Guernsey’s Revenue Service is amending the Channel Island’s income tax law to strengthen its automatic exchange of information (AEOI) system, which is based on the OECD’s common reporting standard (CRS) and America’s Foreign Account Tax Compliance Act (Fatca).
The AEOI has been implemented in a phased approach over the last five years, starting with Fatca and then CRS, law firm Carey Olsen explained.
The latest amendment applies to both measures, but it also impacts all financial institutions regardless of whether they are required to report information or not.
Until now, only firms that fell under CRS or Fatca were required to register with the Revenue Service’s online reporting system – Information Gateway Online Reporter (Igor).
But now all financial institutions (FI) will need to sign up to the platform and specify whether or not they have reporting obligations under CRS or Fatca.
They will also need to specify if their company is classified as a:
- Reporting FI,
- Non-reporting FI,
- Participating jurisdiction FI,
- Non-participating FI.
Every year, by the end of February, FIs will need to confirm that their classification is still correct.
If it changes, firms will need to inform the Revenue Service within 14 days.
Penalties
As part of the amendment, Guernsey passed regulations to increase sanctions for CRS and Fatca non-compliance.
These set out enhanced penalties of £1,000 ($1,364, €1,164) a day if there has been 30 days of continual failure, after an initial fine of £300 and daily sanctions of £50, to submit a report by the yearly deadline of 30 June, Carey Olsen said.
If reports are incorrect or incomplete due to negligence or fraud, penalties will be calculated according to the value of the account or accounts affected.
In the case of negligence, the maximum fine is 0.5% of the balance or value of the account(s), but if a complete return is filed before an enquiry into potential non-compliance begins, there won’t be any sanctions payable.
If the filing is found to be fraudulent, the maximum fine is set at 1% of the balance or value.
Konrad Friedlaender, partner, and Laila Arstall, counsel at Carey Olsen in Guernsey, said: “The latest changes to Guernsey’s tax law facilitate greater monitoring by the Revenue Service at industry and institutional levels and provide the legal basis for targeted compliance measures to be taken by the Revenue Service.
“Given that Guernsey’s financial institutions have now had over five years to become accustomed to the AEOI requirements of CRS and Fatca, it is anticipated that any additional compliance burden on Guernsey’s financial institutions will have limited impact for those who are already engaged with AEOI and have in place appropriate policies and operational procedures that can be readily adapted to meet new requirements.
“Certainly, the exchange of information based on accurate data is in stakeholders’ interests and ultimately assists with Guernsey retaining its well-deserved reputation as a centre of excellence in the world of offshore financial services.”
