Preparing for the OECD Common Reporting. October 6, 2014

Preparing for the OECD

Common Reporting

Notice

The following information is not intended to be “written advice concerning one or more

Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury

Department Circular 230.

You (and your employees, representatives, or agents) may disclose to any and all

persons, without limitation, the tax treatment or tax structure, or both, of any transaction

described in the associated materials we provide to you, including, but not limited to, any

tax opinions, memoranda, or other tax analyses contained in those materials.

tax opinions, memoranda, or other tax analyses contained in those materials.

The information contained herein is of a general nature and based on authorities that are

subject to change. Applicability of the information to specific situations should be

Bank

Country A

Account

Holder





1. Model 1 IGA reporting

2. Model 1 IGA exchanges

3. Leveraging Model 1 IGA implementation to

develop automatic exchange in multilateral

context

Account



CRS – Other Countries Want FATCA, Too

Development of CRS

G-20 Calls on OECD to Develop Multilateral Standard for Automatic Exchange of

Financial Account Information in September 2013

OECD Develops CRS Together with G-20 Countries

●

OECD works with the Business and Industry Advisory Committee via a special

Business Advisory Group

●

February 2014: OECD releases and G-20 approves CRS

●

July 2014: OECD issues Standard for Automatic Exchange of Financial

●

July 2014: OECD issues Standard for Automatic Exchange of Financial

Information in Tax Matters:



Model Competent Authority Agreement (CAA)



Common Reporting Standard (CRS)



CRS Commentary

●

September 2014: G-20 calls on all financial centers to commit by October 2014 to

Bank

Country A

Account

Holder

Reporting of information based on

Common Reporting and Due Diligence

Standard (CRS) implemented via

domestic law

Automatic exchange of information

based on bilateral treaty, TIEA, or MAC,

Automatic exchange standard

Basic approach - CRS + CAA = exchange standard

Bank

Account

Holder

Country B

5

based on bilateral treaty, TIEA, or MAC,

& CAA

Reporting of information based on

Common Reporting and Due Diligence

Standard (CRS) implemented via

Development of CRS

●

CRS and associated Commentary provide:



Due diligence procedures for ascertaining identity and tax residence of

account holders



Reporting requirements (e.g. information on accountholder(s), financial

account assets, and annual income and gross proceeds)



Procedures:

o

Financial institutions reporting information to local tax authorities

o

Receiving jurisdictions exchanging information with residence

EU Revised

Administrative

Cooperation

Directive to be

adopted

Expected Timeline

Oct

2013 2014

2015

2016

EU

EU Revised Savings

Directive adopted

March 2014

EU AEoI on financial

Income is effectively

applied 1/1/2015

EU Revised Savings

Directive to be

effectively applied

1/1/2016

EU Revised Savings

Directive adopted

OECD: CRS and

Commentary are

CRS Review of High-Value

Accounts Completed for

Early Adopters

2017

OECD

FATCA

CD

PLUS

Directive adopted

March 2014

Commentary are

finalized September

2014

FATCA Reporting

(Regulations)

3/31/2015

FATCA Exchange

(Model 1 IGA

countries) 9/30/2015

New Account due

diligence/

identification begins

7/1/2014

New Account due

diligence/

identification begins

7/1/2014

CRS Exchange

begins for Early

Adopters

9/30/2017

OECD Trace Initiative

Various bilateral agreements

Early Adopters

12/31/2016

CRS due diligence New

Accounts for Early

Implementation of the CRS

●

More than 60 jurisdictions have committed to implement CRS



Participating jurisdictions will need to implement legislation adopting

CRS customer due diligence and reporting obligations



Early adopter jurisdictions (more than 40) have committed to begin

exchange of information by September 2017

–

New account opening procedures by January 2016

●

Impact of CRS on FATCA



Ability to enter into IGAs



Will CRS satisfy FFIs’ obligations under FATCA?

Early Adopters as of August 2014

Anguilla

Argentina

Belgium

Bermuda

British Virgin Islands

Bulgaria

Cayman Islands

Colombia

Germany

Gibraltar

Greece

Guernsey

Hungary

Iceland

India

Ireland

Mexico

Montserrat

Netherlands

Norway

Poland

Portugal

Romania

Seychelles

Colombia

Croatia

Cyprus

Czech Republic,

Denmark

Estonia

Faroe Islands

Finland

France

Ireland

Isle of Man

Italy

Jersey

Latvia

Liechtenstein

Lithuania

Malta

Seychelles

Slovakia

Slovenia

South Africa

Spain

Sweden

Development of CRS

●

Scope of CRS largely the same as U.S. Model 1 IGA across three key

dimensions:



Financial information to be reported includes all types of investment

income (including interest, dividends, income from certain insurance

contracts and other similar types of income,) but also account balances

and sales proceeds from financial assets.



Financial institutions that are required to report under the CRS include



Financial institutions that are required to report under the CRS include

not only banks and custodians, but also other financial institutions such

as brokers, certain collective investment vehicles and certain insurance

companies.



Reportable accounts include accounts held by individuals and entities

(which includes trusts and foundations).

●

Important differences between CRS and FATCA will require

Key Differences Between CRS and FATCA

Individuals

• Residence (not including citizenship)

• No thresholds

Entities

• Look-through for Reportable Entities that

are Passive NFEs

No Withholding

• No thresholds

• Residence address test for pre-existing

accounts building on EU Savings

Directive

• Simplified indicia search

are Passive NFEs

• Look-through for investment entities in

non-participating jurisdictions

Low risk FIs and products

Pre-existing accounts (can also

elect to apply New Account

procedures)

No de minimis threshold

Lower Value Accounts : permanent

residence address test based on

documentary evidence (including a

penalties of perjury statement) or

electronic indicia search

CRS Due Diligence Procedure - Individuals

In

d

iv

id

u

a

ls

Higher Value Accounts: enhanced

due diligence procedures (paper

record indicia search, actual

knowledge test by the relationship

manager)

Pre-existing accounts (can also

elect to apply New Account

procedures)

No review for accounts below

250,000 USD

Reportable person: available

information (AML/KYC

procedures), in certain cases

self-certification

CRS Due Diligence Procedure - Entities

E

n

ti

ti

e

s

Passive NFE and controlling

persons: available information or

self-certification

New accounts

Same assessments as for

pre-existing accounts, but no

de minimis threshold &

self-certification required to identify

Other Key Differences

●

Different Account Holder Information Collected



Self-certification for individuals must include date of birth (and maybe

place of birth)



Self-certification must collect tax residence of each account holder (not

just U.S./non-U.S. status)



Controlling Person information for reportable entities that are passive

NFEs



Controlling Person information for Investment Entities in

non-participating jurisdictions

●

Different information reported on account closure

OECD’s Treaty Relief and Compliance

Enhancement Initiative: TRACE

●

Goal: develop standardized cross-border tax relief procedures that protect

government revenues through compliance checks, reduce administrative

barriers to treaty relief, reduce administrative costs, enhance markets, and

promote tax certainty

●

TRACE sets forth an Authorized Intermediary (“AI”) system based on U.S.

QI system



At-source relief under tax treaties and/or domestic law



Financial institutions claim tax relief on “pooled” basis



2013 TRACE Implementation package: agreements and forms

●

TRACE in tandem with CRS:



Potential solution for form problems



Additional check on residency information