This blog was last updated on August 2, 2021
As FATCA rolls on, countries are now starting to pay attention to CRS and recognizing that it isn’t simply a bigger version of FATCA. Australia, for example, is seeing that meeting the tax reporting requirements for FATCA was an arduous task for Australian financial institutions. However, they are preparing themselves for the broader scope of CRS, which means more work and more cost.
“Reporting for certain accounts per the CRS begins in 2017”
The OECD’s Common Reporting Standard takes effect Jan. 1, 2016 for early adopting nations, and reporting for certain accounts begins in 2017. The standard was developed at the OECD under the direction from G20 nations and was endorsed by their finance ministers in February 2014 as a way of combating global tax evasion. Jennifer Sponzilli, global CRS head for KPMG, told The Australian that financial institutions believe the costs they will incur for CRS reporting will exceed those for FATCA because CRS is larger in scope. FATCA and CRS differences FATCA and CRS are similar in that they require financial institutions to report account information, there are some significant differences. FATCA required financial institutions to report information on U.S. citizens who had assets abroad. Any nation who agreed to participate in FATCA would report such information to the U.S. With CRS, the exchange of information could take place among any nation that adopts the standard. Even though the information reported for CRS will be similar to FATCA, there will be a significant increase in the volume of information. Some institutions that were exempt from FATCA reporting aren’t exempt from CRS. They include such entities as local banks, certain retirement funds and sponsored investment vehicles. Another significant difference is minimum balances. FATCA requires a $50,000 balance for an individual account. For entities with a majority controlling ownership by a US citizen, the minimum balance is $250,000.
“Older computer systems may not be sufficient to meet CRS’s demands.”
Sponzilli said CRS’s broader scope could cost Australian financial institutions between AU$50 million to AU$150 million, The Australian reported. With the increase in volume of reporting and the differences in what’s eligible to be reported, financial institutions may need to reconfigure their IT systems so the reporting is automated. Older computer systems that financial institutions have in place may not be sufficient to meet CRS’s demands. And entering the information manually is impractical. Get ready now Lexology.com writes that Australian financial institutions should start their preparations for CRS reporting now. The first step toward CRS compliance is for financial institutions to check with the Australian Treasury to determine whether they fall under the standard’s auspices. Lexology also reported that the OECD released a CRS guide that helps governments and financial institutions implement CRS properly as well as a Model Protocol to the Tax Information Exchange Agreement. “The Handbook provides high-level guidance on steps to implement the CRS into domestic law and select appropriate information exchange procedures, to develop the IT systems required for the reporting regime and to establish appropriate confidentiality and data security protocols,” Lexology reported. The handbook also includes a summary of technical differences between CRS and FATCA, the source reported
