FATCA v CRS – Introduction
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.
The Basics
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.
Enforcement Muscle
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.
Who’s in Scope?
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.
How the Data Flows
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.
Key Differences at a Glance
| 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 |
FATCA v CRS – Conclusion
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.
Final Thoughts
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