Hong Kong updates AEOI FAQ

On 12 July 2018, the Inland Revenue Department of Hong Kong announced the release of updated Automatic Exchange of Information (“AEOI”) Frequently Asked Questions (“FAQs”) to reflect Information on Technical Explanations by adding questions 29-32 to the “Double Taxation Relief and Exchange of Information Arrangements – Automatic Exchange of Financial Account Information – Frequently Asked Questions” in Hong Kong (Link).

Newly added FAQs include:

  • Question 29: The definition of “investment entity” includes any entity whose gross income is primarily attributable to investing, reinvesting, or trading in financial assets; and it is managed by another entity that is a financial institution (i.e. a professionally managed investment entity). When is an entity considered to be “managed by” another entity?
  • Question 30: If a Private Investment Company (PIC), which is typically set up for the purpose of investing in financial assets for generation of income, opens a financial account with discretionary mandate in a private bank, would that make the PIC an investment entity (i.e. a financial institution) as the PIC is investing in financial assets and managed by the bank.
  • Question 31: If a PIC is a financial institution in accordance with the relevant definitions, what are its obligations under AEOI?
  • Question 32: The controlling person of a passive NFE that is a trust is defined to include an enforcer. What is an enforcer?

France introduces FATCA / CRS declarations for recalcitrant account holders

On 4 July 2018, France published implementation decree n. 2018-569 (Link-French) which provides details on the supplementary declaration to the FATCA/CRS declarations that financial institutions already have to file to the tax authorities by 31 July, at the latest. This supplementary FATCA/CRS declaration has been put into place in order to identify and declare account holders who do not provide all the information necessary to identify their tax residences and tax identification numbers. France is one of the first countries to have a specific declaration for “recalcitrant account holders”.

The implementing decree shall enter into force on 1 November 2018. The declaration must be submitted electronically to the French Tax Authorities (the characteristics of the electronic filing will be determined at a later date by the tax authorities) by March 31st each year at the latest for instances noted on 31 December of the previous year.

More information on the amending finance law, the procedure of the reporting and the practical impact can be found in the Fiscal eAlert prepared by PwC Société d’Avocats in France.

European Parliament on the adverse effects of FATCA on EU citizens and, in particular, “accidental Americans”

On 5 July 2018, the European Parliament released resolution 2018/2646(RSP) on the adverse effects of the U.S. Foreign Account Tax Compliance Act (“FATCA”) on European Union (“EU”) citizens and, in particular, “accidental Americans” (Link). The text, tabled by the European Parliament’s Petitions Committee, was approved by 470 votes to 43, with 26 abstentions (Link).

The resolution:

  1. Calls on the Member States and the Commission to ensure that the fundamental rights of all citizens, in particular those of ‘accidental Americans’, are guaranteed, especially the right to a private and family life, the right to privacy and the principle of nondiscrimination, as laid down in the Charter of Fundamental Rights of the European Union and in the European Convention on Human Rights;
  2. Calls on the Member States to ensure the full and correct transposition of the Payment Accounts Directive, in particular Article 15 and Article 16 thereof, and to guarantee the right for all EU citizens to have access to a payment account with basic features, irrespective of their nationality;
  3. Calls on the Commission to expedite its analysis of national transposition measures of the Payment Accounts Directive and to include in its assessment the situation of ‘accidental Americans’, dual citizens and US citizens legally resident in the EU, paying due attention to any discrimination by financial institutions against taxpayers legally residing in the EU and qualifying as ‘US persons’ for the purpose of FATCA;
  4. Urges the Commission to initiate without delay infringement procedures in the event of established breaches in the implementation of the Payment Accounts Directive, and to report back to Parliament and the Council on the measures taken to ensure the proper implementation of the said directive;
  5. Stresses the importance of providing an adequate level of protection for personal data transferred to the US under FATCA, in full compliance with national and EU data protection law; calls on the Member States to review their IGAs and to amend them, if necessary, in order to align them with the rights and principles of the GDPR; urges the Commission and the European Data Protection Board to investigate without delay any infringement of EU data protection rules by Member States whose legislation authorises the transfer of personal data to the US IRS for the purposes of FATCA, and to initiate infringement procedures against Member States that fail to adequately enforce EU data protection rules;
  6. Calls on the Commission to conduct a full assessment of the impact of FATCA and the US extraterritorial practice of CBT on EU citizens, EU financial institutions and EU economies, taking into account ongoing efforts in France and other Member States, and to explain if a serious discrepancy exists between EU citizens and/or residents in different Member States, especially as regards EU data protection rules and fundamental rights standards as a result of FATCA and ‘US indicia’; calls on the Commission to conduct a comprehensive assessment of the status of FATCA reciprocity, or the lack thereof, across the EU, and compliance by the US with its obligations under the various IGAs signed with Member States;
  7. Calls on the Commission to assess and, if necessary, take action to ensure that the EU fundamental rights and values enshrined in the Charter of Fundamental Rights and the European Convention on Human Rights, such as the right to privacy and the principle of non-discrimination, as well as EU data protection rules, are respected in the context of FATCA and the automatic exchange of tax information with the US;
  8. Regrets the inherent lack of reciprocity of IGAs signed by Member States, especially in terms of the scope of information to be exchanged, which is broader for Member States than it is for the US; calls on all Member States to collectively suspend the application of their IGAs (or the sharing of all information other than that in respect of accounts held in the EU by US citizens resident in the US) until such time as the US agrees to a multilateral approach to the automatic exchange of information (AEOI), by either repealing FATCA and joining the CRS or renegotiating FATCA on an EUwide basis and with identical reciprocal sharing obligations on both sides of the Atlantic;
  9. Calls on the Commission and the Council to present a joint EU approach to FATCA in order to adequately protect the rights of European citizens (in particular ‘accidental Americans’) and improve equal reciprocity in the automatic exchange of information by the US;
  10. Calls on the Council to mandate the Commission to open negotiations with the US on an EU-US FATCA agreement, with a view to ensuring the full reciprocal exchange of information, upholding the fundamental principles of EU law, as well as the Payment Accounts Directive, and allowing EU ‘accidental Americans’ to relinquish their unwanted US citizenship on a nofees, nofilings, nopenalties basis;

