What are the multi-jurisdictional issues of the OECD's Common Reporting
Standard (CRS) Part I/II
The Standard for Automatic Exchange of Financial Account
Information in Tax Matters, including the Commentary on the Common Reporting
Standard (CRS), seeks to establish the automatic exchange of tax information
as the new global standard. The electronic exchange of information involves
the systematic and periodic transmission of 'bulk' taxpayer information
from the country that is the source of the payment to the taxpayer's country
of residence.
Potential for an operational overhaul
of the tax disclosures.
Most companies with operations in other countries must be in compliance
with this entirely new tax global regime and regulation. The defining
characteristic of CRS could introduce a potentially high level of complexity
and, the requirement of a robust change process. Each jurisdiction will
translate CRS into its particular understanding, and this could result
in potentially troubling jurisdictional variances. Be prepared!
When implementing a global initiative, like the OECD's Common Reporting
Standard (CRS), there are certain common factors that cannot be avoided.
These are;
- Standardised CRS standards in well-defined and accessible terms
- The CRS regulation must be built around a roadmap and a framework
FATCA gone global?
Although similar to FATCA reporting, the OECD's Common Reporting Standard
(CRS) highlightings that there are only minute synergies. Be prepared
for a due diligence deadline for all pre-existing individual accounts
on 1 January 2016.
The high levels of uncertainty are because no levels of guidance is yet
being provided. The tight implementation schedule has preoccupied companies
for a major overhaul. CRS will handle complex implementation workshops
with the stakeholders within the organisation. Our preliminary analysis
in some firms includes inflexible IT systems and the lack of guidance
from regulators on how to meet current regulatory obligations. This is
not simply a case of implementing FATCA processes on a global scale, and
the demands in terms of data are quite steep.
Does FATCA smooth the way for CRS?
CRS is a global tax initiative that holds some similarities to FATCA but
is, by and large, very different. Indeed, CRS was developed with FATCA
Model 1 IGA acting as a blue print, however there are still substantial
variances.
CRS holds two characteristics that must be considered;
- Requires a massive due diligence overhaul for the identification,
classification and validation of clients to meet the global nature
of CRS.
- Requires firms to report to multiple CRS jurisdictions - on a scale
that makes FATCA look like a piece of cake.
Te recent discussions with industry experts have identified issues relating
to the four critical data and management processes: identification, classification,
validation and reporting. The tax regime is unique in a multitude of respects,
leading up to the final reporting stage.
The new global standard CRS is a baseline that will be required to be
translated into national law prior to implementation. Therefore ensure
that a business case is ready for board approval and implementing the
appropriate compliance procedures.
In the next newsletter, we will provide practical information on the identification,
classification, validation and implementation of the CRS process.
Copenhagen ComplianceŽ works together with JWG to help you determine
how the right regulations can be implemented in the right way. http://www.jwg-it.eu/
