FATCA: THE NEXT PHASE - STEP Jersey slides 05... · FATCA –The Next Phase 1) ... CRS is expected...

03/03/2015

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FATCA: THE NEXT PHASEThursday 05 March 2015

STEP Jersey is sponsored by:

Martin Popplewell & Paul Woodman (Deloitte)

Lorraine Wheeler (First Names Group) - Chair

STEP Jersey

FATCA – The Next Phase

Martin Popplewell

Paul Woodman

5 March 2015

03/03/2015

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© 2015 Deloitte LLP. All rights reserved.

Agenda

FATCA – The Next Phase

1) Tax Information Exchange – FATCA, CRS and the international backdrop.

2) FATCA Industry Activity – where are we now?

3) Technical Update.

4) FATCA Reporting.

5) AML Updates.

6) The End Game – Tax Information Exchange Requests.

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Tax Information Exchange

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Growth in Information Exchange RegimesAutomatic exchange requirements have expanded rapidly and the

Common Reporting Standard (CRS) is set to continue this upward trend

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*Guernsey, Isle of Man, Jersey, Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Turks and Caicos Islands

• Annual reporting by non-US

FIs on US accounts

• First reporting 2015

Low number of accounts

expected to be reported

• Annual reporting by CDOT*

Financial Institutions on UK

account holders

• Annual reporting by UK FIs on

CD and Gib accounts


Higher number of accounts

expected to be reported

• Annual reporting by FIs on

accounts resident in 90+

counterparty jurisdictions

• Global initiative led by the

OECD to increase tax

transparency


Significant number of

accounts expected to be

reported

Increasing number of practical challenges

• Filing multiple returns covering reportable accounts

• Managing relationships with multiple authorities and complying with data privacy laws

• Ensuring reports are filed in respect of all FIs and in the correct format


CRS – Who has signed up?Over 90 jurisdictions have committed to CRS with 58 early adopters going

live in 2016

6 *Signatories of multilateral CAA signed in Berlin; source: http://www.oecd.org/tax/exchange-of-tax-information/MCAA-Signatories.pdf

E U

R O

P E

, M

I D

D L

E E

A S

T

AN

D A

F R

I C

A

A M

E R

I C

A S

A S

I A

P

A C

I F

I C Australia

Brunei Darussalam

China

Hong Kong

India

Indonesia

Japan

South Korea*

Macau

Malaysia

Marshall Islands

New Zealand

Niue

Samoa

Singapore

Anguilla*

Antigua and Barbuda

Argentina*

Aruba

Bahamas

Barbados

Belize

Bermuda*

Brazil

British Virgin Islands*

Canada

Cayman Islands*

Chile

Colombia*

Costa Rica

Curaçao*

Dominica

Grenada

Mexico*

Montserrat*

Saint Kitts and Nevis

Saint Lucia

Saint Vincent and the Grenadines

Saint Martin

Trinidad and Tobago

Turks and Caicos Islands*

Uruguay

Albania

Andorra

Austria

Belgium*

Bulgaria

Croatia*

Cyprus*

Czech Republic*

Denmark*

Estonia*

Faroe Islands*

Finland*

France*

Germany*

Gibraltar*

Greece*

Greenland

Guernsey*

Hungary*

Iceland*

Ireland*

Isle of Man*

Israel

Italy*

Jersey*

Latvia*

Liechtenstein*

Lithuania*

Luxembourg*

Malta*

Mauritius*

Monaco

Netherlands*

Norway*

Poland*

Portugal*

Qatar

Romania*

Russia

San Marino*

Saudi Arabia

Seychelles

Slovak Republic*

Slovenia*

South Africa*

Spain *

Sweden*

Switzerland

Turkey

United Kingdom*

United Arab Emirates

Key

Jurisdictions exchanging by 2017

Jurisdictions exchanging by 2018

http://www.oecd.org/tax/exchange-of-tax-information/MCAA-Signatories.pdf

03/03/2015

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CRS – What information has been released?The CRS encompasses several key elements which form the legal basis

for exchange between jurisdictions and outline the requirements for FIs

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CRS

Competent Authority

Agreement

Common Reporting Standard

GuidanceSchema

EU DAC

• Detailed guidance on

the application of the

CAA and CRS

• Including useful

examples

• Rules on the due

diligence standards

• Similar to Annex 1

of a FATCA IGA

• Draft Council

Directive

amending EU

laws to allow for

AEOI

• Standard for

transmitting info

electronically

• Intended to overcome

practical issues

• Rules on the exchange of

information

• Equivalent to main body of a

FATCA IGA


How does CRS interact with FATCA?CRS is expected to replace UK FATCA but run in parallel with US FATCA,

at least in the short-term

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• Local jurisdictions will need to release local laws and guidance to implement CRS

