Canada, FATCA, and CRS Reporting: Problems?

FATCA reporting is well underway, but lately Canada has begun to balk at its reporting obligations. Recently, the government’s Canada Revenue Agency (CRA) transferred 155,000 documents to the IRS in compliance with FATCA, but some are not happy at how the records were transferred. As a result, a study and a hearing will be conducted to determine how the privacy standards between government organizations were applied to protect the transfer of information. The hearing could come as early as April. However, many believe that the next exchange of information on September 30, 2016 will continue as planned and that the FATCA agreement struck with the US poses no problem. This continues to demonstrate the complexity of FATCA and a global reporting environment. Even after overcoming all of the challenges of identifying, gathering and reporting information in accordance with FATCA regulations, there can still be significant challenges between how governments are sharing the information, even when they are more alike than different. Now, take into account the Common Reporting Standard (CRS), which is expected to be implemented in Canada starting on July 1, 2017 and the first exchange of information will take place in 2018. On February 4, 2016, Canada signed a joint declaration with Switzerland expressing the intent of the two countries to engage in the AEOI in accordance with the CRS. The Canadian Department of Finance announced that by the implementation date, Canadian financial institutions will be expected to have procedures in place to identify accounts held by non-residents and to report the required information to the Canada Revenue Agency. There will no doubt be questions about how to transmit this information securely and in multiple languages. CRS will only expand the volume and complexity as multiple jurisdictions issue guidelines about how to transmit the information they are requiring for reporting. Moreover, as FATCA coexists with CRS, there is a high likelihood that jurisdictions will also be responsible for complicated reporting due under both regimes since most of the world is participating in CRS, but the US has opted to not enroll in CRS, but will continue expanding their FATCA program. Check back with Sovos and sign up to our blog as we follow these developments.