The European Parliament instructs its President to forward the resolution to the Council and the Commission.

OECD publishes new set of bilateral exchange relationships

On 5 July 2018, the Organization for Economic Cooperation and Development (“OECD”) published a new set of bilateral exchange relationships established under the Common Reporting Standard (“CRS”) (Link).

According to the OECD’s release, in total, the international legal network for the automatic exchange of offshore financial account information under the CRS now covers over 90 jurisdictions, with the remaining dozen set to follow suit over the summer. The network will allow over 100 committed jurisdictions to exchange CRS information in September 2018. The list of over 3,200 bilateral relationships that are currently in place and can be found at the OECD’s website (Link).

The last two months have also been marked by a significant increase in jurisdictions participating in the multilateral Convention on Mutual Administrative Assistance in Tax Matters, which is the prime international instrument for all forms of exchange of information in tax matters, including the exchange upon request, as well as the automatic exchange of CRS information and Country-by-Country Reports.

Since early May, the Former Yugoslav Republic of Macedonia, Grenada, Hong Kong (China), Liberia, Macau (China), Paraguay and Vanuatu have joined the Convention, bringing the total number of participating jurisdictions to 124 (Link). In addition, the Bahamas, Bahrain, Grenada, Peru and the United Arab Emirates have deposited their instruments of ratification.

The IRS will be hosting in person presentations on the QI/WP/WT Certification and Periodic Review process in Frankfurt and London

On 6 July 2018, the U.S. Internal Revenue Service (“IRS”) released issue number 2018-09 on Qualified Intermediaries (“QI”) News (Link). Subscribers to QI News were informed that the IRS will be hosting presentations on the Qualified Intermediary (“QI”), Withholding Foreign Partnership (“WP”), Withholding Foreign Trusts (“WT”) certification, and periodic review process in London and Frankfurt. The scope of the presentations will include the QI Certification/Periodic Review requirements, including waiver requests and CCGs, from initiation to submission.  The same material will be covered in all four sessions. There is no cost to attend, nevertheless, attendance is limited, so the seats should be reserved as soon as possible. The sessions in the U.S. Embassy London will be held on Tuesday 31 July 2018 and the sessions in the U.S. Consulate General Frankfurt will be held on Thursday 2 August 2018.

For additional information, please refer to the IRS flyer (Link).

Germany releases CRS Infobrief 02/2018

On 29 June 2018, the Central Tax Office in Germany (“Bundeszentralamt für Steuern” or “BZSt”) issued a newsletter: “Infobrief CRS 02/2018” (Link-German), providing updated information regarding the Common Reporting Standard (“CRS”). This Infobrief includes the final 2018 list of CRS reportable jurisdictions, announcement of possible XML-Web Uploads in the BZSt Online Portal and the planned short-time shut-down of the portal by the end of July, explanation on “undocumented accounts” and a reporting failure list.

In Germany, CRS reporting for 2017 data is due until 31 July 2018. The final 2018 reportable jurisdiction list can be found on the BZSt’s website (Link-German).

HMRC issues updated FATCA and CRS AEOI Manual

On 29 June 2018, Her Majesty’s Revenue & Customs (“HMRC”) updated its “International Exchange of Information Manual”. Apart from several formatting changes, the primary updates are made within the section “What and how to exchange: Template for exchange of tax rulings”.

The “International Exchange of Information Manual” can be found on the government’s website (Link).