Preparing for the OECD Common Reporting. October 6, 2014

Transcription

1 Preparing for the OECD Common Reporting Standard (CRS) October 6, 2014

2 Notice The following information is not intended to be written advice concerning one or more Federal tax matters subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230. You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International NDPPS

3 CRS Other Countries Want FATCA, Too Account Holder Bank 3 1 Country A 1. Model 1 IGA reporting 2. Model 1 IGA exchanges 3. Leveraging Model 1 IGA implementation to develop automatic exchange in multilateral context US 1 Bank Account Holder Country B 3 1 Account Holder Bank 3

4 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 4

5 Automatic exchange standard Basic approach - CRS + CAA = exchange standard Account Holder Bank Country A Reporting of information based on Common Reporting and Due Diligence Standard (CRS) implemented via domestic law Automatic exchange of information based on bilateral treaty, TIEA, or MAC, & CAA Account Holder Country B Bank Reporting of information based on Common Reporting and Due Diligence Standard (CRS) implemented via domestic law 5 5

6 Development of CRS CRS and associated Commentary provide: Due diligence procedures for ascertaining identity and tax residence of account holders Reporting requirements (e.g. information on accountholder(s), financial account assets, and annual income and gross proceeds) Procedures: o Financial institutions reporting information to local tax authorities o Receiving jurisdictions exchanging information with residence jurisdictions 6

7 Expected Timeline EU EU Revised Savings Directive adopted March 2014 EU Revised Administrative Cooperation Directive to be adopted EU AEoI on financial Income is effectively applied 1/1/2015 EU Revised Savings Directive to be effectively applied 1/1/2016 Oct OECD EU Revised Savings Directive adopted March 2014 OECD: CRS and Commentary are finalized September 2014 CRS Review of High-Value Accounts Completed for Early Adopters 12/31/2016 FATCA New Account due diligence/ identification begins 7/1/2014 FATCA Reporting (Regulations) 3/31/2015 FATCA Exchange (Model 1 IGA countries) 9/30/2015 CRS due diligence New Accounts for Early Adopters 1/1/2016 CD New Account due diligence/ identification begins 7/1/2014 CRS Exchange begins for Early Adopters 9/30/2017 PLUS OECD Trace Initiative Various bilateral agreements 7 7

8 Implementation of the CRS More than 60 jurisdictions have committed to implement CRS Participating jurisdictions will need to implement legislation adopting CRS customer due diligence and reporting obligations Early adopter jurisdictions (more than 40) have committed to begin exchange of information by September 2017 New account opening procedures by January 2016 Impact of CRS on FATCA Ability to enter into IGAs Will CRS satisfy FFIs obligations under FATCA? Will U.S. adopt CRS for reporting by USFIs? 8

9 Early Adopters as of August 2014 Anguilla Argentina Belgium Bermuda British Virgin Islands Bulgaria Cayman Islands Colombia Croatia Cyprus Czech Republic, Denmark Estonia Faroe Islands Finland France Germany Gibraltar Greece Guernsey Hungary Iceland India Ireland Isle of Man Italy Jersey Latvia Liechtenstein Lithuania Malta Mexico Montserrat Netherlands Norway Poland Portugal Romania Seychelles Slovakia Slovenia South Africa Spain Sweden Turks & Caicos United Kingdom 9

10 Development of CRS Scope of CRS largely the same as U.S. Model 1 IGA across three key dimensions: Financial information to be reported 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. Financial institutions that are required to report under the CRS include not only banks and custodians, but also other financial institutions such as brokers, certain collective investment vehicles and certain insurance companies. Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations). Important differences between CRS and FATCA will require modifications to existing FATCA compliance programs 10

11 Key Differences Between CRS and FATCA No Withholding Individuals Entities Residence (not including citizenship) No thresholds Residence address test for pre-existing accounts building on EU Savings Directive Simplified indicia search 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 11 11

12 CRS Due Diligence Procedure - Individuals No de minimis threshold Pre-existing accounts (can also elect to apply New Account procedures) Lower Value Accounts : permanent residence address test based on documentary evidence (including a penalties of perjury statement) or electronic indicia search Individuals Higher Value Accounts: enhanced due diligence procedures (paper record indicia search, actual knowledge test by the relationship manager) New accounts Self-certification without de minimis threshold 12

13 CRS Due Diligence Procedure - Entities No review for accounts below 250,000 USD Pre-existing accounts (can also elect to apply New Account procedures) Reportable person: available information (AML/KYC procedures), in certain cases selfcertification Entities Passive NFE and controlling persons: available information or self-certification New accounts Same assessments as for preexisting accounts, but no de minimis threshold & selfcertification required to identify reportable persons 13

14 Other Key Differences Different Account Holder Information Collected Self-certification for individuals must include date of birth (and maybe place of birth) Self-certification must collect tax residence of each account holder (not just U.S./non-U.S. status) Controlling Person information for reportable entities that are passive NFEs Controlling Person information for Investment Entities in nonparticipating jurisdictions Different information reported on account closure Country-specific exclusions for low-risk financial institutions No publicly traded exception for Investment Entities 14

15 OECD s Treaty Relief and Compliance Enhancement Initiative: TRACE Goal: develop standardized cross-border tax relief procedures that protect government revenues through compliance checks, reduce administrative barriers to treaty relief, reduce administrative costs, enhance markets, and promote tax certainty TRACE sets forth an Authorized Intermediary ( AI ) system based on U.S. QI system At-source relief under tax treaties and/or domestic law Financial institutions claim tax relief on pooled basis 2013 TRACE Implementation package: agreements and forms TRACE in tandem with CRS: Potential solution for form problems Additional check on residency information Synergies from making systems changes simultaneously 15

16 Thank you