The world of FATCA & CRS can be daunting. But with the KENDRIS Ultimate Guide to FATCA & CRS for Fiduciaries, we go through everything you need to know.
2. FATCA & CRS BASICS
Contents
2
FATCA Basics 3 Requirements for participating jurisdictions 23
What is FATCA? 4 How does it work? 24
Intergovernmental Agreements 5 Exchange of Information: Individuals 25
IGA status as of January 2019 6 Exchange of Information: Entities 26
Entity Types (FATCA) 8 Reportable Persons 27
Foreign Financial Institution (FFI) obligations under FATCA 9 Entity Types 28
Non-Financial Foreign Entity (NFFE) obligations under FATCA 10 Definitions: Stand-alone Company / Partnership, FI 29
Financial Account 11 Definition: Stand-alone Company / Partnership, Passive NFE 30
Substantial US Owner/Controlling Person 12 Definition: Trust or Foundation, FI 31
FATCA Sponsorship 13 Definition: Trust or Foundation, Passive NFE 32
What type of Sponsored Entity categories are available? 14 Financial Institution (FI) obligations under CRS 33
FATCA Self-Certification Forms 15 Non-Financial Entity (NFE) obligations under CRS 34
Obligations of the Sponsor 17 Reportable information 35
CRS Basics 18 Reportable Information: Company 36
What is CRS? 19 Reportable Information: Trust 37
CRS World Map 20 Differences and similarities between FATCA and CRS 38
List of Participating Jurisdictions 21 KENDRIS CRS FATCA Compliance App 39
The Common Reporting Standard (CRS) 22 Get in touch 40
4. FATCA & CRS BASICS
What is FATCA?
4
▪ FATCA stands for The Foreign Account Tax
Compliance Act (FATCA)
▪ It generally requires that foreign financial
Institutions and certain other non-financial foreign
entities report on the foreign assets held by their US
account holders, or be subject to withholding on
withholdable payments
▪ Keyword: US
▪ Under FATCA, to avoid being withheld upon, foreign
financial institutions (FFIs) may register with the IRS
and agree to report to the IRS certain information
about their US accounts, including accounts of
certain foreign entities with substantial US owners
▪ FFIs that enter into an agreement with the IRS to
report on their account holders may be required to
withhold 30% on certain payments to foreign payees
if such payees do not comply with FATCA
5. FATCA & CRS BASICS
▪ The treatment of an FFI established in a jurisdiction
with an intergovernmental agreement (IGA) treated
as in effect may differ from the treatment described
in the US Treasury Regulations (FATCA).
Intergovernmental Agreements (IGA)
5
▪ An FFI in such a jurisdiction should refer to the
applicable intergovernmental agreement.
6. FATCA & CRS BASICS
IGA status as of January 2019 (1/2)
6
Algeria British Virgin Islands Model 1 Dominica Model 1 Honduras Model 1
Angola Bulgaria Model 1 Dominican Republic Model 1 Hong Kong Model 2
Anguilla Cabo Verde Model 1 Estonia Model 1 Hungary Model 1
Antigua and Barbuda Cambodia Model 1 Finland Model 1 Iceland Model 1
Armenia Canada Model 1 France Model 1 India Model 1
Australia Cayman Islands Model 1 Georgia Model 1 Indonesia Model 1
Austria Chile Model 2 Germany Model 1 Iraq Model 2
Azerbaijan China Model 1 Gibraltar Model 1 Ireland Model 1
Bahamas Colombia Model 1 Greece Model 1 Isle of Man Model 1
Bahrain Costa Rica Model 1 Greenland Model 1 Israel Model 1
Barbados Croatia Model 1 Grenada Model 1 Italy Model 1
Belarus Curaçao Model 1 Guernsey Model 1 Jamaica Model 1
Belgium Cyprus Model 1 Guyana Model 1 Japan Model 2
Bermuda Czech Republic Model 1 Haiti Model 1 Jersey Model 1
Brazil Denmark Model 1 Holy See Model 1 Kazakhstan Model 1
7. FATCA & CRS BASICS 7
Kosovo Model 1 New Zealand Model 1 Singapore Model 1 Turkey Model 1
Kuwait Model 1 Nicaragua Model 2 Slovak Republic Model 1 Turkmenistan Model 1
Latvia Model 1 Norway Model 1 Slovenia Model 1 Turks and Caicos Islands Model 1
Liechtenstein Model 1 Panama Model 1 South Africa Model 1 Ukraine Model 1
Lithuania Model 1 Paraguay Model 2 South Korea Model 1 United Arab Emirates Model 1
Luxembourg Model 1 Peru Model 1 Spain Model 1 United Kingdom Model 1
Macao Model 2 Philippines Model 1 St. Kitts and Nevis Model 1 Uzbekistan Model 1
Malaysia Model 1 Poland Model 1 St. Lucia Model 1 Vietnam Model 1
Malta Model 1 Portugal Model 1 St. Vincent and the Grenadines Model 1
Mauritius Model 1 Qatar Model 1 Sweden Model 1
Mexico Model 1 Romania Model 1 Switzerland Model 2
Moldova Model 2 San Marino Model 2 Taiwan* Model 2
Montenegro Model 1 Saudi Arabia Model 1 Thailand Model 1
Montserrat Model 1 Serbia Model 1 Trinidad and Tobago Model 1
Netherlands Model 1 Seychelles Model 1 Tunisia Model 1
* Consistent with the Taiwan Relations Act, the parties to the agreement are the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the UnitedStates.