• To date some draft laws have been released (e.g. Switzerland) and consultations

conducted (e.g. UK)

2017

CRS

US

FATCA

1 Jul 14

14

UK

FATCA

(CDOT)

May/Jun 2015

First reporting

for US FATCA

May/Jun 2016

First reporting

for UK FATCA

May/Sep 2017

First reporting

for CRS?

1 Jan 16

201620152014

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FATCA Industry Activity –

Where are we now?

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FATCA OverviewRelevant timings

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Workstream 2014 2015 2016

Ph

ase

1

Classification of client entities

Implement new onboarding procedures

Strategy, communications and governance

Registration of FIs with IRS

Ph

ase

2

Customer classification and due diligence

Reporting

30 June 2014 (31 Dec 2014 for

entities under US FATCA)

• The timeline below highlights the key workstreams which from part of phase 1 and phase 2 of the

FATCA project, with key deadlines highlighted in red.

Notes

• 1 – 30 June 2015 – classification of pre-existing individual high value accounts completed

• 2 – 30 June 2016 – classification of all other pre-existing accounts

• 3 – 30 June 2015 – 2014 US FATCA reporting

• 4 – 30 June 2016 – 2015 US FATCA reporting, 2014 and 2015 UK FATCA Reporting

22 Dec 2014 in an IGA jurisdiction

1 2

3 4

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Industry ActivityThe current agenda

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1) Remaining phase 1 issues to resolve

• Classification

• Registration

• Onboarding

2) Classification requests from banks and other counterparties

3) Approach to due diligence and searches

• Timeline to work towards?

• Apply thresholds?

• Document all clients or follow indicia led approach?

• Internal processes in regard to “reason to know” requirements

4) Reporting

• Understanding the rules and what is reportable

• Alternative Reporting Regime?

• XML reporting - the technology requirement

5) Client communications


Technical Update

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Technical Update

13

GSY JSY IOM

Re

po

rting

1) Removal of requirement to report on benefits (“and / or benefit”)

2) Confirmation that no reporting for discretionary beneficiaries if not

received distribution in period

3) Confirmation that nil returns will be required per reporting FI

4) Additional guidance on EBTs

Sp

on

so

red

en

tities

5) Confirmation that sponsored investment entities need to register by 1

January 2016

6) Replacement of “contractual arrangement” with “authorisation” in regard

to requirements to appoint a sponsoring entity

Du

e d

ilige

nc

e

7) Review taking place in regard to the requirement to dissapply threshold

elections

8) Onboarding required within a “reasonable period”

Ge

ne

ral

9) Transition period - “reasonable efforts”

Updated CD Guidance notes issued 15 December 2014 (and updated Jersey Guidance Notes issued 3 February 2015)


FATCA Reporting

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FATCA ReportingFiduciary scenarios to watch out for

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1) Discretionary trusts – receipt of distributions

2) Mandatory distributions – valuation of future distributions

3) Settlor – excluded

4) Settlor – not excluded

5) Company shareholders

6) Loans

7) EBTs (per updated guidance)

8) Benefits (per updated guidance)

9) Impact of de minimis thresholds

10)UK resident non-domiciled – Alternative Reporting Regime? Survey results:-


Automatic Exchange of Information (“AEOI”)Registration

(1/2)

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Automatic Exchange of Information (“AEOI”)Registration

(2/2)

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John Smith

[email protected]

FATCA Team

A1234567890


Automatic Exchange of Information (“AEOI”)Manage Users

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John Smith

John Smith

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AEOISubmit report

John Smith

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AEOIData Validation - Unsuccessful

John Smith

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21

AEOIData Validation - Successful

John Smith

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AEOISubmission

John Smith

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AEOISubmission History

John Smith

John Smith

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AEOIPost Submission Email Receipt

[email protected]

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EU Fourth Anti-Money

Laundering Directive – what

does it mean for Jersey?

