In 2010, the US enacted the Foreign Account Tax Compliance Act (FATCA), rules designed to use foreign financial institutions (FFIs) to combat tax evasion by US taxpayers with offshore investments. More detailed FATCA rules have since been adopted, the principle consequences of which came into effect from 01 July 2014. The FATCA rules are wide ranging and complex and have a significant impact on non US financial institutions and others.

In particular, FATCA imposes a 30% withholding tax on US related payments made to FFIs unless they identify and annually report information on “financial accounts” held by specified US persons and foreign entities in which US persons hold a substantial (ie generally greater than 10%) or controlling (ie generally greater than 25%) interest: 

  • to the IRS under a FFI agreement entered into with the US or 
  • to their national tax authority or the IRS under national legislation implementing FATCA, where the FFI is in a jurisdiction that has entered into an intergovernmental agreement (IGA) with the US.

Similar automatic tax information exchange measures have been introduced by the UK, on a bilateral basis, with the UK Crown Dependencies and British Overseas Territories and on a multilateral basis between certain EU jurisdictions. Meanwhile, the OECD has put forward a Common Reporting Standard, based on FATCA, which has received widespread support and is expected to replace the UK’s bilateral arrangements from September 2017.

What's new

IRS limits scope of FATCA rules

The IRS has issued proposed new regulations that will further delay the imposition of withholding tax on foreign passthru payments, remove the potential imposition of withholding tax on gross payments and clarify the meaning of the definition of “investment entity financial institution”.

HMRC updates list of CRS reportable jurisdictions

HMRC has removed six jurisdictions from the list of reportable jurisdictions for the purposes of the Common Reporting Standard.

Cayman Islands AEOI update: March 2018 

The Cayman Islands Department for International Tax Cooperation has re-opened its FATCA and CRS reporting portal and announced changes to its certification and notification forms, including introducing a lower threshold of 10% for the “Controlling Person” definition.

OECD Model Mandatory Disclosure Rules for CRS avoidance arrangements 

The OECD has issued model rules to require disclosure by promotors and service providers of schemes to avoid the need for disclosures under the CRS.

Cayman Islands extends CRS and FATCA registration dates

The Cayman Islands have extended the FATCA and CRS registration deadline to 31 July 2017 and released revised self-certification forms.

Renewal of FFI Agreements required

Foreign financial institutions (FFIs) with existing FFI agreements with the US Internal Revenue Service are required to renew those agreements by 31 July 2017.

CRS and FATCA: UK implementation

The UK recently updated its implementing regulations giving effect to CRS and FATCA agreements, amending a number of aspects in the process.

Cayman funds: how to comply with the OECD Common Reporting Standard

A summary of the actions that managers and boards of Cayman Island funds should undertake in 2017 to be compliant with their Common Reporting Standard obligations.

Cayman Islands extends CRS notification and reporting dates 

The Cayman Islands has announced that CRS notification and first reporting deadlines have been extended by two months.

Cayman Islands CRS Regulations: compliance and penalty provisions

Proposed amendments to the existing Cayman CRS regulations will bring in significant reporting changes as well as adding compliance and penalty provisions.

Foreign Account Tax Compliance Act, the Common Reporting Standard and international automatic exchange of information

A review of the current state of play of FATCA, UK implementation and other OECD and EU automatic exchange of information developments (reviewed 07 October 2016).

20 Questions on the Common Reporting Standard

Hatice Ismail and Martin Shah’s Tax Journal article on the complex due diligence and reporting obligations introduced by the implementation of the Common Reporting Standard.

Foreign Account Tax Compliance Act and international automatic exchange of information

A review of the current state of play of FATCA, UK implementation and OECD and EU automatic exchange of information developments.

EU Commission proposes EU FATCA

EU Finance Ministers have agreed on a draft directive extending the scope for the mandatory automatic exchange of information between EU tax authorities.

Cayman Islands extends 2016 deadlines for FATCA reporting and notification

The Cayman Islands is extending the Foreign Account Tax Compliance Act (FATCA) reporting and notification deadlines for 2016.

CbC Competent Authority Agreement signed

31 countries have signed an agreement to share of Country-by-Country (CbC) reports produced by multinationals in their jurisdictions to other signatory jurisdictions in which the multinational group does business.

CRS implementation: Cayman Islands update 

The Cayman Islands’ Government has issued guidance on the implementation of CRS reporting requirements, including the period of overlap with UK FATCA during 2016.

The Common Reporting Standard (Global FATCA): how fund managers should prepare

With the commencement date for the OECD Common Reporting Standard (CRS) on the horizon, asset managers and investment funds should start to prepare to implement CRS.

FATCA transitional rules extended

The US has announced a further delay to the implementation of certain Foreign Account Tax Compliance Act (FATCA) obligations, including those imposing withholding tax on gross proceeds and foreign passthru payments.

FATCA and holding companies: HMRC guidance

HMRC has provided guidance on holding companies and treasury companies operating as the registered lead FI for FATCA reporting purposes.

Cayman FATCA portal open for registration

The Cayman Islands has opened its online Automatic Exchange of Information Portal to enable "reporting" Cayman Islands financial institutions to register by the deadline of 30 April 2015 for US and UK FATCA purposes.

Practical guide to dealing with FATCA in bank lending transactions

An overview of developments in market practice towards FATCA in bank lending transactions, and practical approaches to dealing with FATCA issues. 

Updated FATCA Project Plan

An updated FATCA Project Plan will identify what FATCA related steps managers of Cayman hedge funds should be addressing in Q4 2014.

Common Reporting Standard moves a step closer to reality

The OECD’s Common Reporting Standard received further endorsement at the recent Global Forum meeting where 51 jurisdictions signed a multilateral competent authority agreement.

G20 leaders welcome progress on BEPS and CRS

The G20 Finance Ministers have reaffirmed their commitment to the OECD’s BEPS and Common Reporting Standard projects following the G20 Cairns September 2014 meeting at which the OECD presented its progress reports on these topics.

Access all elexica commentary relating to FATCA

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.