In preparation for the upcoming Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) report filing and compliance season, reporting Financial Institutions (FIs) and their advisors should be sure to take note of several upcoming deadlines and new developments in multiple jurisdictions.
U.S. FFI Responsible Officer Certification
- Designated Responsible Officers (ROs) of Participating Foreign Financial Institutions (FFIs) and reporting Model 2 FFIs with an FFI agreement effective date of June 30, 2014 must certify that their financial institutions are in compliance with their FFI agreements by July 1, 2018. However, the IRS has recently announced in the FATCA section of its website that the FATCA portal will not be available by July 1, 2018 and will not open in time enough for RO’s to make the required certifications by the deadline (see link). As a result, FFIs will have an additional three month extension from the date that the FATCA portal opens to make the required certifications. Additionally, in order to assist RO’s with making the required certifications, the IRS has published draft certification questions for pre-existing accounts (see link) and periodic certifications (see link).
Under the FFI agreements, the certification of compliance may be made on or before July 1 of the calendar year following the certification period. For participating FFIs or reporting Model 2 FFIs with an FFI agreement effective date of June 30, 2014, the first certification period for the FFI ended Dec. 31, 2017. Accordingly, the first periodic certification of compliance is generally required to be made on or before July 1, 2018 for participating FFIs or reporting Model 2 FFIs with an FFI agreement effective date of June 30, 2014, but with the delayed opening of the FATCA portal, FFIs will have until at least Oct. 1, 2018 to make the required certifications.
More information regarding the FATCA Certifications can be found on the IRS Draft FATCA Certifications webpage.
For information regarding Qualified Intermediary (QI) certifications, please see our prior alert: Key updates in U.S. tax information reporting have operational impact
Cayman Islands Developments and Deadlines
- The Cayman Islands (CI) has released an updated entity self-certification form which, most importantly, now indicates that the new threshold for a controlling person is 10 percent as opposed to 25 percent control/ownership. Cayman’s new guidance requires that the new entity self-certification form be used starting April 1, 2018 and requires closing an account if a CRS self-certification form is not collected within 90 days of a new account opening. Reporting Financial Institutions FIs should modify their systems and procedures to address these new requirements and should make sure that they are collecting the latest version of the form.
- Additionally, the CI has issued a revised Automatic Exchange of Information (AEOI) Portal User Guide (version 4.0), which includes guidance on how to correct CRS returns, details on requirements for termination of a Cayman FI, and guidance on changes/differences in the xml schema v. 2.0. Most importantly, the new user guide indicates that when a taxpayer identification number (TIN) field is left blank, then the account holder will be considered recalcitrant and the CI taxing authority (TIA) may take regulatory action. Instead of leaving the TIN field blank, financial institutions must now enter the letter “A” nine times in place of the nine character TIN. This new requirement highlights how important it is for all account holders to obtain TINs. Accordingly, it is imperative that Cayman FIs follow up with their account holders who have missing or incomplete TINs early and often to avoid having to treat them as recalcitrant going forward.
- The CI has also issued updated CRS Guidance Notes (version 3.0), which include a number of updates. Most significantly, the new guidance notes clarify that accounts opened after Feb. 1, 2018 must use the new self-certification form. In addition, the CRS Guidance Notes clarify that CI financial institutions migrating to a new jurisdiction must file a final return.
- Finally, taxpayers and practitioners should be sure to note the CI’s various upcoming deadlines.
- April 30, 2018 – deadline for entities established in 2017 to file Cayman Notifications
- May 31, 2018 – deadline for submission of 2017 Cayman FATCA and CRS reports
- Dec. 31, 2018 – deadline for Cayman FI’s to collect new entity self-certification forms from pre-existing nonfinancial entities (NFEs).
Revised OECD CRS Implementation Handbook
- The Organisation for Economic Cooperation and Development (OECD) has released the second edition of its Common Reporting Standards (CRS) handbook, which provides practical guidance for financial institutions and governments implementing CRS. The handbook includes a list of frequently asked questions, provides additional guidance regarding the identification of ‘controlling persons’ with respect to trusts, and expands on IT and administrative requirements, and sets forth measures for compliance with CRS. A revision to the guide is expected in May 2018 and may impact guidance published by local jurisdictions as well as certain filing deadlines.
New Developments in the United Kingdom and Netherlands
- The United Kingdom has recently released a new CRS implementation handbook and the Netherlands has published a list of Frequently Asked Questions. Reporting FIs in the UK should be sure to consult the new handbook when filing reports for the UK’s upcoming May 31, 2018 reporting deadline.