IGA status as of January 2019 (2/2)
8. FATCA & CRS BASICS
Entity types
8
Entity
Account
Holder
Non Financial Foreign Entity (NFFE)
Passive NFFEActive
By reason of Income & Assets, Publicly
Traded NFE, Governmental Entity (…),
Holding NFE, Start-Up NFE, NFE in
Liquidation, Treasury Center, Non-Profit
NFE
Substantial US owner/
Controlling person(s)
Foreign Financial
Institution (FI)
Depository institutions, Custodial
institutions, Investment entities,
Specified Insurance companies
9. FATCA & CRS BASICS
▪ Classify itself under FATCA to:
▪ find out whether there is a reporting obligation
▪ certify FATCA status to the banks and other
financial institutions
▪ Register for own GIIN at IRS to comply with the
FATCA regulations or appoint sponsor and use
Sponsor’s GIIN, if possible
▪ Identify all US Persons by obtaining
Self-Certification Forms
Foreign Financial Institution
(FFI) obligations under FATCA
9
▪ Review transactions with US Persons to identify
Financial Accounts
▪ Perform an annual review of the appropriateness of
the current status, account for changes in
circumstances
▪ Report Financial Accounts on an annual basis to the
IRS or local tax authority
10. FATCA & CRS BASICS
▪ Classify itself under FATCA to
▪ find out whether there is a reporting obligation
▪ certify FATCA status to the banks and other
financial institutions
▪ Identify all US Persons
▪ Disclose its US controlling persons / substantial
owners to reporting FFIs upon request
Non-Financial Foreign Entity
(NFFE) obligations under FATCA
10
▪ Perform an annual review of the appropriateness of
the current status, account for changes in
circumstances
11. FATCA & CRS BASICS
Financial Account
11
A Financial Account means:
▪ Depository account
▪ Custodial account
▪ Equity or debt interest in an investment entity
▪ In case of a trust that is a FI, an equity interest means interest held by:
○ A person who is considered to be the owner of all or a portion of
the trust
○ A beneficiary that is entitled to a mandatory distribution from the
trust
○ A beneficiary who may receive a discretionary distribution from
the trust, but only if such person received a distribution in the
calendar year
12. FATCA & CRS BASICS
▪ Corporation
US Person owns, directly or indirectly, more than 10
% of the stock
▪ Partnership
US Person owns, directly or indirectly, more than 10
% of the profits or capital interest
Substantial US Owner/Controlling Person
12
▪ Trust
US Person is:
▪ Treated as an owner of any portion of such trust
(grantor trusts), or
▪ holds, directly or indirectly, more than 10% of the
beneficial interests
of such trust
13. FATCA & CRS BASICS
▪ An entity can benefit from having a FATCA Sponsor
▪ Entity : Sponsored Entity
▪ Sponsor: Sponsoring Entity
▪ Sponsoring Entity will perform due diligence,
withholding (in certain cases),
and reporting obligations on behalf of the
Sponsored Entity
▪ The Sponsorship is subject to a contractual
relationship – a Sponsorship Agreement
FATCA Sponsorship
13
14. FATCA & CRS BASICS
What type of
Sponsored Entity
categories are
available?
