Know about Foreign Account Tax Compliance (FATCA) & Common Reporting Standard (CRS)

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) has been developed since 2014. It is referred to as a law demanding Foreign Financial Institutions (FFI) across the world to record the financial data of U.S. Citizens. Moreover, suppose an FFI recognises accounts belonging to U.S. citizens. In that case, that organisation is obligated to report the account holder’s identity, inclusive of the assets present in the account of the U.S. Department of the Treasury. The primary purpose of FATCA is to ensure that Americans are docile with tax regulations, even when their assets are in a foreign country.

What is a Common Reporting Standard (CRS)?

Commenced by the Organization for Economic Cooperation and Development, the Common Reporting Standard (CRS) is a worldwide policy for automated exchange of information. The fundamental goal of CRS is to provide governments with a more reliable view of the financial assets of their country’s citizens. This act may seem the same as FATCA but comes with many differences.

  • Scope of Reporting Institutions: CRS includes insurance companies, banks, collective investment channels, and brokers.
  • Scope of Taxpayers In Regards to Reporting: CRS aims at shell companies, trusts, taxable entities, and individuals.
  • Scope of Required Financial Information: CRS expects institutions to Report on various types of income, including dividends and interest.

Difference Between FATCA and CRS

Although the Common Reporting Standard (CRS) is dependent on the Model 1 Intergovernmental Agreement (Model 1 IGA) approach of The Foreign Account Tax Compliance Act (FATCA), there are some of the fundamental differences that need remediation specific onboarding, processes, and reporting enhancements. For Instance, the reach of CRS is more extensive than FATCA as it strives to identify financial institutions tax residents in one of the jurisdictions operating in CRS.

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Marlon Clements

Marlon Clements

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The Caribbean is a region of the Americas that comprises the Caribbean Sea, its surrounding coasts, and its islands.