OECD Finalizes FATCA Like Regime With More Reporting Obligations
Global companies that hold account balances have a new FATCA-like regime to contend with after the Organization for Economic Co-Operation and Development finalized a new method to govern information exchange among more than 50 countries.
OECD is instituting the Common Reporting Standard as a huge step toward international tax cooperation and transparency, says Michael Plowgian, a principal in international tax for KPMG. While the United States is not a signing participant in the arrangement, subsidiaries or branches of U.S. entities will need to comply with the reporting requirements in the jurisdictions where authorities are signing on to the OECD plan, he says. “The fact that the U.S. has not implemented the Common Reporting Standard may actually create additional challenges for U.S.-based financial institutions in coordinating implementation across the various jurisdictions in which they do business.”
The Common Reporting Standard is the global answer to the Foreign Accounting Tax Compliance Act in the United States. Approved by Congress in 2010, FATCA requires U.S. taxpayers to report more information about their offshore holdings, but it also gives foreign financial institutions a huge incentive to report on those offshore holdings of U.S. citizens as well, so the Internal Revenue Service can compare notes and assess tax and penalties as necessary. Through intergovernmental agreements, the U.S. government partners with other jurisdictions to compel reporting and share information.Read more on Compliance Week.