FATCA, Euro-FATCA, CRS

Analysis

A new bill on exchange of tax information with other countries

FATCA, Euro-FATCA, CRS

Taxes in Finance: FATCA, Euro-FATCA, CRS 7/2016

On 12 October 2016, a new bill on exchange of tax information with other countries, dated 7 October 2016, was published on the website of the Government Legislation Center.

Its purpose is to:

  • implement Directive 2014/107/EU (Euro-FATCA);
  • introduce provisions enabling fulfilment of the obligations under the Competent Authority Agreement with respect to the Common Reporting Standards (CRS); and
  • amend the Act on the performance of the FATCA Agreement.

As regards Euro-FATCA/CRS, reporting financial institutions will be required to:

  • apply new customer identification procedures. As expected, the bill introduces two categories of accounts, namely "undocumented" and "transitional" accounts;
  • register any activities undertaken with a view to performing the said procedures; and
  • collect specific documents.

As regards FATCA, the bill cancels the obligation imposed on certain account holders to make representations concerning criminal liability. However, it seems to follow from the draft legislation that the change may enter into force as from 1 January 2017 and not December 2016, as expected.

The new legislation is to come into effect on 1 January 2017 (Article 111 of the bill).

Necessary action

In the upcoming months, an obligation to block accounts in the FATCA regime will arise and it should be expected that the Euro-FATCA/CRS regulations will be enacted. Reporting financial institutions should:

  • verify the correctness of their FATCA procedures in order to minimize contractual and relational risks relating to account blocking in connection with FATCA, in addition to ensuring proper customer identification and future period reporting;
  • considering that the vacatio legis period is expected to be very short, prepare themselves for the implementation of Euro-FATCA/CRS compliance procedures. Please note that it is necessary that the procedures take account of material differences between Euro-FATCA/CRS and FATCA (e.g. with respect to the receipt of representations, customer status verification as well as the reporting principles and scope).
FATCA, Euro-FATCA, CRS

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