A flexible solution for FATCA compliance
FATCA compliance requires foreign financial institutions – not just the tax department – to report information about financial accounts held by U.S. taxpayers to the IRS or national tax body.
In 2014, 51 jurisdictions signed on to the Common Reporting Standard (CRS), an the Organization for Economic Co-operation and Development (OECD) initiative designed to enhance the Automatic Exchange of Information (AEoI). CRS broadens and facilitates the efficient exchange of information between tax authorities, and will be an invaluable tool in the global fight against tax avoidance.
Together with the Foreign Account Tax Compliance Act (FATCA), which is U.S.-centric, the global CRS initiative has significant implications for financial institutions, including:
- Stricter reporting requirements
- The need for more stringent customer due diligence (CDD) procedures.
FATCA requires foreign financial institutions (FFIs) to report information about financial accounts held by U.S. taxpayers to the IRS or national tax body.
The aim of FATCA
FATCA is intended to reduce the levels of tax avoidance by U.S. citizens and entities through FFIs. The aim is to identify U.S. taxpayers who hold financial assets in non-U.S. financial institutions and offshore accounts, so that they cannot avoid their U.S. tax obligations.
While FATCA is designed to combat individual tax avoidance, most of the compliance burden falls on the FFIs.
FATCA will have a significant impact on the compliance processes of thousands of organizations around the world, both financial and non-financial. It will transform the global tax framework, and preparation for the Act will be complex and arduous.
The Thomson Reuters FATCA solution is both flexible and scalable to meet a client’s specific needs. As the implications of both FATCA and the CRS begin to impact the day-to-day compliance procedures of these institutions, our solution’s sophisticated software will ensure seamless workflow and delivery.
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