Since the introduction of FATCA in 2014, many Irish financial institutions (including banks, investment funds, custodians, brokers etc) have been obliged to file certain information with the Irish Revenue Commissioners in respect of US account holders. Spurred on by the rollout of FATCA, the OECD announced a further move towards international tax transparency with their own exchange of FATCA-type financial account information; the “Standard for Automatic Exchange of Financial Account Information” known as the Common Reporting Standard (the “CRS”). The CRS sets out a global standard for the automatic exchange of financial account information. Some 96 countries have now signed up and committed to exchange information under the CRS by 2017/2018. CRS will take effect for early adopters, including Ireland, on 1 January 2016, with the first actual exchanges of information occurring in 2017.
EU DAC 2 and CRS
In the EU context, the revised European Directive on Administrative Cooperation (“DAC 2”) was transposed into Irish law in the Finance Bill. DAC 2 in effect implements the OECD’s CRS into European law focusing on the reporting of financial account information between EU Member States. Under DAC 2 Member States will be obliged to exchange this information on financial accounts in 2017 for the first time in respect of 2016 information. Following the adoption of CRS, and the obvious overlaps in terms of financial information reporting, on 10 November 2015 the Council of the EU repealed the EU Savings Tax Directive which since 2005 had provided for access by tax authorities to certain information on private savers.
Irish implementation of CRS
It is anticipated that the Irish Revenue Commissioners will issue Regulations and Guidance in respect of the implementation of CRS/DAC 2 before the end of 2015. It is hoped that Irish financial institutions will be required to file a single consolidated return only, covering both CRS and DAC 2. The adoption of CRS will significantly expand the scope of account holders in respect of whom Irish financial institutions will be required to report on. Appropriate account holder due diligence and reporting may effectively be applied to all account holders under CRS rather than a US focused approach under the FATCA regime.
The Irish CRS Regulations are expected to confirm that Ireland will adopt the “wider approach” for CRS. This will allow financial institutions to collect and file with Revenue data relating to all non-resident account holders rather than needing to isolate data for residents of jurisdictions with which Ireland has an exchange of information agreement. This wider approach to CRS should hopefully reduce the compliance and data capture costs for Irish financial institutions.
A number of implementation guides and practical FAQs in respect of the CRS can be found on the OECD’s CRS Portal. It is anticipated that the Irish implementation of CRS and the associated Regulations when issued in 2015 will largely mirror the OECD Standard (e.g. as regards treatment of pre-existing accounts, scope of reporting requirements, due diligence procedures, obtaining tax reference numbers etc). Given that Irish financial institutions will be required to file personal information of all account holders, it is likely that certain changes to their privacy / data protection notices as presented to account holder may be required to be updated to reflect CRS.
Nexus Taxation Comment
The move towards automatic exchanges of information and great tax transparency between tax authorities is a trend which is likely to continue. Ireland generally fully supports these global moves and has been actively involved in such measures within the EU (e.g. DAC 2), the OECD (e.g. CRS), and bilaterally (e.g. FATCA). It is hoped that the Irish authorities will implement these measures in a clear and streamlined fashion in order to minimise disruption and costs for Irish financial institutions. Strong upfront due diligence procedures, data capture and documentation in respect of new financial account holders should ease the pain in a post-CRS world.
To learn more about Ireland’s adoption of FATCA and CRS and their practical implementation please contact Patrick McClafferty, Partner at Nexus Taxation – firstname.lastname@example.org