significant non-compliance by the other Competent Authority. Article 4 – Application of FATCA to [FATCA Partner] FI, Article 6 – Mutual Commitment to Continue to Enhance the Effectiveness of Information Exchange and Transparency; Article 7 – Consistency in the Application of FATCA to Partner Jurisdiction; and Article 9 – Annexes. Consultations and Amendments Similar to the Article 8 of the Model 1 IGA. Section Section IGA Articles not included in CAA: Interaction between FATCA and CRS and the Key Differences
- 25. 25 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CRS versus Model 1 IGA Due Diligence for Pre-Existing Individual Accounts ■ An exemption for Cash Value Insurance Contracts or Annuity Contracts, provided the FI is effectively prevented by law from selling such Contracts to residents of a Reportable Jurisdiction (IGA: to US Residents). ■ Lower Value Accounts (Balance or value ≤ $1,000,000): – Electronic Record Search. ■ High Value Accounts (Balance or value > $1,000,000): – Electronic Record Search; – Paper Record Search; – Relationship Manager Inquiry for Actual Knowledge. ■ The CRS does not provide for a de minimis carve outs included in IGA; ■ For Lower Value Accounts the CRS provides for a documented residence address test as an alternative to the Electronic Record Search; ■ Variances in Indicia: – Place of birth and Nationality are not included in the CRS, since reporting is based on residence and not citizenship; – Telephone Number, Standing Instructions, and an “in-care-of” or “hold- mail” indicia slightly modified; – Specific procedures for “hold mail” instructions or “in-care-of” address indicia discovered in the electronic search; ■ The Documentary Evidence to cure the discovered indicia is not specified; ■ The CRS allows one calendar year for completion of the enhanced review of accounts that are not initially High Value but become High Value accounts in a subsequent year (Six months under IGA); ■ Enhanced Review procedures may be applied annually to undocumented High Value accounts; ■ The CRS does not allow to rely on the previously obtained documentation as a result of fulfilling obligations under other agreements, e.g., a qualified intermediary agreement with the IRS. It is possible to rely on such documentation under IGA. Similarities Differences Interaction between FATCA and CRS and the Key Differences
- 26. 26 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CRS versus Model 1 IGA New Individual Accounts ■ The CRS identification requirements are generally similar to the IGA, including the requirements to: – Obtain the Self-Certification; and – Confirm the reasonableness of the Self-Certification based on information obtained; ■ CRS include “reason to know” rules to test whether the original Self-Certification is incorrect or unreliable. ■ The Self-Certification under the CRS requires providing tax residence(s) of the account holder, while under IGA it may be interpreted as confirmation whether the account holder is a resident in the US for tax purposes; ■ The CRS does not provide for a de minimis carve outs included in IGA; ■ The CRS requires that Self-Certification must include the Account Holder’s Date of birth, in addition to including the Account Holder’s TIN. IGA requires only the TIN. Similarities Differences Interaction between FATCA and CRS and the Key Differences
- 27. 27 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CRS versus Model 1 IGA Pre-Existing Entity Accounts ■ Carve out for an account with a balance or value ≤ 250,000; ■ Similar information/documentation requirements for determining the FATCA status of the account holder e.g., – A place of incorporation or organization, an address in Reportable Jurisdiction; – Self-Certification or information in FI’s possession or that is publicly available; – Reliance on information collected and maintained pursuant to AML/KYC procedures. ■ Under CRS accounts that initially do not exceed $250,000 are subject to review when they exceed $250,00 at the end of the calendar year. IGA requires exceeding the balance of $1,000,000; ■ The CRS does not require determination whether an entity account holder is a Nonparticipating Financial Institution. As a result, payments to Nonparticipating Financial Institutions are not required to be reported under the CRS. Similarities Differences Interaction between FATCA and CRS and the Key Differences
