Global Forum on the effective implementation of AEOI and Covid-19

From 16 to 18 March 2020, the Global Forum on Transparency and Exchange of Information for Tax Purposes held the first meeting of its peer review group on the effective implementation of automatic exchange of tax information (Link).

The Peer Review Group should ensure the effective implementation of the Standard for Automatic Exchange of Financial Account Information in Tax Matters. Comprised of 34 Global Forum members, the Peer Review Group discussed key issues in ensuring that jurisdictions are putting in place what is required to deliver an effective AEOI Standard as well as how the recent developments in relation to Covid-19 might impact expectations.

SIFMA recommends changes to clarify QI Agreement

On 23 March 2020, the Securities Industry and Financial Markets Association (“SIFMA”) asked the U.S. Internal Revenue Service (“IRS”) to take their comments in anticipation of revisions to the Qualified Intermediary Agreement (“QI Agreement”) into account (Link).

In addition to recommending an extension to request responsible officer certification, limiting the scope of “depooling” required under the QI agreement, SIFMA requests to simplify joint account certifications in the new QI agreement. The certification would have been required in addition to a Form W-8 from the partnership or trust, which already contained certifications regarding the entity’s Foreign Account Tax Compliance Act (“FATCA”) status, including a certification, under penalties of perjury, that the partnership or trust would update the form within 30 days of any change in circumstances.

IRS updates FAQ on FATCA providing an extended filing deadline

On 25 March 2020, U.S. Internal Revenue Service (“IRS”) updated its Frequently Asked Questions (“FAQs”) – General on the Foreign Account Tax Compliance Act (“FATCA”) (Link).

Question 4 in the section “Reporting” has been updated to support users in understanding the respective requirements:

Question4: Due to the COVID-19 virus, will foreign financial institutions (FFI) filing the FATCA Report (Form 8966) to the IRS pursuant to the terms of a Model 2 IGA or the FFI agreement (i.e., a Reporting Model 2 FFI or Participating FFI) be granted an extension of time to file the FATCA Report which is generally due on March 31?

Answer 4: Yes. In response to the COVID-19 virus, the Internal Revenue Service will provide an extension of time for a Reporting Model 2 FFI or a Participating FFI to file the FATCA Report (Form 8966) to the IRS. The filing deadline for the FATCA Report (Form 8966) will be extended from March 31, 2020 to July 15, 2020.  Form 8809-I, Application for Extension of Time to File FATCA Form 8966 will not be required for this extension

IRS updates FAQs on QI/WP/WT

On 25 March 2020, the U.S. Internal Revenue Service (“IRS”) released issue number 2020 – 04 updating its Frequently Asked Questions (“FAQs”) on Qualified Intermediaries (“QI”), Withholding Foreign Partnerships (“WP”) and Withholding Foreign Trusts (“WT”) (Link).

Question 5 and 18 in the section “Certifications and Periodic Reviews” have been updated to support users in understanding the respective requirements.

Question 5: How can a group of Qualified Intermediaries or Withholding Foreign Partnerships apply to form a CCG?

Answer 5: An application to form a CCG should be submitted by the responsible officer, or other authorized user of the proposed Compliance Entity account, no earlier than January 1st of the year following the proposed year of periodic review, and no later than April 1st of the year the certification is due. The submission should not be made before a complete application, including statistics required to propose a statistical sampling plan, can be submitted. If the submission is made on or after January 1st of the year the certification is due, the submission must be made using the QI/WP/WT Application and Account Management system.  If the submission is made earlier, it must be sent via e-mail to the Financial Intermediaries Team (FI Team) at lbi.fi.qiwpissues@irs.gov.  If the submission is made by e-mail before 1/1 of the year the certification is due, the submission must still be made using the QI/WP/WT system, to allow for automated internal tracking, no later than April 1st of the year the certification is due, even if the CCG request was already approved by the IRS.

Upon submission of an application to form a CCG, the IRS will contact the applying Compliance Entity to request any further information necessary to determine if the CCG is acceptable to the IRS.  This ongoing discussion will also address such issues as the final composition of group members and sample design for any statistical sampling to be utilized for the periodic review.

