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FATCA and CRS are often mentioned in the same breath, but they aren’t identical twins.
They’re more like transatlantic cousins.
Both were born out of the post-financial-crisis push for tax transparency, and both involve the exchange of financial account information.
But their origins, scope, and enforcement mechanisms differ considerably.
FATCA is a US law.
It requires foreign financial institutions to report information about US taxpayers to the US IRS.
CRS, by contrast, is a global framework developed by the OECD.
It enables participating countries to share information with each other about their residents’ overseas financial assets.
FATCA has sharp teeth.
If a foreign institution doesn’t comply, it risks a 30% withholding tax on US-sourced income.
CRS doesn’t impose penalties directly – enforcement is left to participating jurisdictions. It’s a bit more carrot, a bit less stick.
FATCA applies to US persons: citizens, residents, and entities with substantial US ownership.
CRS casts a wider net.
It applies to anyone holding financial accounts outside their country of tax residence, no matter their nationality.
FATCA often works through intergovernmental agreements (IGAs), where local authorities collect and transmit the information to the IRS.
CRS is multilateral and reciprocal: tax authorities both send and receive data under standardised protocols.
| Feature | FATCA | CRS |
|---|---|---|
| Origin | US law (2010) | OECD initiative (2014) |
| Scope | US taxpayers | All tax residents |
| Reporting | To US IRS | To home jurisdiction tax authority |
| Penalties | 30% withholding | Local enforcement only |
| Data Exchange | Mostly one-way | Reciprocal |
Both FATCA and CRS have transformed the global tax landscape.
FATCA fired the first shot; CRS followed up with a coordinated global response.
For advisers and clients alike, understanding the nuances between the two is essential to staying compliant and informed.
If you have any queries about this article on FATCA v CRS, or tax matters in your country or internationally then please get in touch.
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The Foreign Account Tax Compliance Act, or FATCA, might sound like something from an international spy novel, but it’s actually a US tax law with global reach.
Enacted in 2010, FATCA was designed to combat tax evasion by US persons using foreign accounts.
Since then, it’s reshaped how banks and governments around the world interact with the IRS – and how taxpayers disclose their offshore assets.
The rules require foreign financial institutions (FFIs) to report information on accounts held by US taxpayers or foreign entities in which US taxpayers hold substantial ownership.
If they don’t comply, the IRS can impose a 30% withholding tax on certain US-source payments made to them.
In short: cooperate, or lose money.
To make FATCA function globally, the US signed intergovernmental agreements (IGAs) with over 100 jurisdictions.
These IGAs compel local institutions to report to their own tax authorities, who then share the data with the IRS.
FATCA affects a wide range of actors:
For individual taxpayers, FATCA introduced new reporting obligations, such as Form 8938 (Statement of Specified Foreign Financial Assets), which runs alongside but is separate from the more familiar FBAR.
This has had far-reaching consequences.
Some foreign banks have closed accounts held by US persons rather than deal with the compliance burden.
Others have upgraded their due diligence procedures significantly.
FATCA also sparked international efforts to develop broader information exchange frameworks.
FATCA isn’t just about Americans. It was a turning point in global tax transparency and signalled the start of a wider crackdown on hidden offshore wealth.
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The Common Reporting Standard (CRS) is sometimes described as the world’s answer to FATCA.
Developed by the OECD and adopted by over 100 jurisdictions, CRS aims to crack down on global tax evasion by enabling automatic exchange of financial account information between countries.
CRS requires financial institutions in participating jurisdictions to collect information about their account holders and report it to their local tax authorities.
These authorities then exchange the data with the relevant countries where the account holders are tax residents.
The scope is wide. CRS covers individuals and entities, and applies to a range of financial assets, including bank accounts, investment income, insurance products and even certain types of trusts and foundations.
Typical data reported includes:
Anyone holding financial accounts outside their country of tax residence could be affected.
Financial institutions have had to overhaul onboarding procedures and due diligence checks.
CRS also affects family offices, trusts, and private investment structures.
Unlike FATCA, which focuses on US taxpayers, CRS is multilateral – and it doesn’t rely on any one country enforcing it. Countries commit to reciprocal information exchange.
FATCA and CRS share many features but differ in scope and origin.
