AEOI - FATCA & CRS | KPMG | BM

FATCA & CRS

AEOI - FATCA & CRS

FATCA is U.S. legislation enacted by Congress to prevent offshore tax abuses by U.S. persons.

FATCA is U.S. legislation enacted to prevent offshore tax abuses by U.S. persons.

Background to AEOI

In 2010, the US enacted the Foreign Account Tax Compliance Act (commonly known as “FATCA”) as part of the HIRE Act in an attempt to combat tax evasion by US citizens. In order to account for legal difficulties in implementing FATCA, many jurisdictions have since then entered into Intergovernmental Agreements (“IGAs”) with the U.S. Bermuda has entered into a Model 2 IGA with the U.S., meaning that Bermuda Financial Institutions report information on Reportable Financial Accounts directly to the IRS. The UK soon followed the U.S. example and entered into IGAs with their Crown Dependencies and Overseas Territories.  

Building on U.S. FATCA and the associated IGAs, the Common Reporting Standard (“CRS”) is the OECD’s response to combatting cross-border tax evasion. CRS and FATCA, now collectively known as Automatic Exchange of Information (“AEOI”), is a significant step towards a globally coordinated approach to the automatic exchange of financial account information of non-resident customers and investors. With the CRS becoming the dominant standard, the IGAs between the UK and their Crown Dependencies and Overseas Territories have been converted into exchange agreements under CRS. 

This means that Financial Institutions around the globe are faced with significant additional identification and reporting responsibilities for their customers, which may vary in detail and timing by jurisdiction. Crucially, Financial Institutions need to be able to collect and track complex, varied customer information quickly and easily and to report domestically in each jurisdiction in which they operate. Failing to comply with the requirements of AEOI may have severe regulatory, financial and reputational risks for a Financial Institution. 

AEOI will impact most banks, investment management/administration companies, trust companies and life insurers globally. In order to become compliant, Financial Institutions need to review their customer on-boarding processes, make changes to their withholding and reporting engines and remediate millions of customer accounts globally.

The ambitious time frame in implementing CRS, and the local differences in the
interpretation of CRS across jurisdictions, in particular with regards to registration and reporting requirements and applicable deadlines, has constituted great challenges to Financial Institutions.   

 

Our experience

KPMG's teams of highly-experienced professionals globally include former regulators, tax authorities and industry executives that helped develop model IGA agreements, negotiated bilateral and multilateral instruments (including the CRS), and have drafted US regulatory guidance under FATCA.

In addition, professionals from our global Network have undertaken some of the largest international FATCA remediation and look-back exercises, and have global experience in designing, implementing and testing FATCA operating models and controls.

The team at KPMG Bermuda is in regular dialogue with the tax authorities and local government officials, and participates in local industry FATCA and CRS steering committees. Further, through KPMG’s global network, our team is in regular contact with other jurisdictions, including Bermuda’s peer jurisdictions such as the British Virgin Islands, the Cayman Islands, and the Channel Islands, to exchange knowledge on latest developments, local requirements and best practices across jurisdictions.

 

How we can help

To help our clients move forward with confidence in the midst of uncertainty, KPMG has developed a range of services to support organisations’ compliance with evolving AEOI rule sets across and within jurisdictions. KPMG’s tools offer a blend of technology-based services, project accelerators, tax technical advice, communications and training methods, and process and control planning.

We can work closely with you to provide a bespoke service depending on the level of involvement you require from us.

 

Our services

Education

  • Assess and identify gaps between existing FATCA/IGA framework and CRS requirements;
  • Provide training on CRS and other relevant areas appropriate for all levels of staff; and
  • Provide help desk service to support you with the implementation of CRS.

Policies and Procedures

  • Provide assistance with developing policies and procedures on the implementation requirements for FATCA/IGA and CRS purposes;
  • Review new customer on-boarding forms and other customer communication documentation to ensure compliance with FATCA and CRS requirements; and
  • Provide assistance and advice on remediation of existing customers for FATCA/IGA/CRS purposes.

Reporting

  • Provide advice and assistance on reporting requirements and respective processes under FATCA/IGA and CRS; and
  • The KPMG AEOI Reporting tool provides a global tax reporting solution to support reporting under FATCA/CDOT/CRS across multiple reporting regimes.

Health Checks

  • Undertake testing of any work completed and implemented policies and procedures as and when required; and
  • Carry out health-checks of current due diligence and reporting processes and provide suggestions and advice on how processes may be improved to meet best practices.

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