Global tax evasion and the opacity of tax havens has led to world-wide efforts to improve coordination and exchange of financial information among nations. The US initiated these efforts through FATCA (the Foreign Account Tax Compliance Act), which requires financial institutions around the world to collect data on the financial transactions and account balances of US citizens and report back to the IRS (Internal Revenue Service). However most firms, with limited exposure to US accounts, did not require a large amount of investment in technology upgrades or employee training.
All this is set to change as the deadline for CRS (the Common Reporting Standard) looms ever closer. CRS, which closely followed FATCA, is a set of globally coordinated tax disclosure agreements, which will see signatory governments from the G20 and OECD collecting data from domestic financial institutions and exchanging under mutual disclosure. According to this whitepaper “although some firms were able to get by under the FATCA regime with minimal change to their systems, the reality of the CRS is that financial institutions will require a major overhaul of the way they identify clients and collect and report client data to their respective governments.”
This whitepaper explores the challenges and the complex requirements of the looming reporting standard.
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