As tax specialists will already know, operational taxes are a crucial area for compliance matters nowadays. Broadly speaking, they encompass withholding taxes, transactional taxes, due diligence, and tax and investor reporting. In this article, we look at these requirements under the FATCA and CRS regimes. Keep reading for our 5-question checklist, designed to help you determine how compliant you are with FATCA and CRS.
1. Pre-existing accounts
Have you completed the FATCA and CRS remediations of pre-existing accounts?
The remediation period for entities was two years under both FATCA and CRS. In other words, reporting financial institutions had two years from the go-live of FATCA and CRS to conduct the necessary due diligence procedures for pre-existing accounts. They should now ensure that their reporting and policy documentation, for recalcitrant and undocumented individuals or entities, are treated properly.
2. Onboarding
Are you comfortable with the FATCA/CRS status provided by your clients?
Compared to pre-existing clients or account holders, new accounts are subject to enhanced due diligence obligations in terms of the collection of self-certification forms and the identification of controlling persons. Thus, robust client onboarding processes should be put in place.
3. Reporting
Do you have a comprehensive system for annual FATCA and CRS reporting?
Automatic exchanges of information are challenging compliance obligations, where the reporting process will highlight the accuracy and completeness of data and documentation obtained from all relevant account holders. The XML files produced should also be in line with precise specifications prescribed by local tax authorities. In the view of avoiding error or penalties, tested and validated IT systems should be used to generate such files.
4. Risk framework
Does your entity maintain an internal control framework for FATCA and CRS?
Based on OECD recommendations, internal controls may include oversight of the due diligence and reporting requirements; written policies and procedures; adequate employee-training and monitoring of compliance with such policies and procedures; maintenance of sufficient systems for due diligence, record keeping, and reporting; and periodic, independent, risk-based testing of controls whose results are documented.
5. Governance
Are regulatory changes sufficiently monitored by your organisation?
The initial legislation is likely to evolve in many jurisdictions, making it challenging to stay aware and in control of these changing requirements without robust governance and regulatory monitoring. In all, reviews of regulatory developments should consider local laws and implementation guidelines as well as industry's best practices in managing FATCA and CRS requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
