FATCA CRS alert 2019-01

FATCA CRS alert 2019-01



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Today’s business environment is a highly dynamic one, marked by close regulatory attention and rapid technological development, and so in this newsletter we want to help you test how complaint your organization is with operational taxes.

Operational taxes are the withholding taxes (WHT), transactional taxes, and compliance obligations (due diligence and tax/investor reporting) that exist under the US Qualified Intermediary (QI), FATCA and CRS regimes, as well as US tax compliance requirements. Below you will find our 5-question checklist, designed to help you determine to what extent your organization is compliant.

Key compliance priorities

  1. FATCA and CRS healthcheck: To prepare for audits by local tax authorities, reporting FIs should start carrying out healthchecks. These may take the form of (1) a sample review, (2) a review of the internal control framework, or (3) a risk-based approach.

  2. US Tax compliance: If a Luxembourg entity makes US investments or has US investors/clients, it must comply with US tax compliance obligations. These obligations are typically due diligence, withholding, and/or reporting (e.g. PFIC statements, K-1 schedule, and others).

  3. Documentation: The remediation period for entities was two years under FATCA and CRS. In other words, reporting FIs had two years— after those regimes began being enforced—to conduct the necessary due diligence procedures for preexisting accounts. FIs should now take steps to ensure the correct treatment, in terms of reporting and policy, of recalcitrant and undocumented individual or entities.

  4. Entity classification: In certain instances, the determination of internal FATCA and CRS policies was made based on limited industry guidelines. It is now time to revisit these policies to ensure compliance.

  5. FATCA and CRS Reporting: Although FATCA and CRS reporting mainly reflect the situation at year-end, preparation should start early on in the year, to account for changes in circumstances, additional due diligence needs, account closures, etc.

FATCA and CRS Checklist

  1. Pre-existing accounts: Have you completed the FATCA and CRS remediation of pre-existing accounts
  2. Onboarding: Are you comfortable with the FATCA/CRS status provided by your clients?
  3. Reporting: Do you have a comprehensive system for annual FATCA and CRS reporting?
  4. Risk Framework: Does your entity maintain an internal control framework for FATCA and CRS?
  5. Governance: Are regulatory changes sufficiently monitored by your organization?

To find out more, click here.

US Tax Compliance Checklist

  1. PFIC Reports: Is one of your entities a passive entity with US investors?
  2. Tax Return or reclaim: Are you confident that the correct amount of US withholding taxes was paid on your past US investments?
  3. K-1 Statements: Is one of your entities a partnership engaged in a trade or business in the US and do you receive K-1 statements from your counterparty or investments?
  4. 871(m): Have you made an assessment as to whether your organization is affected by section 871 (m)?
  5. Check-the-box election: Have you considered making the check the box election to change an entity’s classification from transparent to corporation (or vise-versa)?

To find out more, click here.

KPMG Luxembourg has built a broad range of tools and managed services to help financial institutions face their operational tax compliance challenges.

Qualified Intermediary FATCA and CRS US Tax compliance
Standardized review of compliance 
Standardized review of compliance
PFIC Reporting:
For certain Luxembourg entities with US investors
Annual 1042-S electronic reporting
Determining FATCA/CRS status
Tax reclaim:
Simplified reclaim of US withholding tax 
Tax Return:
1042 Validation tool
Annual reporting to the Luxembourg tax authorities
K-1: statements:
For partnerships reporting the partner’s income
Online or onsite training (as per QI Compliance Program)
AEoI Tracker:
Status in multiple jurisdictions
871(m) Compliance

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