14
15. FATCA & CRS BASICS
FATCA Self-Certification Form (Individual)
15
Non-US Person
US Person
16. FATCA & CRS BASICS
FATCA Self-Certification Form (Entity)
16
Non-US Person
US Person
17. FATCA & CRS BASICS
▪ Maintaining the registration with the IRS as the
Sponsor
▪ Reviewing the US Indicia on an annual basis and
identifying any new reportable accounts in respect of
the entity
▪ Managing change in circumstances events:
identification of any changes to the entity, ensuring
appropriate action is taken to ensure compliance
with FATCA
Obligations of the Sponsor
17
The Sponsor’s role is to fulfil all due diligence, withholding and reporting responsibilities that the
entity would have assumed if it were a Participating Foreign Financial Institution
Annual Activities of the Sponsor are:
▪ Reviewing FATCA status classification once a year,
documenting the review and amending the FATCA
status if necessary
▪ Maintaining the documentation of the entity in
relation to FATCA and keeping the documentary
evidence up to date for the audit trail
19. FATCA & CRS BASICS
▪ The Common Reporting Standard (CRS), developed in response to the G20 request and
approved by the OECD Council on 15 July 2014, calls on jurisdictions to obtain information
from their financial institutions and automatically exchange that information with other
jurisdictions on an annual basis
▪ It sets out the financial account information to be exchanged, the financial institutions
required to report, the different types of accounts and taxpayers covered, as well as common
due diligence procedures to be followed by financial institutions
▪ Key word: Multilateral
What is CRS?
19
20. FATCA & CRS BASICS
CRS
World
Map
20
More than 100 participating jurisdictions
21. FATCA & CRS BASICS
Source: OECD Website http://www.oecd.org/tax/transparency/AEOI-commitments.pdf
List of Participating Jurisdictions
21
Jurisdictions undertaking first
exchanges in 2017 (49)
Jurisdictions undertaking first
exchanges in 2018 (51)
Jurisdictions undertaking first
exchanges in 2019/2020 (8)
Anguilla, Argentina, Belgium, Bermuda, British Virgin
Islands, Bulgaria, Cayman Islands, Colombia, Croatia,
Cyprus, Czech Republic, Denmark, Estonia, Faroe
Islands, Finland, France, Germany, Gibraltar, Greece,
Guernsey, Hungary, Iceland, India, Ireland, Isle of Man,
Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania,
Luxembourg, Malta, Mexico, Montserrat,
Netherlands, Norway, Poland, Portugal, Romania, San
Marino, Seychelles, Slovak Republic, Slovenia, South
Africa, Spain, Sweden, Turks and Caicos Islands,
United Kingdom
Andorra, Antigua and Barbuda, Aruba, Australia,
Austria, Azerbaijan, The Bahamas, Bahrain, Barbados,
Belize, Brazil, Brunei Darussalam, Canada, Chile,
China, Cook Islands, Costa Rica, Curacao, Dominica,
Greenland, Grenada, Hong Kong (China), Indonesia,
Israel, Japan, Lebanon, Macau (China), Malaysia,
Marshall Islands, Mauritius, Monaco, Nauru, New
Zealand, Niue, Pakistan3 , Panama, Qatar, Russia,
Saint Kitts and Nevis, Saint Lucia, Saint Vincent and
the Grenadines, Samoa, Saudi Arabia, Singapore, Sint
Maarten, Switzerland, Trinidad and Tobago, Turkey,
United Arab Emirates, Uruguay, Vanuatu
Albania (2020), Ghana (2019), Kazakhstan (2020),
Kuwait (2019), Maldives (2020), Nigeria (2019),
Oman (2020), Peru (2020)
22. FATCA & CRS BASICS
▪ The Standard consists of the following four key
parts:
▪ A model Competent Authority Agreement (CAA),
providing the international legal framework for
the automatic exchange of CRS information;
▪ The Common Reporting Standard;
▪ The Commentaries on the CAA and the CRS; and
▪ The CRS XML Schema User Guide
The Common Reporting Standard (CRS)
22
▪ In addition to the CRS, the OECD has published the
second edition of the CRS Implementation
Handbook
▪ OECD collects and publishes national legislation at
their homepage (CRS by jurisdiction)
23. FATCA & CRS BASICS
▪ Implement CRS rules in their national legislation,
which is generally more or less based on the CRS,
translating the due diligence and reporting rules into
domestic law
▪ Select a legal basis for the exchange of information
(bilateral or multilateral agreements e.g.)
