FATCA/CRS/AEoI: 10 Things You Need to Know

The Organisation for Economic Co-operation and Development (OECD) and the Internal Revenue Service (IRS) implemented the FATCA/CRS regime to identify undisclosed record assets held by citizens in foreign countries. Under the regime, each participating country’s Foreign Financial Institutions (FFIs) were imposed with reporting obligations to prepare their FATCA/CRS reports in XML format every year. Complying with FATCA/CRS requirements can be arduous, and you must know everything about the regime to ensure error-free reports.

10 Things You Must Know About FATCA/CRS/AEoI

  1. The Foreign Account Tax Compliant Act (FATCA) and Common Reporting Standard (CRS) aim to ensure that all eligible taxpayers reveal their income and assets in offshore accounts. This allows the tax authorities to identify fraud or discrepancies.
  2. Both FBAR and FATCA are applied to uncover tax evaders. When it comes to FBAR it requires to report only the bank accounts ignoring the other assets but whereas FATCA reporting is more comprehensive including the bank accounts and other foreign assets.
  3. The assets defined by IRS for FATCA reporting include:-
  • Foreign pensions
  • Foreign stockholdings
  • Foreign financial accounts
  • Foreign partnership interests
  • Foreign-issued life insurance
  • Foreign mutual funds

       4. The main difference between FATCA and CRS is their account scope. While FATCA requires financial institutions to report offshore accounts of only those who qualify as US persons, CRS has a much broader scope and requires reporting financial accounts from over 100 countries.

       5. Financial institutions for FATCA and CRS can be depository institutions, custodial institutions, investment entities, and specified insurance companies. These include investment traders, banks, fund management companies, and trust managers.

        CRS document will be containing the following information:-

  • Name, address, birthplace and day, and taxpayer identification number
  • Name and number of institution
  • Account number
  • Account balance
  • Capital gains (all included)

      6. CRS has four parts:-

  • A model Competent Authority Agreement (CAA) provides a legal framework for the automatic exchange of CRS information.
  • The Common Reporting Standard (CRS)
  • Commentaries on the CAA and CRS
  • A user guide

       7. Automatic Exchange of Information (AEoI) is the exchange of financial information between countries by tax regulators and administrators. AEoI is a combination of both FATCA and CRS.

       8. The main difference between AEoI and FATCA/CRS is their applicability. AEoI applies to UK financial institutions and UK residents or any part of non-resident financial institutions situated in the UK. On the contrary, FATCA/CRS applies to the rest of Europe’s financial institutions, except the UK.

       9. Penalties for non-compliance with FATCA reporting are harsh. According to IRS, penalties include $10,000 per violation and an additional penalty of up to $50,000 for failure to file FATCA reports after IRS notification. Moreover, it includes a 40 percent penalty for understating taxes accountable to non-disclosed assets.

Facing Trouble With Your FATCA/CRS/AEoI Reporting?

Foreign financial reporting can feel burdensome. However, you do not need to go through it alone! A trusted vendor like DataTracks can help you meet all your reporting needs of FATCA, CRS, and AEoI. With over 17 years of experience, the experts at DataTracks leave no room for errors. Moreover, DataTracks can help you file your reports before deadlines. So what are you waiting for? Get in touch with a DataTracks professional at +31202253702 or email @ enquiry@datatracks.eu.



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