 

Question 18: Will the IRS accept applications to form a consolidated compliance group (CCG) if the application proposes using the first year of its certification period as its periodic review year?

Answer 18: Yes, the IRS will accept an application proposing to use the first year of the certification period when the responsible officer (RO), or other authorized user of the proposed Compliance Entity submits a CCG application that includes:

  1. Forms 872 (Consent to Extend the Time to Assess Tax) validly executed for each entity to be included in the CCG, extending the time to assess tax on Forms 1042 and 945 until no earlier than 12/31 of the second full calendar year following the certification due date. CCG applications proposing to use the first year for periodic review will not be evaluated until all Forms 872 are submitted and approved. For example:

If a proposed compliance entity, with a certification period covering 2017, 2018 and 2019, and a certification due date of 7/1/20, wants to have a periodic review performed for 2017 (the first year of their certification cycle), the QI must submit Forms 872 consenting to extend the time to access tax on Forms 1042 and 945 for calendar years 2017 and 2018 until 12/31/22 (at the earliest) on all entities included in the CCG.

  1. A time line that proposes the start and completion dates of the periodic review, along with a due date for delivery of the periodic review report by the reviewer(s) to the RO of the compliance entity. The periodic review report must be submitted to the IRS by the earlier of:
  • 30 days after delivery of the periodic review report by the reviewer(s) to the RO of the compliance entity; or
  • the Certification Due Date.

The entity must also agree to:

  1. Include in the periodic review report, the review plan that directed the reviewer(s), along with any deviations from that plan. Any such deviations from the review plan should be explained in detail. Any such description must explain the reason the reviewer deviated from the review plan, and what alternate steps the reviewer(s) took.
  2. Notify the IRS of any material failures or events of defaults within 30 days of identification.

Morocco approves AEOI agreement

On 30 January 2020, Morocco issued Bill No. 77-19 approving the multilateral agreement between Competent Authorities concerning the Automatic Exchange of Information (“AEOI”). The bill was signed by the Kingdom of Morocco (Link-French).

Morocco has been added to the OECD Common Reporting Standard (“CRS”) Multilateral Competent Authority Agreement signatories list on 25 June 2019 (Link-Blog). As the Convention is the premier instrument for the implementation of the Common Reporting Standard (“CRS”), the Convention should enable Morocco to fulfil the commitment to begin the first exchange of the information by September 2021 (Link).

South Africa opens SARS Third Party Data Annual Submission process

On 2 March 2020, the South African Revenue Service (“SARS”) announced the opening of the Third-Party Data Annual Submission process for the period 1 March 2019 – 29 February 2020. The process is open from 1 April 2020 to 31 May 2020. Details on submission dates and the various reportable data types, including Common Reporting Standard (“CRS”) and Foreign Account Tax Compliance Act (“FATCA”) data, can be found in the table provided on the SARS website (Link).

Cayman Islands releases AEOI News & Updates

On 17 March 2020, the Cayman Islands’ Department for International Tax Cooperation (“DITC”) released an updated version of the Automatic Exchange of Information (“AEOI”) News & Updates circular: “AEOI News & Updates” to reflect recent changes regarding the AEOI (Link).

The Common Reporting Standard (“CRS”) and Foreign Account Tax Compliance Act (“FATCA”) section “AEOI Portal/new DITC Portal” was updated to include a survey on the functionalities of the new portal. The survey lists 10 questions which provide an indication of the functionalities which are planned to be developed and released in the new DITC portal.

The survey is available on the Cayman Islands website (Link).

Russia updates information on CRS reporting

On 13 March 2020, Russia updated information on the Common Reporting Standard (“CRS”) reporting in the section “Legislation, forms and formats, clarifications” to provide information on the relevant technical documentation (Link-Russian).

In addition, also on 13 March 2020, the section “Rules of Reporting – new reporting rules for financial market organizations” has been updated (Link-Russian).

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