Requirements for participating jurisdictions
23
Participating jurisdictions need to:
▪ Ensure protection of confidentiality and
safeguarding data
▪ Put in place IT and administrative
infrastructure and resources
24. FATCA & CRS BASICS
How does it work?
24
Reporting Financial
Institutions review
their Financial
Accounts...
to identify reportable
Accounts...
by applying Due
Diligence rules.
and then report the
relevant information...
25. FATCA & CRS BASICS
Exchange of Information: Individuals
25
State A State B
Reporting of information based on Common
Reporting Standard and applicable Due Diligence
obligations implemented in the local law in State B
sends income and
account details to
authority of State B
Authority
State A
Authority
State B
has a (reportable) account in State B
e.g. bank, financial
Institution, investment
company, trust
26. FATCA & CRS BASICS
Exchange of Information: Entities
26
Reporting is based on the Common Reporting
Standard and applicable Due Diligence
Obligations implemented in the local Law of
State B
sends income and
account details to
authority of State B
Authority
State A
Authority
State B
Is an Account
Holder of a FI in
Country B
e.g. bank, financial
Institution, investment
company, trust
State A State B
27. FATCA & CRS BASICS
Reportable Persons
27
Reportable:
Reporting by FI
Reportable:
Reporting by FI
Reportable -
incl. Controlling Person of passive
NFE:
Reporting by FI
In general –
Not reportable:
FI has to do its own reporting
EntitiesNon-Financial Entities (NFE)
Active NFE
• < 50% investment income and
< 50% Financial Assets generating
passive income
• Charitable organizations
Passive NFE
• E.g. Trust and Foundations
Financial Institution
• Banks
• Life Insurance Company
• Investment Entity
Financial Institution
Private Clients
Individuals
28. FATCA & CRS BASICS
Entity types
28
Entity
Controlling
Person
Non Financial Entity (NFE)
PassiveActive
By reason of Income & Assets, Publicly
Traded NFE, Governmental Entity (…),
Holding NFE, Start-Up NFE, NFE in
Liquidation, Treasury Center, Non-Profit
NFE
Controlling
Person
Financial Institution (FI)
Depository institutions, Custodial
institutions, Investment entities,
Specified Insurance companies
29. FATCA & CRS BASICS
Definitions: Stand-alone Company / Partnership, FI
29
Debt Interest Holder
(Lender)
*Partnership: Anyone who holds capital or profit interest in the partnership.
Account Holder
Equity Interest Holder
(Company – Shareholder)*
30. FATCA & CRS BASICS
Definition: Stand-alone Company / Partnership,
Passive NFE
30
If no such shareholder can be
identified, a director or other natural
person who exercises control over the
company through other means
If no natural person exercises control
over the company, any person who is a
senior managing official can be seen as
Controlling Person
Controlling Person (CP)
(must be a natural person)
Main rule: Person who owns at
least 25% interest in the
company (shareholder)
31. FATCA & CRS BASICS
Definition: Trust or Foundation, FI
31
Account Holder
Debt Interest
Holder
No, if discretionary + no
distributions
Yes, if received distributions
Yes, if Mandatory BeneficiarySettlor
Protector*
Trustee*
*Not in all national legislation
Equity Interest
Holder
Beneficiary
(named)
32. FATCA & CRS BASICS
Definition: Trust or Foundation, passive NFE
32
Beneficiary
Excluded as Controlling Person if not
Reportable Person in certain
jurisdictions
Settlor If Settlor is a legal entity
Protector
Trustee
If Corporate
Trustee
look through to natural person behind
(economic/de facto settlor)
look through to natural
person behind
Controlling Person
(CP)
33. FATCA & CRS BASICS
▪ Classify itself under CRS to
▪ find out whether there is a reporting obligation
▪ certify CRS status to the banks and other financial institutions
▪ Register at local CRS portal, if required
▪ Identify all Account Holders and Controlling Persons by obtaining Self-Certification Forms
▪ Review transactions with Account Holders to identify Financial Accounts
▪ Perform an annual review of the appropriateness of the current status, account for changes in
circumstances
▪ Report Financial Accounts on an annual basis to the local tax authority
Financial Institution (FI) obligations under CRS
33
34. FATCA & CRS BASICS