FATCA is a unilateral US initiative with global effects; CRS is a multilateral agreement coordinated through the OECD.
CRS doesn’t have the same teeth as FATCA (no 30% withholding), but it casts a wider net.
The Common Reporting Standard represents a new normal in cross-border tax compliance.
It marks the end of banking secrecy and the rise of a transparency-first global tax environment.
If you have any queries about this article on the Common Reporting Standard, or tax matters in your country or internationally then please get in touch.
Alternatively, if you are a tax adviser and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here..
Australia has implemented one of the world’s most stringent tax disclosure laws, seemingly raising the bar for corporate transparency.
From January 2025, multinational corporations (MNCs) operating in Australia are required to disclose detailed financial information, including revenues, profits, and taxes paid across 41 jurisdictions, many of which are recognized as low-tax or tax-advantageous regions.
This bold move is part of Australia’s broader effort to tackle tax avoidance and ensure corporations contribute their fair share.
Under the updated laws, MNCs must provide granular details of their global operations, including:
The reforms align with global initiatives such as the OECD’s Base Erosion and Profit Shifting (BEPS) framework but go further by requiring enhanced reporting in jurisdictions flagged as high risk.
The reforms are expected to enhance public trust in the tax system and demonstrate Australia’s leadership in promoting global tax transparency.
However, critics argue that the new requirements may deter investment, particularly from MNCs concerned about the administrative burden and public exposure of their financial data.
Australia’s tax disclosure reforms represent a significant step forward in the global fight against tax avoidance.
By requiring detailed reporting from MNCs, the country is setting a new standard for corporate transparency.
However, businesses operating in Australia must prepare for increased compliance demands and potential reputational risks.
For companies operating in or expanding into Australia, understanding and adapting to these new requirements is critical to maintaining compliance and minimizing risks.
If you have questions about Australia’s tax disclosure laws or need assistance with compliance strategies, get in touch.
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Country-by-Country Reporting (CbCR) is a tax transparency measure introduced by the OECD as part of its Base Erosion and Profit Shifting (BEPS) initiative.
CbCR requires large multinational companies to report detailed information about their operations, profits, and taxes paid in each country where they do business.
This information is then shared with tax authorities to help them detect tax avoidance practices, such as profit shifting to low-tax jurisdictions.
CbCR applies to multinational companies with global revenues of more than €750 million.
These companies must file an annual CbCR report that provides a breakdown of their income, profits, taxes paid, and other economic activities in each country where they operate.
For example, if a company has subsidiaries in 10 different countries, it must provide information on how much revenue each subsidiary earns, how much profit it makes, and how much tax it pays in each country.
This level of detail helps tax authorities identify where a company might be shifting profits to avoid taxes.
as introduced as part of the OECD’s effort to tackle tax avoidance by multinational companies.
Before CbCR, it was difficult for tax authorities to see the full picture of a company’s global operations.
By requiring companies to disclose their activities on a country-by-country basis, CbCR gives tax authorities the information they need to detect tax avoidance schemes.
This reporting helps ensure that multinational companies are paying their fair share of taxes in the countries where they actually do business, rather than shifting profits to tax havens.
Country-by-Country Reporting is a critical tool for improving tax transparency and combating tax avoidance.
By requiring large multinational companies to report detailed information about their global operations,
CbCR helps tax authorities ensure that companies are paying their fair share of taxes and operating in a fair and transparent manner.
If you have any queries about this article – What is country by country reporting? – then please do get in touch.
On October 15, 2024, the UAE Ministry of Finance officially announced the cancellation of the Economic Substance Regulations (ESR).
This significant development follows the introduction of the Federal Corporate Tax (CT) Law and marks a pivotal shift in the regulatory landscape for businesses operating in the UAE.
The cancellation was formalised through Cabinet Resolution No. (98) of 2024, which amends the earlier provisions of Cabinet Resolution No. (57) of 2020 on Economic Substance Requirements.
This article explores the background, implications, and key provisions of the latest resolution.
The Economic Substance Regulations were initially introduced on April 30, 2019, through Cabinet Resolution No. 31 of 2019, as part of the UAE’s commitment to the OECD Inclusive Framework on BEPS and to address the EU’s concerns about the UAE’s tax framework.