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EU Fourth Anti-Money Laundering DirectiveBeneficial ownership of companies and trusts

• Need / requirement for registers of beneficial ownership of companies and trusts

was one of the more politically sensitive aspects of 4MLD.

• Agreement reached 16 December 2014 between the European Parliament,

Presidency and Commission negotiators.

• Press release stated “[4MLD] will for the first time oblige EU member states to

maintain central registers […] on the ultimate beneficial owners of corporate and

other legal entities, as well as trusts.

• Press release implied public access to registers, to any person or organisation

with ‘legitimate interest’ including, specifically, investigative journalists.

• Compromise text released 12 January 2015 more measured.

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EU Fourth Anti-Money Laundering DirectiveArticle 29 - Beneficial ownership of companies

• Requirement for ‘adequate, accurate and current’ register of beneficial

ownership of corporate and other legal entities incorporated in each member

State.

• Choice of whether to make the register public or not.

• Information to be available to Competent Authority and Financial Intelligence

Units (‘FIUs’) without restriction.

• Also to persons or organisations with ‘legitimate interest’ in accordance with

data protection rules and not if such disclosure would expose the UBO to the

risk of violence, blackmail, kidnapping, etc.

• Disclosure is purely on a domestic basis – any cross-border access to the

register would be under the usual mechanisms of DTA, TIEA, etc.

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EU Fourth Anti-Money Laundering DirectiveArticle 30 - Beneficial ownership of trusts

• Trustees required to hold adequate, accurate and current information on the

beneficial ownership of trusts;

• Information includes identity of settlor, the trustee(s), the protector (if any), the

beneficiaries, and any other natural person exercising control over the trust.

• Information to be accessible to competent authorities and FIUs in a timely

manner and provided when required for AML purposes when the trustee forms a

business relationship or carries out a relevant transaction.

• Information only required to be held in a central register when the trust

‘generates tax consequences’.

• ‘Tax consequences’ interpreted to mean domestic tax consequences.

• Member States must allow unrestricted access to register for domestic

Competent Authority and FIU, and may allow access for obliged entities.

• No requirement to allow access by other persons or organisations.

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EU Fourth Anti-Money Laundering DirectiveWhat does it mean for Jersey?

• No obligation to adopt 4MLD (or any other EU Directive).

• Voluntary adoption of equivalent measures for a variety of reasons:

− Protect market access;

− Follows FATF recommendations;

− Political pressure;

− ‘Good neighbour’ policy.

• No requirement for public register of ownership of trusts; central register

requirement which Jersey already meets.

• Access by those with ‘legitimate interest’ can be interpreted by each jurisdiction;

must be in furtherance of objectives of Directive.

• No requirement for trust register unless ‘tax consequence’; trustee information

requirements already met under Jersey law.

• UK electioneering may muddy the waters?

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Tax Information Exchange

Agreement Requests –

the End Game

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Tax Information ExchangeThe End Game

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1) FATCA and CRS will lead to greater information in hands of tax authorities.

2) Jersey tax law includes wide reaching powers allowing Tax Office to ask for

information from a person or from a third party.

3) Also includes provisions which allow powers to be used on requests received

from other countries under “international agreements”.

4) These include DTAs and TIEAs between the States of Jersey and the

government of another jurisdiction providing for obtaining and exchanging of

information.

5) Jersey can only use powers if a request is made in relation to a specific person

– no fishing expeditions – and all other means have been exhausted.

6) Request may start with an informal approach on voluntary basis.

7) Approach may then move to formal basis.

8) Request may require that there is “no tipping off”.


Contact

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Paul Woodman

Director

01534 824208

[email protected]

Martin Popplewell

Senior Manager

01481 703229

[email protected]

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Deloitte LLP is the United Kingdom member firm of DTTL.

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THANK YOU FOR YOUR ATTENDANCE

STEP Jersey is sponsored by:

FATCA: THE NEXT PHASE - STEP Jersey slides 05... · FATCA –The Next Phase 1) ... CRS is expected...

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