On 29 March 2016, the U.S. Internal Revenue Service (“IRS”) published an updated version of the FATCA International Data Exchange Services (“IDES”) User Guide (Link) with new information on the data packaging process and other technologies in the IDES Portal.
On 30 March 2016, the U.S. Internal Revenue Service (“IRS”) announced that starting 9 July 2016, it would no longer accept data packets encrypted with the “EBC cipher mode” but only data packets with the “CBC cipher mode” (Link). According to the announcement the revised encryption mode improves the “AES-256 key encryption”. Apart from this change, all remaining data packaging requirements (e.g. data padding) will remain unchanged. This update is also reflected in the IDES User Guide (Link).
On 29 March 2016, the U.S. Internal Revenue Service (“IRS”) published updated FATCA International Data Exchange Services (IDES) Frequently Asked Questions (“FAQs”) with new questions on how to report a Substantial Owner as an organization (FAQ C24), on data preparation software (FAQ E16), on the modified encryption cipher mode (FAQ E19) and on the creation of an Initialization Vector (E20, E21) (Link).
In February 2016, the U.S. signed a Competent Authority Arrangement (“CAA”) with St. Lucia (Link) in accordance with the IGA signed between these jurisdictions (Link). In general, a Competent Authority Arrangement is a bilateral agreement between the U.S. and a treaty partner to clarify or interpret treaty provisions (Link). The CAAs establish the procedures for the automatic exchange obligations and for the exchange of information between these jurisdictions.
On 18 March 2016, the Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015 (Link) which implements the Organisation for Economic Co-operation and Development’s (OECD) Common Reporting Standard (CRS) received Royal Assent becoming the Tax Laws Amendment (Implementation of the Common Reporting Standard) Act 2016 – Act No 23 (Link) of 2016. The CRS is intended to reduce international tax evasion and represents the next significant wave of compliance for taxpayers, both financial institutions and account holders. Under the implementing legislation, Australian financial institutions will need to carry out due diligence procedures to identify the tax residence of account holders and report relevant data to the ATO. The CRS is to be implemented from 1 July 2017 with the initial information exchange between the ATO and foreign tax authorities expected to take place in September 2018.
Additional information on the ATO’s planned implementation of the Common Reporting Standard can be found on its website (Link), including an expected implementation timeline (Link) and discussion paper from 2014 (Link).
Further insights from PwC Australia on the CRS and other Global Information Reporting matters may be found here.
PwC’s CITT Compare Tool has been updated to include Bahrain and the United Arab Emirates (15 March 2016), Angola and Indonesia (17 March 2016). In addition, information has been revised to reflect recent regulatory news regarding Luxembourg and the Netherlands (15 March 2016), Belgium and Thailand (23 March 2016). Please take this opportunity to re-run reports for those countries and use the latest information within your projects.
On 17 March 2016, the Luxembourg authorities published it list of countries considered to be Partner Jurisdictions with regard to the Common Reporting Standard (Link-French).
On 20 March 2016, the Irish Revenue issued an update to the Frequently Asked Questions (Link) which are intended to supplement the Guidance Notes on the Implementation of FATCA in Ireland (Link). Additional information can also be found on the Irish Revenue’s website (Link).
Certain US withholding agents, foreign financial institutions, and nonfinancial foreign entities are required to file Form 8966, FATCA Report (Link), to report information under FATCA. Financial institutions must file Form 8966 electronically with the IRS, regardless of the number of forms required to be filed, by submitting an XML file to the IRS via the International Data Exchange Service (IDES). Nonfinancial entities filing 250 or more Forms 8966 also are required to file electronically via IDES. Nonfinancial entities filing fewer than 250 Forms 8966 are permitted to file on paper with the IRS. (Link-Form 8966 Instructions)
The 2015 Form 8966 filings are due on 31 March 2016. Filers can request by 31 March 2016 an automatic 90-day extension of time to file by mailing to the IRS a paper Form 8809-I, Application for Extension of Time to File FATCA Form 8966 (Link). However, reporting Model 2 FFIs should refer to their applicable Model 2 IGA or to guidance issued by their local taxing authority for the due date of Form 8966 and whether an extension of time to file is permitted. Filing after 31 March without having obtained an extension may result in late filing penalties.
Read more in our PwC Tax Insight
On 1 March 2016, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued proposed rules to modify final regulations issued in February 2011, under the Bank Secrecy Act (BSA) (Link) regarding the reporting of foreign financial accounts. The proposed regulations are intended to strike a balance between the need to collect information consistent with the BSA’s intended purpose (i.e., combatting money laundering, terrorist financing, and other financial crimes) and the desire to reduce the compliance burden of individuals and entities.
BSA requires US persons (individuals and entities) with a financial interest in, or signature or other authority over, foreign financial accounts with an aggregate value over $10,000 in any calendar year to file a foreign bank account report (FBAR) using FinCEN Form 114 by 30 June (the due date for calendar year 2016 and beyond is 15 April) of the year following the calendar year in which the dollar threshold is met. US citizens and residents who have signature or other authority over employer-owned accounts have an FBAR filing obligation with respect to these accounts unless either the reporting threshold is not satisfied or an exception applies.
The proposed regulations both reduce and expand requirements for US persons filing FBARs. The proposed rules would broaden the exemption for certain individuals who have signature or other authority over, but no financial interest in, foreign financial accounts as part of their employment responsibilities. The proposed regulations, however, would increase the information required to be reported by eliminating abbreviated filing when an individual or entity has a financial interest in, or signatory authority over, 25 or more foreign financial accounts. The proposed rules also would permit filers to request a six-month extension to file an FBAR.
Read more in our PwC Tax Insight