This move aimed to ensure that the UAE was removed from the EU’s list of non-cooperative jurisdictions for tax purposes (EU Blacklist), which occurred on October 10, 2019.
The regulations required UAE onshore and free zone companies conducting specific “Relevant Activities” to meet an Economic Substance Test by maintaining sufficient substance in the UAE.
However, with the advent of the Federal CT Law, the relevance of ESR has diminished, leading to its eventual withdrawal.
The new resolution limits the applicability of ESR to fiscal years beginning January 1, 2019, and ending December 31, 2022.
For financial years commencing after December 31, 2022, UAE entities are no longer required to comply with ESR obligations, including filing notifications or reports.
Penalties imposed for non-compliance with ESR obligations for financial years beginning after December 31, 2022, have been revoked.
The Federal Tax Authority (FTA) will refund fines already paid, and procedures for claiming these refunds are expected to be announced soon.
Although ESR obligations have ended for financial years after December 31, 2022, businesses must retain documentation for ESR submissions made during the effective period (2019–2022).
The FTA continues to audit filings for this period, and entities should be prepared for such reviews.
With the cessation of ESR, businesses can now direct their focus toward compliance with the UAE CT Law.
Clarifications on administrative procedures for penalties and filings related to the post-ESR period are anticipated.
Entities that have paid fines or filed appeals for fiscal years ending after December 31, 2022, can seek refunds and expect the resolution of their grievances.
Businesses should monitor updates from the FTA on refund procedures.
For the ESR period (2019–2022), entities should maintain proper records of filings and ensure readiness for potential audits.
The cancellation of ESR signifies a shift in the UAE’s approach to economic regulation, reflecting the evolving tax framework under the UAE CT Law.
Businesses must align their operations with the new regulatory requirements while addressing any residual ESR obligations for the 2019–2022 period.
If you have any queries about this article on the UAE Ministry of Finance’s cancellation of Economic Substance Regulations or tax matters in the UAE, please get in touch.
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The OECD has introduced a new Crypto-Asset Reporting Framework (CARF) designed to enhance transparency and combat tax evasion in the cryptocurrency market.
This framework represents a significant step forward in addressing the tax challenges posed by digital assets.
The Crypto-Asset Reporting Framework requires crypto exchanges, wallet providers, and other intermediaries to report transactions and account balances to tax authorities.
This information will then be shared among jurisdictions through the OECD’s Common Reporting Standard.
Crypto users in participating jurisdictions will face increased scrutiny of their transactions.
This may lead to higher compliance costs but is expected to reduce the misuse of cryptocurrencies for tax evasion and other illicit activities.
The CARF aims to standardise the treatment of crypto assets across jurisdictions, making it easier for governments to track and tax digital transactions.
However, countries with lax regulations may still pose challenges to enforcement.
The OECD’s Crypto-Asset Reporting Framework is a game-changer for the regulation of digital assets.
While it may create additional burdens for crypto users and businesses, its long-term benefits for transparency and tax compliance are undeniable.
If you have any queries about this article on OECD’s crypto reporting framework, or tax matters in crypto-friendly jurisdictions, then please get in touch.
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In April 2023, the Trust Property Control Act (TPCA) was amended to require trusts to submit a register containing prescribed information about beneficial owners (BO Register) to the Master of the High Court.
This amendment was introduced to address deficiencies highlighted by the Financial Action Task Force (FATF) when South Africa was grey listed.
In addition to these trust-related requirements, new rules regarding the disclosure of beneficial ownership for assets owned by companies were also implemented.
These measures aim to enhance transparency and combat financial crimes.
Although the new rules under the TPCA came into effect on 1 April 2023, neither the legislation nor the Master of the High Court initially specified a deadline for submitting BO Registers.
However, trusts have reportedly been slow to comply. Recently, the Master’s website was updated to set a firm deadline of 15 November 2024 for submission.
Failure to submit the BO Register constitutes an offence. Trustees found guilty of non-compliance could face penalties, including fines of up to ZAR 10 million and/or imprisonment for up to five years. This underscores the importance of ensuring timely compliance with the BO Register submission requirements.
While it remains uncertain whether the Master will actively enforce these sanctions in practice, trustees are strongly advised to prepare and submit their BO Registers promptly.
