FATCA vs CRS – The Differences Explained

FATCA – Foreign Account Tax Compliance Act

The Basics:

• A US tax initiative introduced by the United States Inland Revenue Services (IRS).
• Commitment: 100+ countries have signed up to FATCA.
• AIM: to reduce tax evasion by US citizens and US tax residents.

CRS – Common Reporting Standard

The Basics:

• A global tax initiative introduced by the Organisation for Economic Co-operation and Development (OECD).
• Commitment: 90+ countries have signed up to CRS.
• AIM: To reduce tax evasion by the taxpayers of the 90+ countries signed up to CRS.

KEY DIFFERENCES:

Registration:

FATCA: Financial institutions (FIs) must register on the IRS portal to obtain a Global Intermediary Identification Number (GIIN).

CRS: There is no requirement to register and receive a unique identifier of compliance under CRS.

Due Diligence:

FATCA:

• FATCA aims to identify whether an account holder is a US person using citizenship and tax residency.
• Tax information is collected for US account holders ONLY.

CRS:

• CRS aims to identify the tax residency of each and every one of its account holders (most countries are adopting the ‘wider approach’ under CRS which allows Funds to collect tax information from all investors).
• Tax information is required for ALL account holders.

Reporting:

FATCA:

FATCA requires FIs to report on US account holders ONLY.

• Reporting requirements: Name, Address, TIN, Account Number, Name and identifying Number of FI, Account Balance, Income & Sales Proceeds phased in from 2017 for all US account holders.
• Information must be reported on the US FATCA schema to the local Tax Authority for onward forwarding to the IRS.

CRS:

CRS requires FIs to report on almost all foreign tax residents which will result in significantly higher volumes of reporting.

The reporting requirements are the same as FATCA with the exception of:

• Tax residency, date and place of birth are also reported for ALL account holders.
• Information must be reported on the CRS schema to the local Tax Authority for onward forwarding to all countries complying with CRS.

Thresholds and Exemptions

FATCA:

There are less accounts in scope for due diligence and reporting under FATCA due to the minimum thresholds:

• Pre-existing individuals <$50k and pre-existing entities <$250k (as at 30 June 2014) are not in scope for reporting until balances exceed $1m.

CRS:

There are far more accounts in scope for due diligence and reporting under CRS.

• The only exemption threshold that applies is $250k for pre-existing entity accounts (as at 31 December 2015). Once the balance exceeds $250k then investors fall within the scope of CRS.

PENALTIES!

FATCA:

• Compliance with FATCA reporting is a legal obligation.
• The Fund and its directors are subject to the local jurisdictional penalties for non-compliance.
• Monetary penalties are in place in each jurisdiction and persistent non-compliance could result in the closure of a Fund.

CRS:

• Compliance with CRS reporting is a legal obligation.
• The Fund and its directors are subject to local jurisdictional penalties for non-compliance.
• Monetary penalties are in place in each jurisdiction and persistent non-compliance could result in the closure of a Fund.

For more information or support with CRS or FATCA, contact your local Apex office: Locations