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Reporting Obligations of EU Financial Institutions

Published by in Risk & Compliance ·
Tags: EUTaxationNonEUTaxationComplianceAMLFATCAOECD

Following a number of convections, treaties and regulations that became into force over the last years the burden to E.U. financial institution IT departments for mandate reporting has significantly increase.

U.S. Foreign Account Tax Compliance Act (FATCA): In 2010, the United States enacted FATCA, which introduced a comprehensive Automatic Exchange of Information by requiring non-U.S. financial institutions (“FFI”) to provide annually U.S. tax authorities (IRS) with data on the financial accounts maintained directly or indirectly by persons considered as U.S. citizens for U.S. tax purposes. E.U. Member States Financial Institutions participating to any model of Intergovernmental Agreement (“IGA”) will have to start report financial account information as from March 31st, 2015 for FFIs in non-IGA jurisdictions and FFIs in Model 2 IGA jurisdictions and from September 30th, 2015 for FFIs in Model 1 IGA jurisdictions. The same mandate reporting is applicable in the consecutive years.

E.U. Directive on Administrative Cooperation (DAC or EUDAC): The European Council of Economic and Financial Affairs (ECOFIN) on October 14th, 2014 agreed to an amendment of the text of the Directive on Administrative Cooperation in the Field of Taxation, Directive 2011/16/EU (“DAC” or “EUDAC”). The new Directive, Directive 2014/107/EU is amending Directive 2011/16/EU, is adopted on December 9th, 2014 and significantly extends the scope of the automatic exchange of information (“AEOI” or “AEI”) for tax purposes. E.U. Member States Financial Institutions will be required to identify residency of customers and annually report financial account information as from 1 January 2016.

OECD Automatic Exchange of Information (AEOI): The Convention on Mutual Administrative Assistance in Tax Matters (“MCAA”) was developed jointly by the OECD and the Council of Europe in 1988 and amended by Protocol in 2010.
In the G20 Meeting of Finance Ministers and Central Bank Governors in Saint Petersburg, Russia, July 20th 2013, the OECD proposal for multilateral and bilateral automatic exchange of information for tax purposes, single global standard, was endorsed (article 19) and OECD was asked for a timeline to complete the development of the standard in 2014.
In the G20 Meeting of Finance Ministers and Central Bank Governors in Cairns, Australia, September 20th & 21st, 2014, In September 2014, the G20 approved the second part and in full the G20 Common Reporting Standard Implementation Plan which resulted to the document known as the "Standard for Automatic Exchange of Financial Account Information - Common Reporting Standard” (CRS) developed by the OECD (which actually will be used as well as the standard for the DAC reporting purposes). The MCAA is the international agreement activating the OECD AEOI.
In August 2015, the first edition of the CRS Implementation Handbook was published, providing practical guidance to assist government officials in the implementation of the Standard which is intended to be a living document and will be updated on a regular basis. E.U. Member States Financial Institutions will be required to annually report financial account information by September 2017 for the early adopters of OECD AEOI and one year later, September 2018, the other signatory countries.

In summary, E.U. Member States Financial Institutions are subject to three (3) different reporting obligations:
  • FATCA for clients or beneficiary owners that are U.S. citizens.
  • The revised DAC (Directive 2014/107/EU) for clients or beneficiary owners that are E.U. residents
  • The OECD AEOI for for clients or beneficiary owners that are residents in a (OECD) participating country other than the U.S. or an E.U. Member State.


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