Switzerland discusses on Global Forums’ recommendations

On 21 November 2018, the Swiss Federal Council adopted a bill regarding the implementation of the Organisation for Economic Co-operation and Development (“OECD”) Global Forum’s recommendations (Link-German).

The bill includes the topic of bearer shares, which would only be permitted if the company has securities listed on a stock exchange or if the shares are structured as book-entry securities.

The bill also deals with the exchange of information requirements on the confidentiality of administrative cooperation requests and on the party-capability and process-capability of parties, which will be subject to administrative cooperation information requests. The bill further clarifies the procedures of administrative assistance requests that are based on stolen data.

The Swiss Federal Department of Finance plans to publish instructions on the conversion of bearer shares into registered shares and on structuring them as book-entry securities.

The bill will be discussed by the Swiss parliament in early 2019.

Canada updates declaration of tax residence process for individuals

On 22 November 2018, after the statement on Canada’s commitment to combating offshore tax evasion and aggressive tax avoidance (Link-Blog), the Canada Revenue Agency (“CRA”) released an updated version of form RC518, which is the declaration of tax residence for individuals form (Link). For the purpose of the Foreign Account Tax Compliance Act (“FATCA”) and the Common Reporting Standard (“CRS”), individuals may populate the form to identify the account holder (section 1) and to declare the tax residence (section 2).

India amends due diligence process by releasing a list of jurisdictions where passive non-financial entities will not be considered as regulated under FATCA

On 5 November 2018, the Indian Central Board of direct taxes issued a “Notification no. 78/2018”, which sets out a list of specific jurisdictions that will not be considered for the purposes of determining a “Passive non-financial entity” as regulated in sub-clause (ii) of clause (D) of the Explanation to clause (6) of Rule 114F of the Income tax rules, 1962. The list contains 87 countries (Link).

The related Rule 114F, describing due diligence requirements under the Foreign Account Tax Compliance Act (“FATCA”) in India can be found on the website of the Indian Income Tax Department (Link).

The IIB discovered unintended consequences for Form 1099 reporting for foreign subsidiaries of foreign banks due to the repeal of section 958(b)(4)

On 20 November 2018, the Institute of International Bankers (“IIB”) sent a letter to the Internal Revenue Service in the United States (“IRS”) to request guidance to eliminate new U.S. tax reporting obligations on foreign subsidiaries of foreign banks (Link).

The IIB states that the repeal unintentionally imposes new U.S. tax reporting obligations on foreign subsidiaries of foreign banks, if the bank has a U.S. subsidiary. The IIB therefore requests that the IRS issue guidance that controlled foreign corporations (“CFCs”) created due to the repeal of section 958(b)(4) will not be treated as “U.S. Payors” for purposes of Form 1099 reporting (chapter 61) and backup withholding (section 3406) purposes.

American Bar Association hosts a webcast on the new wave of global reporting rules and IRS tools to unearth Foreign Financial Accounts

On 12 December 2018, the American Bar Association will host a webcast on the new wave of global reporting rules and Internal Revenue Service in the United States (“IRS”) tools to unearth Foreign Financial Accounts (Link). The American Bar Association state that mandatory reporting of offshore financial assets by financial institutions has been expanding globally ever since the U.S., in the wake of the UBS scandal, passed the Foreign Account Tax Compliance Act (“FATCA”) as a complementary program to the Foreign Bank Account Report (“FBAR”).

The Justice Department and IRS maintain that, despite these reporting regimes, a high percentage of U.S. taxpayers, including millions residing abroad, are still failing to comply. The Criminal Investigation division of the IRS recently unveiled two new investigative units: the International Tax Enforcement Group (“ITEG”) and the Nationally Coordinated Investigations Unit (“NCIU”) – both aimed at increasing taxpayer compliance using advanced data analytics. Meanwhile, the Justice Department’s Swiss Bank Program – an amnesty program designed for Swiss financial institutions – is in its legacy phase and the IRS is closing (as of Sept. 28, 2018) its popular Offshore Voluntary Disclosure Program (“OVDP”) under which cooperating taxpayers could pay reduced penalties and avoid criminal sanctions. Both the Justice Department and IRS have broadened their efforts and are now investigating funds that flowed out of the scrutinized Swiss banks to banks in other countries.

