AEOI Automatic Exchange of Information

FATCA and CRS regime are commonly referred to as AEOI Automatic Exchange of Information. GATCA, or global account tax compliance act introduces the global AEOI.

The OECD has developed a standard for global information exchange which has been widely endorsed:

• On 21 July 2014 the OECD issued the Standard for Automatic Exchange of Financial Information in Tax Matters (The Standard).
• The Standard is a global “FATCA-like” automatic information exchange regime aimed at preventing offshore tax evasion and maintaining the integrity of tax systems.
• The Standard includes the Model Competent Authority Agreement (CAA), the Common Reporting Standard (CRS) and accompanying commentaries.
• More than 90 jurisdictions have already committed to the swift implementation of CRS. Of these, 56 are committed to first exchange in 2017.

[box]The long and short of it is that this Hong Kong ORS402(b) retirement account is a “Non-reporting Financial Institution” and membership accounts are “Excluded Accounts”. Please see the quote from page 38 of The Automatic Exchange (AEOI) Handbook[/box]

“While the two systems are independent from each other a starting point ….is the Financial Institution treated as non-reporting with respect to FATCA IGA?”. The answer is “YES”! The language of AEOI is similar to FATCA in purpose, intent and meaning. What this represents is a global FATCA (foreign account tax compliance act).

Presentation of the Ernst & Young Operational Awareness Workshop on Exchange of Financial Account Information (Global FATCA/CRS)

Common Reporting Standard (“CRS”) is an OECD initiative which requires financial institutions to identify account holders based on tax residency and report the information to local tax authority in order to enable automatic exchange with other participating jurisdictions.

Financial institutions located in early adopting countries are required to perform due diligence procedures by January 1, 2016 while those in late adopting countries will be required to comply by January 1, 2017.

Since CRS will be part of the local legislation, non-compliance will result in penalties imposed by local regulatory bodies. Although the CRS has the same intention as FATCA, there are many differences and hence financial institutions will need to revisit their onboarding procedures, system capability and reporting ability as well as engage with the local authorities to identify and resolve all key operational issues early on.

Photo credit: Greg Lilly Photos via VisualHunt.com / CC BY-NC