Even if a trust misses the deadline, it is better to comply as soon as reasonably possible to avoid potential legal and financial consequences.
The definition of a beneficial owner under the TPCA can be ambiguous.
At a minimum, the founder and the trustees of a trust are considered beneficial owners.
However, beneficiaries are not automatically included within this definition.
Trustees should carefully assess their obligations and consult the relevant guidance to ensure compliance.
If you have any queries about this article on South Africa’s Beneficial Register, or tax matters in South Africa more generally, then please get in touch.
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In an era of increasing global tax transparency, businesses must navigate evolving disclosure standards to maintain compliance and uphold their reputations.
Recent developments highlight significant changes, including the European Union’s public Country-by-Country (CbC) reporting directive, Romania’s early adoption of this directive, and the United States’ new tax disclosure standards.
The EU’s public CbC reporting directive mandates that multinational enterprises (MNEs) with consolidated revenues exceeding €750 million disclose specific tax-related information on a country-by-country basis.
This initiative aims to enhance transparency and allow public scrutiny of MNEs’ tax practices.
The directive requires the disclosure of data such as revenue, profit before tax, income tax paid and accrued, number of employees, and the nature of activities in each EU member state and certain non-cooperative jurisdictions.
Romania has proactively implemented the EU’s public CbC reporting directive ahead of other member states.
This early adoption reflects Romania’s commitment to tax transparency and positions it as a leader in implementing EU tax directives.
Romanian entities meeting the revenue threshold must comply with these reporting requirements, necessitating adjustments to their financial reporting processes to ensure accurate and timely disclosures.
In the United States, new tax disclosure standards have emerged, influenced by the global shift towards public CbC reporting.
While the US has not adopted public CbC reporting, it has introduced regulations requiring certain tax disclosures to enhance transparency.
These standards focus on providing stakeholders with a clearer understanding of a company’s tax position and strategies, aligning with the global trend of increased tax transparency.
The global movement towards greater tax transparency is driven by efforts to combat tax avoidance and ensure that MNEs pay their fair share of taxes in the jurisdictions where they operate.
This shift is evident in various international initiatives, including the OECD’s Base Erosion and Profit Shifting (BEPS) project, which aims to address tax avoidance strategies that exploit gaps and mismatches in tax rules.
To navigate these evolving tax disclosure requirements, companies should develop cohesive global tax transparency strategies. Key steps include:
By proactively addressing these requirements, companies can mitigate risks and align with the global trend towards transparency in tax matters.
The landscape of tax disclosure is rapidly evolving, with significant implications for multinational enterprises.
Understanding and adapting to new standards, such as the EU’s public CbC reporting directive and the US’s enhanced disclosure requirements, is crucial.
By developing comprehensive compliance strategies, businesses can navigate these changes effectively, ensuring transparency and maintaining stakeholder trust.
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A tax haven is a country or jurisdiction that offers very low or no taxes to individuals and businesses.
Tax havens also often have strict privacy laws, making it difficult for other countries’ tax authorities to find out who is holding money there or how much income they’re earning.
These features make tax havens attractive to people and companies who want to reduce their tax bills by moving profits or wealth offshore.
Many multinational companies use tax havens to reduce their overall tax bills by moving profits to these low-tax jurisdictions.
For example, a company might establish a subsidiary in a tax haven, shift its profits to that subsidiary, and avoid paying higher taxes in the countries where it actually does business.
Individuals also use tax havens to avoid paying taxes on their wealth.
By moving money to a tax haven, they can often keep their income hidden from their home country’s tax authorities.
Tax havens are often criticized for enabling tax avoidance and contributing to global inequality.
When companies and wealthy individuals use tax havens to reduce their tax bills, it deprives governments of the revenue they need to fund public services like healthcare, education, and infrastructure.
Efforts are being made by organisations like the OECD and European Union to crack down on tax havens and make it harder for individuals and companies to use them to avoid paying taxes.
Tax havens play a significant role in international tax avoidance, but they are increasingly under scrutiny.
As global efforts to combat tax avoidance ramp up, the role of tax havens is likely to decline, but they remain a key part of the discussion on how to ensure fair taxation across borders.
If you have any queries about this article on ‘what is a tax haven?’ – or any queries at all – then please do not hesitate to get in touch.