Justin Hayes, product manager at the international software provider, dubbed the automatic exchange agreement between an initial 58 countries “FATCA on steroids’ and an “unparalleled regulatory headache”.
“Financial institutions have just seven months to get their act together as they will be required to track unprecedented volumes of investor information from the start of next year,” he said. “This will be a steep learning curve for fund administrators and investment managers.”
Global exchange
The CRS sets out the financial account information to be exchanged between governments, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as the common due diligence procedures to be followed by financial institutions.
The information likely to be exchanged includes account balances, interest, dividends, and sales proceeds from financial assets.
Hayes said the agreement will provide a new single global standard for the exchange of tax information, and will affect investors who were not previously impacted by the US Foreign Account Tax Compliance Act, which requires FFIs around the world to provide information on their US clients to the US Internal Revenue Service.
“These clients will now have their financial information shared with other jurisdictions on an annual basis. While there is not tax withholding for non-compliance, as with FATCA, financial institutions need to start implementing the changes, because complying with the rules is so involved for affected firms and individual member states may impose their own penalties for non-compliance.”