Tax advisors with international components to their practices should be aware of the impacts and exigencies of both the FATCA and the Common Reporting Standard (“CRS”). The panel will discuss critical updates to the FATCA and FBAR reporting regimes, outline recent enforcement efforts by the Justice Department and IRS, and compare the OECD’s CRS to FATCA, including their respective impacts on funds. Tax planning strategies and policy implications will also be discussed, including how the automatic exchange-of-information programs are likely to affect taxpayer behavior and compliance rates, professional tax advice, and the so-called tax gap in the U.S. and other jurisdictions.

First Ever Conviction for Failing to Comply with FATCA

On 11 September 2018, the Department of Justice in the United States announced that an individual pleaded guilty to conspiring to defraud the United States by failing to comply with the Foreign Account Tax Compliance Act (“FATCA”) at the federal court in Brooklyn (Link).

This former Chief Business Officer and former Chief Executive Officer of Loyal Bank Ltd, an offshore bank with offices in Budapest, Hungary and Saint Vincent and the Grenadines was extradited to the United States from Hungary in July 2018. This guilty plea represents the first-ever conviction for failing to comply with FATCA. When sentenced, this individual faces a maximum of five years in prison.

U.S. IRS reminds users of IDES testing session

On 27 November 2018, the Internal Revenue Service in the United States (“IRS”) released issue 2018-12, which reminds users that there will be a testing session of the FATCA International Data Exchange Service (“IDES”) from Monday, 17 December 2018 at 8:00 AM EST to Friday, 25 January 2018 at 5:00 PM (Link). The test session will be open to users that have completed IDES enrollment by Thursday, 13 December 2018 at 5:00 PM EST. In order to participate in testing, users need to have an active password. All passwords and profile information should be updated before the enrollment cutoff. All testing sessions will be announced on the IDES Testing Schedule web page (Link). If Financial Institutions need assistance with enrollment the IDES Help Desk should be contacted (Link).

IRS Public Key for FATCA Filing is Expiring Soon

On 27 November 2018, the Internal Revenue Service in the United States (“IRS”) released issue 2018-13, which reminds that the public/private key pairs used for encryption for Foreign Account Tax Compliance Act filings will expire on 30 November 2018 (Link). The IRS has a new key and will replace the existing key with a new IRS Public Key, which has to be downloaded from International Data Exchange Service (“IDES”) to file FATCA Reports (Link).

As a reminder, when purchasing a new digital certificate or replacing one that is about to expire, IDES only recognizes and accepts digital certificates issued by IRS approved Certificate Authorities (CA) (Link).

IRS updates e-service registration process

On 26 November 2018, the U.S. Internal Revenue Service (“IRS”) announced an update of the e-service registration process (Link). Based on the feedback received from tax professionals regarding the e-Services registration process, the following changes have been made:

  • The types of acceptable financial accounts to include student loans have been expanded. The financial account information is one of a combination of ways we verify your identity through Secure Access.
  • For those tax professionals who lack an e-Services account and who cannot complete the identity proofing process online, an exception process that allows for manual assistance once in-person authentication has been made has been created. This will help new hires as well as those first-time users who were unable to complete the process last year.

A user, which already created an e-Services account using Security Access authentication, does not need to take any action. This is a one-time registration process. Please review Updated Information for e-Services Users for details about these changes.

OECD Global Forum summarizes annual meeting

From 20 to 22 November 2018, the Global Forum on Transparency and Exchange of Information for Tax Purposes held its annual meeting in Punta del Este, Uruguay, bringing together over 200 delegates from more than 100 jurisdictions, international organizations and regional groups to further strengthen the international community’s fight against tax evasion (Link).

The meeting marked the widespread rollout of automatic exchange of financial account information. Global Forum members took stock of the tremendous progress made in the implementation of the standard of automatic exchange of information (“AEOI”) with 4,500 successful bilateral exchanges having taken place under the new AEOI Standard in 2018 by 86 jurisdictions. Each exchange contains detailed information about the financial accounts each jurisdiction’s taxpayers hold abroad. Such widespread exchange was also facilitated by the use of the Common Transmission System managed by the Global Forum (Link).

Following its review of the legal frameworks, the Global Forum will move to assessing the effectiveness of the AEOI Standard in practice. To this end members adopted a detailed Terms of Reference for such reviews and a work plan to further develop, test and refine its approach to conducting the reviews, which will commence in 2020.

The Global Forum also published a further 22 jurisdiction reviews (Link) this year in relation to the exchange of information on request (“EOIR”), which has only increased in relevance with the move to AEOI and transparency initiatives in relation to base erosion and profit shifting (“BEPS”).


A short cartoon of the Global Forum’s work and the meeting statement of outcomes can be accessed via YouTube (Link) and the Organization for Economic Co-operation and Development (“OECD”) website (Link).