On 29 October 2015, thirteen new countries signed a Multilateral Competent Authority Agreement to adopt CRS (Antigua and Barbuda, Barbados, Belize, Bulgaria, Cook Islands, Grenada, Japan, Marshall Islands, Niue, Saint Lucia, Saint Vincent and the Grenadines, Sint Maarten and Samoa). This raises the number of signatory states to 74 (Link). Further, an updated list of countries committed to the CRS was also published by the OECD on 30 October 2015 (Link).
On 29 October 2015, HM Revenue & Customs issued “The International Tax Compliance (Amendment) Regulations 2015” which introduces amendments to the International Tax Compliance Regulations 2015 (S.I. 2015/878) in order to remove venture capital trusts and dormant accounts from the categorization of “excluded accounts” under the Common Reporting Standard (Link). The Regulations were presented to the House of Commons on 30 October 2015 and will come into force on 20 November 2015.
On 28 October 2015, the Mauritius Revenue Authority (“MRA”) issued a position paper on the implementation of CRS (Link). According to this paper, Mauritius, as an early adopter, plans to implement CRS in time for financial institutions to report financial accounts to MRA by 31 July 2017. A first possible exchange of information with the relevant authorities should be made by 30 September 2017.
The agreement between Romania and the United States to improve international tax compliance and implementation of FATCA (US Foreign Account Tax Compliance Act) has been ratified by the Romanian Parliament and published in the Official Gazette on 30 October 2015 (Link – Romanian).
The U.S. signed a Competent Authority Arrangement (“CAA”) with Guernsey (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). These CAAs establish the procedures for the automatic exchange obligations and for the exchange of information between these jurisdictions.
On 28 October 2015, the IRS published new questions in the list of IDES Technical FAQs on the “Use for entities not required to obtain a GIIN” (Link). According to F10, a Sponsored entity should continue to use the Sponsoring entity’s GIIN until 1 January 2016 (date when all Sponsored entities are supposed to get their own GIIN). In addition, according to F9, the FATCA XML Schema v1.1 does not allow a controlling person to be an entity but only a natural US person. Last but not least, F11 informs the users that the FATCA XML Schema v1.1 definition supports the representation of two types of addresses, using two distinct data elements <AddressFix> and <AddressFree>.
On 2 November 2015, an updated list of the signed IGAs was published on the IRS website (Link). Recent changes include the addition of Algeria to the Model 1 list on 13 October and San Marino to the Model 2 list on 28 October.
In late October, the Mexican Tax Authorities (Servicio de Administración Tributaria or SAT) published a Competent Authority Arrangement (CAA) signed between Mexico and the US, which contains clarifications and guidance on FATCA obligations, such as the format of reporting (XML files) and the procedures applicable to non-compliance (Link).
Most importantly, the CAA establishes that for the purposes of enforcing FATCA obligations, both 2014 and 2015 would be treated as “transitional periods” by the US and Mexican governments. This means that the “good faith efforts” of financial institutions towards FATCA compliance for these years will be taken into account when considering the sanctions and penalties to be applied for a failure to fully comply with FATCA requirements.
This transitional rule would seem to give financial institutions that were unable to fulfill all reporting obligations by 15 September 2015, but demonstrated “good faith efforts”, additional time to review, rectify and resolve instances of non-compliance.
If you were not able to fulfill all of your FATCA reporting obligations by 15 September 2015, or would like to discuss what this new announcement could mean for your institution in more detail, please get in touch with our experts.
Karina Perez Delgadillo
Link to previous post regarding the CAA between the U.S. and Mexico
On 2 November 2015, a public hearing of the Finance Committee will take place in the German Federal Parliament (Deutscher Bundestag, Link – German) to discuss the CRS implementing law drafted by the Government (Link – German). It is expected that the law will be adopted shortly. In conjunction with the other EU Member States the law should reflect the EU DAC II and the OECD MCAA (early adopters) with an effective date beginning on 1 January 2016 and reporting in 2017. Consequently, financial institutions shall transfer certain account information of clients with a foreign tax residence once a year to enable the Federal Republic of Germany of its obligation to exchange those information with the other Participating Jurisdictions.
It is noteworthy that the hearing on Monday also comes with three additional requests from the parliamentary fractions “BÜNDIS 90/DIE GRÜNEN” and “DIE LINKE” (18/6064, 18/6065, 18/2014), in which, inter alia, the extension of the CRS in Germany is stipulated with regard to the additional reporting of local tax residents, or the abolishment of the flat tax withholding regime on capital income (25%) resulting in the taxation of such based on individual income tax rates (14 – 45%).
On 21 October 2015, the Internal Revenue Service (IRS) Rev. Proc. 2015-53 (Link) announcing inflation-adjusted amounts for penalties imposed under Sections 6721 and 6722 of the Internal Revenue Code for failure to timely file correct information returns (e.g., Forms 1099, 1042-S, etc.) with the IRS and to furnish correct and timely statements to payees.
Observations: Taxpayers in all industries that make payments in the course of their trade or business have the responsibility to file information returns (e.g., Forms 1099, 1042-S, etc.). This responsibility often is situated outside of the traditional corporate tax department occurring instead in operations groups, accounts payable, and treasury departments. Corporate tax departments often may not have direct insight into how these tax reporting obligations are executed. With the increased penalties and IRS focus in this area, it is important to have consistent controls and policies and procedures to limit an organization’s exposure to penalties.
Link to US Tax Insights