The Foreign Account Tax Compliance Act (FATCA) is a complex set of rules which aims to increase tax compliance by US citizens. It requires foreign financial institutions to determine their clients who are “US persons” and directly report to the US Internal Revenue Service (US IRS) information on their financial accounts. Failure to comply with the reporting rules and legislation will result in heavy penalties.
The Common Reporting Standard (CRS), which is similar to FATCA, also aims to prevent offshore tax evasion and protect the integrity of tax systems. It requires financial institutions in participating jurisdictions to identify the tax residencies of their clients and report financial accounts held by foreign tax residents to local tax authorities, which will in turn be exchanged with the tax authorities of the relevant jurisdictions.
For both FATCA and CRS, delays in reporting – or failing to report at all – can result in fines and other penalties.
Things to consider for this year’s reporting
Reporting Financial Institutions (RFIs) need to ensure they remain updated with any amendments introduced by local tax authorities with respect to FATCA and CRS to avoid being held liable for non-compliance and sustain penalties.
The additional participating and reportable jurisdictions for each country is one such example of keeping updated with the latest changes. By way of update, Costa Rica, Curacao, Grenada and Peru are now participating jurisdictions under CRS, whereas Morocco is the new 2021 reportable jurisdiction for Cyprus. Another update is that Curacao, Costa Rica and Hong Kong are the new 2021 reportable jurisdictions for British Virgin Islands.
Several jurisdictions have introduced additional requirements.
Luxembourg, for example, introduced a new law which entered into force on 1 January 2021 and amends both FATCA and CRS laws. One significant change is that Nil Reporting is now mandatory for both CRS and FATCA (it used to be mandatory for FATCA only). This carries a lump-sum penalty of EUR 10,000 for those who will not submit a Nil report. In addition to this, the Luxembourg tax administration can impose penalties of up to EUR 250,000 if it identifies non-compliance with the FATCA and CRS obligations, which can be increased by a maximum of 0.5% of the amounts that should have been reported by the RFIs but were not. In addition, the Luxembourg tax authority further issued a newsletter regarding the new codes introduced by the US IRS, which are recommended to be used for unknown tax identification numbers (TINs).
On another note, the South African Revenue Service has issued updated CRS rules in October 2020, which replace the previous ones from 1 June 2021 and include, among others, rules on suspending and closing of financial accounts for failure to provide self-certification and on mandatory disclosure rules and administrative procedures.
The reporting deadlines for a number of jurisdictions have been extended for this year, such as for the British Virgin Islands which are extended to 30 June 2021 (from 31 May 2021) for both CRS and FATCA and for Australia which – for FATCA only – is extended to 31 August 2021 (from 31 July 2021). Other jurisdictions stick to their ordinary deadlines, such as Cyprus and Luxembourg (30 June 2021), Germany and Australia (for CRS only) (31 July 2021), while in certain jurisdictions, the reporting deadline has already passed, such as the UK and South Africa (31 May 2021).
How can MAP FinTech assist you?
Given the complexity of the FATCA and CRS reporting, the challenges in keeping up with the regulatory updates and the penalties in case of non-compliance, it is reasonable to get ready early.
MAP FinTech can fully support your business’ regulatory reporting needs. We receive reportable information, construct the CRS and FATCA annual reports, and, for most countries, submit them to the relevant competent authority as prescribed by the relevant provisions of CRS and FATCA.
ΜΑΡ FinTech’s CRS and FATCA Reporting Services provide a user-friendly approach to receiving, validating, transforming and submitting the relevant information required under the CRS/FATCA reporting and due diligence rules.
These services are delivered via our powerful and award-winning Polaris platform, together with the rest of its reporting offerings and our team of experts’ impeccable support services.
ΜΑΡ FinTech’s CRS/FATCA – Key Features
- Cost-efficient integrated reporting solutions provided under a single platform.
- Highly automated and scalable solution that can report as many accounts as you have.
- Flexible in the way it receives data, either via standard templates or raw data.
- Multiple reporting health checks for both content and schema and automatic filtering of erroneous entries.
- Automatic conversion of data to XML and separation of files based on tax residency.
- Submissions to various tax authorities worldwide.
- On-going communication with regulators to ensure the system reports reflect regulatory updates and changes.