FATCA and CRS compliance reviews intensify

The international tax landscape has undergone significant reform in recent years and is under the spotlight more than ever. This degree of change is particularly evident with the increased scrutiny in the area of exchange of information initiatives (FATCA and CRS) by local tax authorities, which demonstrates a trend towards greater transparency.

Irish Revenue is currently undergoing a peer review by other tax authorities to ensure that Irish financial institutions with due diligence and reporting obligations under the CRS are meeting their responsibilities. As a result, Revenue is actively undertaking a thorough compliance review process in this area.

Revenue is now contacting reporting financial institutions with regard to their CRS and FATCA compliance obligations. Typically, this involves detailed information requests, as well as a profile interview to discuss the answers to their questions (Revenue would typically expect a response to the questions in advance of the profile interview).

Revenue have also been issuing 'non-filer' letters to reporting Irish financial institutions where they have identified that a financial institution has registered for a reporting obligation for FATCA and/or CRS via ROS (Revenue Online Service), but there was no return filed during the 2020 reporting period. In the letters, Revenue state that the financial institutions have 21 days to revert. Where the financial institution fails to revert within the required timeframe, Revenue will escalate the matter to the division that deals with the tax affairs of the Financial Institution for further action. This may result in an on-site visit, a review of FATCA and DAC2/CRS procedures and/or the application of penalties. We are aware of Irish Revenue instigating penalty proceedings with respect to non compliance and specifically in relation to the lack of response to their issuance of non filer letters. In this regard, Revenue is encouraging prompt engagement to ensure that any issues are rectified as soon as possible.

We have worked with financial institutions to manage the compliance review process. This includes attending Revenue profile interviews, providing assistance with appropriate policies and procedures documentation and providing training to relevant team members. Although the due diligence and reporting process is outsourced to third-party service providers in many instances, Revenue expects financial institutions to maintain overall responsibility for the process. In this regard, they expect that the relevant teams with FATCA and DAC2/CRS responsibilities are informed and kept up to date to ensure that they fully understand their obligations.

The trend towards greater transparency is also evident more globally, with a significant focus on the appropriate written policies and procedures. Examples include the introduction of the CRS compliance form under the Caymans Islands CRS reporting framework and the introduction of an annual CRS compliance certification form by the Bermuda Ministry of Finance. These additional, mandatory requirements are geared towards collating additional information to ensure the effective implementation of, and compliance with, due diligence and reporting procedures by financial institutions.

The three areas you cannot afford to ignore

1. Develop robust internal policies and procedures

The increased focus on FATCA and CRS compliance, both locally and internationally, means that you need to clearly document your policies and procedures to ensure that you can demonstrate compliance with both due diligence and reporting obligations.

2. Provide training to your teams

One of the areas of focus for tax authorities is on whether appropriate training on FATCA and CRS has been provided to the relevant team members. It's therefore imperative that your team is up to speed in relation to account onboarding procedures, the need to test the quality of the account holder data provided and the ultimate determination of account holder classifications.

3. Manage annual reporting obligations and your data

Whether you are an Irish Financial Institution or an international group with multi-jurisdictional financial institutions, you need to ensure that all relevant deadlines are adhered to with respect to requisite annual FATCA and CRS filings. Having the necessary technology solutions is key to meeting your obligations, from the ability to convert your data into the requisite XML format to accommodating country-specific requirements, as well as the ability to provide an appropriate audit trail of the work performed.

We are here to help you

Our Information Reporting team, which specialises in tax transparency and the Automatic Exchange of Information (AEOI), is ready to help you prepare for any Revenue review, assist you in engaging with Revenue and, more importantly, ensure that you are meeting your due diligence and reporting CRS and FATCA obligations in relation to the financial accounts maintained by you. We can prepare and submit FATCA and CRS reports for you across multiple jurisdictions in a secure and auditable way. Contact us today.