▪ Classify itself under CRS to
▪ find out whether there is a reporting obligation
▪ certify CRS status to the banks and other financial
institutions
▪ Identify all Controlling Persons
Non-Financial Entity (NFE) obligations under CRS
34
▪ Disclose its Controlling Persons to reporting FIs
upon request
▪ Perform an annual review of the appropriateness of
the current status, account for changes in
circumstances
35. FATCA & CRS BASICS
Reportable information
35
Identification Information Account Information
Name Date of birth* Account Number
Address Place of birth**
Type of Account Holder (if entity): Classification of the entity
and role of the Controlling Person with passive NFE
Tax domicile Tax number (TIN)*
Name and identification number (if existing) of the Financial
Institution
Financial Information
Account balance, dividend, interest, other income and revenue from sale of financial wealth
For each Account Holder and Controlling Person
* TIN and date of birth mustn’t be reported if they do not exist in the database of the reporting Financial Institution. A reportable Financial
Institution must take appropriate steps to gather TIN and date of birth within two years after implementation of the AEoI
** Place of birth is not required except the FI needs to collect it according to the local law and it is available in electronic data
36. FATCA & CRS BASICS
Reportable Information: Company
36
FI Company Passive NFE Company
Account Holder Account balance Payments Controlling
person
Account
balance
Payments
Shareholder Value of of the
company
Dividends
Other payments to
shareholder
Each
shareholder
that holds at
least 25%
shares
Value of the
account held
at the
reporting FI
Depends on the type
of the financial
institution
(depository, custodial,
investment entity,
insurance company)
Debt Interest
Holder
Value of the
outstanding debt
Interest
Repayments of
debt
*any other
controlling
person
If account was
closed
The fact of closure All relevant
payments made in
the period
**Senior
managing
official
* Tier 2 - If no one controls the company by shares
** Tier 3 – if no one controls the company by shares and there is no other controlling person
37. FATCA & CRS BASICS
Reportable Information: Trust
37
FI Trust Passive NFE
Account holder
Account Balance
or Value
Gross Payments
Account Balance
or Value
Gross Payments
Settlor Total value of all
trust property
Value of payments /
distributions made in
reporting period
Total account
balance or value
Gross payments
made or credited
Mandatory benef.
Discret. Benef. n/a
Any other controlling
persons
n/a n/a n/a
Debt interest holder
Princ. amount of
debt
- -
Trustee - -
Total account
balance or value
Gross payments
made or creditedProtector (depends on
jurisdiction)
Total value of all
trust property
-
If account was closed The fact of closure
38. FATCA & CRS BASICS
Differences and similarities between FATCA and CRS
38
FATCA CRS
Focus and reach US; US Persons with foreign assets Multilateral; persons with accounts abroad
It’s all about finding US persons Tax residency of client
Due diligence – individuals FATCA Self-Certification, W-8BEN,
W-9…
CRS Individual Self-Certification, Controlling
Person Self-Certification…
Due diligence – entities W-8BEN-E, W-8IMY… Entity Self-Certification…
Controlling Person (of NFFE/NFE) Main rule: > 10% (also applicable for
Substantial US Owner)
Main rule: > 25 %
TIN US TIN National TIN – no unified standard, some
jurisdictions do not issue TIN
Registration With IRS With national competent authority
Delegation possible? Via Sponsoring Entity (in certain
cases)
Via Delegate (not permitted in all
jurisdictions)
Delegation how? Sponsorship Agreement Delegation Agreement
Reporting To US Multilateral
39. FATCA & CRS BASICS
KENDRIS CRS FATCA Compliance App
Download the KENDRIS CRS
FATCA Compliance App in
AppStore or Google Play to see
all reporting deadlines and
agreements
39
40. FATCA & CRS BASICS
Get in touch
40
Anna Szkudlarek
Director, Head of Regulatory,
Office Managing Director Zurich
T. +41 58 450 51 16
E. a.szkudlarek@kendris.com
If you need help with CRS / FATCA, then please get in
touch with Anna Szkudlarek today, to find out more
about how we can help you with our CRS and FATCA
reporting services and more.