- 28. 28 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CRS versus Model 1 IGA New Entity Accounts ■ Similar identification requirements for determining the FATCA status of the account holder, including the requirement to: – Obtain the Self-Certification; and – Confirm the reasonableness of the Self-Certification based on information obtained. ■ The CRS does not provide for the carve out for the credit card accounts or revolving credit facilitates; ■ Under the CRS, the Reporting FI needs to determine whether the account is held by one or more Reportable Persons or Passive NFE with one or more Controlling Persons that are Reportable Persons. There is no need to determine any other status, e.g.: FATCA Partner FI, Jurisdiction FI, a Participating FFI, a Deemed-Compliant FFI, or an Exempt Beneficial Owner; ■ The CRS does not require determination whether the entity is a Nonparticipating Financial Institution. As a result, payments to Nonparticipating Financial Institutions are not required to be reported under the CRS. ■ For entities that do not have a residence for tax purposes), the address of the principal office of the Entity is used as a proxy for purposes of determining its residence; ■ Limited use of the information in possession of the Reporting FI or information that is publicly available – only to determine whether the entity is an Active NFFE or certain type of an Investment Entity. IGA allows to use Global Intermediary Identification Number to determine the status of a Financial Institution. Similarities Differences Interaction between FATCA and CRS and the Key Differences
- 29. 29 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CRS versus Model 1 IGA Defined Terms ■ The Participating FI test is based on the place of residence or location of the branch in the Participating Jurisdiction. ■ The Reporting FI is any Participating FI that is not Non- Reporting FI. ■ The definition of an Investment Entity is similar to the definition provided for in Article 1(j) of the IGA. The “managed by“ definition in the CRS also includes an entity the gross income of which is primarily attributable to investing, reinvesting or trading in Financial Assets test. ■ The CRS includes definition of a Financial Asset, which is not included in the IGA. ■ The terms are similar to the Annex II of the IGA, however no distinction is made between Exempt Beneficial Owners and other Non-Reporting FIs. ■ An open definition of the Non-Reporting FI allows domestic law to treat similar, low-risk entities as Non- Reporting FIs provided that it does not frustrate the purposes of the CRS. ■ Certain Non-Reporting FIs from IGA Annex II are not included (either because they are not appropriate or irrelevant in a multilateral context) e.g.: – Treaty-Qualified Retirement Fund; – Investment Entities Wholly Owned by Exempt Beneficial Owners; – FIs with a Local Client Base; – Local Banks; – FIs with Only Low-Value Accounts; – Sponsored Investment Entities and Controlled Foreign Corporation; – Sponsored, Closely Held Investment Vehicles; – Investment Advisors and Investment Mangers. A. Reporting FI B. Non-Reporting FI Interaction between FATCA and CRS and the Key Differences
- 30. 30 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CRS versus Model 1 IGA Defined Terms (cont.) ■ Under the CRS the definition of a Financial Account includes equity and debt interests in certain types of Financial Institutions that are regularly traded on a stock exchange. IGA excludes these type of interests from the definition of a Financial Account. ■ The CRS provides a broader set of exclusions from the term Cash Value and the term Cash Value Insurance Contract does not include the $50,000 de minimis; ■ The definition of the Excluded Account is similar to the content of Annex II of the Model 1 IGA. Additionally, the CRS excludes: – A Depository Account that resulted from the credit card or other revolving credit facility overpayment; and – An open definition that allows domestic law to treat similar, low-risk accounts as Excluded Accounts provided that it does not frustrate the purposes of the CRS. ■ The definition of a Reportable Person does not include the US specific exclusions provided in the definition of Specified US Person. Instead, it excludes the following: ■ Corporations regularly traded on established securities markets and Related Entities of the corporations; – Governmental Entities; – International Organizations; – Central banks; and – Financial Institutions ■ The definition of Passive NFE is expanded to cover Investment Entities managed by other FIs (e.g., funds) that are located in non-participating jurisdictions. As a result these Investment Entities will have to provide information on the residency of their Controlling Persons. C. Financial Account D. Reportable Account ■ The CRS provides that the term ‘control’ in the definition of a Related Entity includes direct or indirect ownership of more than 50% of vote and value whilst the IGA defines the term as more than 50% of vote or value. ■ Documentary Evidence do not include documents referenced in the attachment to a Qualified Intermediary agreement. E. Miscellaneous Interaction between FATCA and CRS
- 31. 31 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. CRS versus Model 1 IGA Defined Terms (cont.) This Section contains a similar rule to IGA Article 5(4) Prevention of Avoidance. The CRS, however, includes additional rules and administrative procedures that an implementing jurisdiction must have in place to ensure effective implementation of, and compliance with, the reporting and due diligence procedures. Effective Implementation Interaction between FATCA and CRS and the Key Differences
- 32.
