The Common Reporting Standard (CRS) is a globally co-ordinated approach that requires financial institutions to report certain financial information on account holders, resident in other CRS participating jurisdictions.
Proposed by the OECD, it will be effective from January 2016 for more than 50 ‘early adopter’ countries. In many ways, the CRS will impose a heavier operational burden on financial institutions compared to the existing Foreign Account Tax Compliance Act (FATCA) and UK Crown Dependencies & Overseas Territories (CDOT) regimes.
Aiming to reduce tax evasion on assets and income held abroad by investors, the CRS builds on the US Foreign Account Tax Compliance Act (FATCA) to take a significant step towards a globally coordinated approach to the automatic exchange of financial account information (AEOI).
Financial institutions around the world are now faced with significant additional identification and reporting obligations, which may vary in detail and timing by jurisdiction. Crucially, they need to be able to collect and track complex, varied customer information quickly and efficiently to report to tax authorities in each jurisdiction where they operate.
KPMG has developed ‘KPMG AEOI Reporting’, a global technology solution which is scalable and easy-to-use and allows organisations to comply under multiple regimes in a cost and resource-effective way.
CRS will be implemented across the European Union through the Directive on Administrative Cooperation (DAC). More than 24,000 financial institutions have registered with the Internal Revenue Service under FATCA and most, if not all, are expected to also be impacted under the CRS.
HM Revenue & Customs (HMRC) has released draft guidance collectively covering the AEOI regimes. These guidance notes are designed to assist financial institutions with their implementation of CRS and DAC. They also highlight differences in the approach between the DAC, FATCA and CDOT reporting regimes. For more information, please visit our webpage.
As the next reporting in the UK is due by 31 May 2016 and the complexity and volume of client information to collect and report on increases, financial institutions face a much heavier operational burden. According to a recent KPMG survey among executives in financial institutions, 61% of organisations with headquarters and/or operations in the UK surveyed, believe compliance with the CRS will require more resources than compliance with FATCA. However, only 29% have actively taken substantial steps towards implementation.
Opting to undertake the reporting manually presents a significant risk and has high cost implications. An automated solution is likely to be required to cut the cost and resource, while minimising the risk of not complying with these regulations.
For more information on how KPMG can help you address the reporting requirements for CRS, DAC, FATCA and CDOT, please visit our dedicated webpage.