Automatic Exchange of Information (AEOI) Updates: Aug. 29 – Sep. 16, 2016

Automatic Exchange of Information (AEOI) legislation and technical updates are top concerns for financial institutions. The Sovos Compliance Research Team continually monitors new regulations and updates from around the world and publishes them in our tool, Sovos Taxport Compass. Contact us today to start your subscription and have access to all the latest Tax Information Reporting updates, including AEOI, 1099, and Affordable Care Act reporting. Below are key updates from the past two weeks (Aug. 29 – Sept. 23):

OECD Expresses Concern Regarding Bahamas CRS Implementation

Following this week’s leak of international financial information for accounts maintained in the Bahamas, the OECD has expressed concerns about the Bahamas’ progress in implementing CRS. Bahamas—a late adopter—is scheduled to begin automatic exchanges in 2018; however, the OECD’s concern arises from the fact that the Bahamas has not signed on to the MCAA and instead will be executing AEOI agreements on a bilateral basis. The Bahamas is defending its progress, maintaining that it will be prepared to commence exchanges on schedule. They have attempted to assuage these concerns by releasing information about its various financial regulatory regimens.

Cyprus Releases List of CRS Participating Jurisdictions and Due Diligence Information

The Tax Department of Cyprus has published its list of jurisdictions with which it has committed to making automatic exchanges of tax information pursuant to the Common Reporting Standard (CRS) and the Multilateral Competent Authority Agreement (MCAA). Cyprus intends to exchange account information with a total of 81 jurisdictions, consisting of both Early and Late Adopters. Additionally, the OECD website has indicated that Cyprus will employ the “Wider Approach” to due diligence. This would require all Financial Institutions to identify and maintain records for all territories in which any Account Holder or Controlling Person is a resident, regardless of whether or not those jurisdictions are Participating or Non-Participating.

IRS Released FATCA XML Schema User Guide (Publication 5124) v2.0

The IRS has published a draft version of its Foreign Account Tax Compliance Act (FATCA) XML Schema User Guide (Publication 5124) v2.0. This guide is intended for use with the FATCA XML v2.0, which becomes effective for all reports transmitted on or after Jan. 1, 2017. Although this is designated as a “draft,” the IRS is not expected to make any further changes to this particular version. Learn more here: IRS Updates Publication 5124 For Next Year’s FATCA Filing.

Hong Kong Releases New CRS Guidance and Announces Due Date for CRS Reporting

Hong Kong, a late adopter of CRS, has recently released new guidance for CRS reporting. The guidance consists of 18 chapters of topical guidelines for Financial Institutions and their obligations under CRS. Additionally, it includes pamphlets that gives a contextual overview of AEOI under the CRS regime. The pamphlets address questions about AEOI, outline the new reporting rules, and discuss the enforcement mechanisms for compliance. The guidance also indicates that the due date for the first round of CRS information returns will be May 31, 2018.

Australia and Singapore Sign Competent Authority Agreement for CRS

The Australian Tax Office (ATO) has updated its guidance for AEOI pursuant to the FATCA and CRS. Most of these changes are the result of the approaching commencement of CRS, of which Australia is a late adopter. Specifically, the guidance expounded upon the “Wider Approach” to due diligence that Australia (along with most other participants) will require Reporting Financial Institutions (RFIs) to adopt in order to keep pace with the growing number of jurisdictions expected to sign on to the MCAA. The new material also contains guidelines for determining the residency of an Australian Financial Institution, rules for treatment of various types of financial accounts under CRS, further explanation of due diligence procedures, reporting instructions, and compliance measures for RFIs. The ATO also published new FAQs that address standard industry codes, financial assets, non-profit entities, related entities, and reporting of all foreign resident accounts.

Mauritius Releases CRS Guidance Notes

The Republic of Mauritius has released a set of CRS Guidance Notes that cover a wide variety of subjects. Among the topics discussed in the guidance are the legal and operational framework of CRS, the practical operation of the standard, information and instructions for various types of financial institutions and accounts, reportable information, due diligence and nil reporting requirements, registration guidelines, and frequently asked questions. As a late adopter, Mauritius will join the other countries that are scheduled to file their first CRS returns in 2018. Like most of those countries, Mauritius has adopted the Wider Approach to due diligence.

Dominican Republic Signs FATCA IGA

On Sept. 15, 2016, the Dominican Republic signed a Model 1A FATCA Intergovernmental Agreement with the United States. The U.S.-Dominican Republic IGA is a necessary precursor for reciprocal reporting between the Dominican Republic and the U.S.; however, the U.S. has treated the Dominican Republic as having an agreement in effect as of June 30, 2014. The Dominican Republic has yet to publish legislation or guidance.