- 33. 33 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2013 2014 2015 2016 2017 2018 March 31, 2016 Withholding on recalcitrant account holders not being reported May 31, 2016 Annual Form 8966 reporting and includes aggregated foreign reportable amounts paid to NPFFIs July 1, 2014 • New account due diligence/ identification begins • Grandfathered Obligations: Payments on certain obligations outstanding on 7/1/14 are exempt from FATCA withholding** • FFI Agreement becomes effective • Reporting FIs with withholding responsibility must withhold on US source withholdable payments made to NPFFIs FATCA Time Line for Foreign Financial Institutions (“FFIs”): Model 1 IGA A Spring 2014 April 25, 2014 Last date to register with IRS to ensure inclusion on FFI List (safe harbor) June 1, 2014 Reporting FIs with withholding responsibility must withhold on US source withholdable payments to Related Entities not FATCA compliant. June 2, 2014 FFI List published by IRS June 30, 2015 Deadline for FFIs to complete remediation on preexisting high-value accounts* January 1, 2017 • FATCA withholding begins on certain gross proceeds payments to noncompliant accounts • FATCA withholding begins on foreign passthru payment (or 6 months after publication of regulations defining term, whichever is later) • For qualified collective investment vehicles, date by which policies aim to redeem or immobilize Bearer Interests December 31, 2014 Deadline for FFIs to complete remediation on preexisting entity accounts held by Prima Facie FFIs (begin withholding)* J G March 31, 2015 Withholding on recalcitrant account holders not being reported May 31, 2015 Form 8966 reporting for 2014 on US Reportable Accounts N July 12, 2013 Revised Model IGAs and accompanying annexes released December 31, 2015 Final date for FFIs to qualify for Limited Branch & Limited FFI Status March 31, 2017 Withholding on recalcitrant account holders not being reported May 31, 2017 Annual Form 8966 reporting and includes aggregated foreign reportable amounts paid to NPFFIs. E * These dates assume that the PFFI’s FFI agreement is approved by the IRS and effective on July 1, 2014 January 17, 2013 Final FATCA regulations released Summer/Fall 2013 IRS portal anticipated to open C December 31, 2016 Final Day of Transitional Rule treating U.S. source FDAP payment paid by non-intermediaries on offshore obligations as excluded from definition of “withholdable payment” M L ** Payments treated as dividend equivalents, under section 871(m), may be treated as Grandfathered up to 6 months after the publication of regulation implementing 871(m) Payments treated as foreign passthru payments may be treated as Grandfathered up to 6 months after the publication of implementing regulations June 30, 2018 Deadline for Responsible Officer to file certification for First Certification Period June 30, 2016 Deadline for FFIs to complete remediation on preexisting accounts, other than Prima Facie FFIs and high-value accounts (begin withholding)* B D F H I August 31, 2016 Due date for Responsible Officer due diligence certifications (unless previously submitted)* K P O
- 34. 34 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Common Reporting Standard (CRS) Time Line for Early Adopters Key Dates for Implementation of CRS 2014 2015 2016 2017 2018 2019 A F January 1, 2016 CRS go-live date Accounts opened on or after this date will be referred to as ‘new accounts’ New account opening procedures must be in place to record tax residence JFebruary 13, 2014 OECD release the CRS February 22, 2014 G20 endorsed global standard for AEoI (including the CRS) December 31, 2016 Due diligence procedures completed for high-value pre- existing individual accounts * Declaration can be accessed at http://www.oecd.org/mcm/MCM-2014-Declaration-Tax.pdf April 2014 Early adoption initiative first launched May 6, 2014 The new standard declaration was signed by more than 40 countries* C December 31, 2017 Due diligence procedures completed for low-value pre-existing individual accounts I H September 30, 2018 All information on reportable accounts will be available for exchange, including the low-value individual pre-existing accounts and entity accounts B D E G September 30, 2017 First exchange of information for new accounts and pre- existing individual high- value accounts December 31, 2015 Accounts opened on or before this date will be referred to as ‘pre-existing accounts’ Spring/Summer 2014 Various jurisdictions signed the Joint Statement by Early Adopter Group committing to the implementation strategy allowing for the first automatic exchange of information in 2017; these jurisdictions will be referred to as ‘early adopters’
- 35. 35 © 2015 KPMGLLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. FATCA Timeline - Model 1 IGA FIs and CRS (early adopters) 2013 2014 2015 2016 2017 2018 October, 2014 Last date to register with the IRS to ensure inclusion on initial FFI List September 30, 2017 Competent Authority must provide required information to the IRS for 2016 January 1, 2015 Deadline for Reporting Model I IGA FI to provide upstream withholding agent with GIIN G June 30, 2015 Complete due diligence for pre-existing high value individual accounts M November 4, 2013 The latest revised Model IGAs and accompanying Annexes released September 30, 2015 Competent Authority must provide required information to the IRS for 2014 August 19, 2013 IRS registration portal opened A K September 30, 2018 Competent Authority must provide required information to the IRS for 2017 June 30, 2016 Complete due diligence for pre-existing lower-value accounts and pre-existing entity accounts B D F H September 30, 2016 Competent Authority must provide required information for the IRS for 2015 Reporting of foreign reportable amounts to NPFFIs begins J P July 1, 2014 Treat accounts opened on or after this date as new accounts C July – October CRS HMRC Consultation Request for comments from Industry E January 1, 2016 CRS go-live date for early adopter countries I December 31, 2016 Complete due diligence for pre-existing high value accounts N September, 2017 CRS exchange of information begins L O December 31, 2017 Remediation of pre- existing accounts must be completed CRS Model 1 IGA Key Dates for Implementation of CRS
- 36. The information containedherein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2015 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. In preparing this advice, we considered tax authorities that are subject to change, retroactively, prospectively, or both, and any such changes could affect the conclusions stated herein. This advice is based on the completeness and accuracy of any one or more of the facts, assumptions, and client representations on which we relied, relating to the matters to which this advice is addressed. Unless separately agreed in writing, we will not update our advice for subsequent changes or modifications to the law, regulations, or to the judicial and administrative interpretations thereof, nor to take into account your correcting, updating, or providing new or additional facts or information you supplied or any assumptions on which we relied in preparing our advice. The advice or other information in this document was prepared for the sole benefit of KPMG’s client and may not be relied upon by any other person or organization. KPMG accepts no responsibility or liability in respect of this document to any person or organization other than KPMG’s client.