A number of jurisdictions have extended their Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) reporting deadlines due to the COVID-19 pandemic to give financial organisations the time needed to prepare and file their returns. This extra time could be used not just to provide businesses with the breathing space they need, but also the opportunity to review the way they report.
Malta has moved its deadline to the end of June, while the US, along with Bermuda, has moved it to 15 July, and Liechtenstein to the end of July. These extensions, which in some cases have seen filings delayed by up to three and a half months, have intensified pressure on HMRC to follow suit and move back its deadline, currently set for the end of May. There’s been no word yet from the UK’s tax authority, but an extension would make sense given that finance teams are now split and forced to work remotely.
Any hiatus would also allow these organisations to look afresh at how they report. We’ve now been living with FATCA/CRS reporting for almost five years under the International Tax Compliance Regulations 2015, subsequently amended in 2017. Many financial organisations may still be using the same reporting process not because it’s the best, but because they simply haven’t had the opportunity to assess whether it continues to meet their needs.
One of the main problems with international reporting requirements is that the goalposts can often move. Each jurisdiction can specify the way it wants reporting to be carried out. This means the report must be converted into an acceptable format that meets the rules of the relevant tax authority. But those tax rules are subject to change and if the software or advisor being used to complete the return is not up to speed and has not adjusted their reporting mechanisms accordingly, the return may be rejected and the business fined for non-compliance (up to £1,000 a day for not filing or £3,000 for an inaccurate report in the UK).
Evaluating the options
Many businesses will have ‘made do’ with their existing provision but will find this becomes increasingly difficult given these moving targets. Those using in-house resource may find personnel are not up to speed on the regulations for each jurisdiction. Those using ‘form filler’ software supplied by a tax authority may find the service does not cover all the required jurisdictions and face having to re-key data. Those using an advisory firm or third party may find they have to take the reporting option in-house with other services.
In contrast, a dedicated software solution sees the software provider shoulder the responsibility of maintaining the different jurisdiction rule requirements and of providing the mechanisms needed to convert the data into a suitable format.
Alphacat, our FATCA and CRS reporting engine, has been developed specifically to ensure you get your reporting right first time. The solution is available either as a standalone engine or as a service and now benefits from a number of enhancements. These include faster updates to jurisdiction rules to Alphacat installations, clearer guidance around the data required for reporting, and support for more jurisdictions thereby enabling reports to be created and submitted for more tax authorities.