Common Reporting Standard/FATCA
What is FATCA?
Foreign Account Tax Compliance Act (FATCA) is a US tax law that is intended to combat tax evasion by US persons who hold financial assets outside the US. This regime enhances tax transparency by requiring foreign (non-US) financial institutions to report information on financial accounts held by US persons and certain non-US entities to the US Internal Revenue Service (IRS). Non-compliant financial institutions and their account holders may be subject to a 30% withholding on certain US source income.
Many jurisdictions, including Hong Kong, have entered into intergovernmental agreement with the US to implement FATCA. The FATCA framework became effective in Hong Kong on 1 July 2014. Hong Kong financial institutions are generally required to certify their FATCA compliance to the IRS every three years to confirm that the financial institution has met the requirements outlined in the FATCA agreement, including registration, due diligence, reporting, and withholding obligations.
What is CRS or AEOI?
The Common Reporting Standard (CRS), developed by the Organisation for Economic Co-operation and Development (OECD), is a global framework designed to combat tax evasion through the Automatic Exchange of Financial Account Information (AEOI) between jurisdictions.
In Hong Kong, the Inland Revenue (Amendment) (No. 3) Ordinance 2016, enacted on 30 June 2016, established the legal framework for AEOI, effective from 1 January 2017. The first exchange of information occurred in 2018, covering over 120 reportable jurisdictions. The Inland Revenue Department (IRD) conducts regular reviews, including enquiry letters and site inspections, to ensure effective CRS implementation. As a result, financial institutions (FIs), both traditional and non-traditional, are prioritising compliance and data quality to meet regulatory expectations.
Hong Kong FATCA/CRS requirements
Obligations of financial institutions (FI)
Under the FATCA/CRS regime, entities in Hong Kong can follow a streamlined four-step approach to ensure compliance:
|
Financial institution |
|
|
Financial accounts |
|
|
Review accounts |
|
|
Data collection and reporting |
|
Key FATCA timeline in Hong Kong
- Registration: FIs are generally required to register with the IRS via the IRS FATCA Portal upon becoming an FI.
- Reporting: March 31 of the year following the reporting year
Key CRS timeline in Hong Kong
- Registration: FIs must notify the IRD via the AEOI Portal within 3 months after the date of the first occasion on which they commenced to maintain a reportable account.
- Reporting: FIs receive electronic notices from the IRD in January each year via the AEOI Portal, requiring submission of Financial Account Information Returns within 5 months.
Our services
PwC delivers tailored compliance and governance solutions to ensure regulatory adherence:
- Legal entity analysis: We conduct FATCA/CRS legal entity analysis to identify financial institution, and its financial and reportable accounts.
- Policy and framework development: We design or enhance FATCA/CRS -related policies, procedures, and controls to prepare clients for regulatory reviews.
- Tax authority enquiry support: We provide expert assistance to FIs navigating tax authority enquiries, ensuring robust and timely responses that demonstrate compliance. Our dedicated team collaborates closely with clients to prepare professional response letters that effectively substantiate adherence to FATCA/CRS requirements.
- Health check: We provide comprehensive FATCA/CRS health check services to strengthen your compliance framework. We meet with your team to review compliance processes and pinpoint risks. We evaluate your policies, manuals, and training materials to ensure they meet FATCA/CRS standards, supported by sample checks. Additionally, we use automated tools to verify the accuracy and completeness of your returns, addressing any issues proactively.
- FATCA Certification: We provide support to the Responsible Officer (RO) in preparing for and completing the required FATCA certification, including reviewing documentation and providing guidance on the certification process.
- Ongoing advisory: We offer continuous, tailored advisory services to support FIs in navigating the complexities of FATCA/CRS compliance. Our team serves as a trusted partner, providing prompt and expert guidance on a wide range of FATCA/CRS-related enquiries, including due diligence, reporting, training, regulatory updates, and other ad-hoc FATCA/CRS questions.
PwC empowers FIs to meet their FATCA/CRS obligations with confidence. Our expert team provides:
- Initial registration support: Assistance in completing FATCA registration with the IRS, and assistance in obtaining an e-Cert and completing AEOI registration with the IRD.
- Annual reporting assistance: Comprehensive support for preparing and submitting FATCA/CRS filings to ensure compliance.
PwC simplifies FATCA/CRS compliance for FIs facing challenges from manual processes and increased tax authority scrutiny. Our all-in-one solution supports every step, from client onboarding to annual reporting, acting as your single point of contact.
Our FATCA/CRS risk assessment tool enhances compliance efficiency and accuracy by:
- Extracting data from your systems.
- Checking and correcting data for accuracy.
- Identifying reportable accounts using FATCA/CRS rules.
- Creating compliant FATCA/CRS XML files.
Our FATCA/CRS reporting solution automates the entire reporting process:
- Data extraction: Pulls data from proprietary systems.
- Quality validation: Checks for mandatory fields, invalid characters, and tax residency accuracy.
- Reportable account identification: Applies FATCA/CRS rules to determine reportable accounts.
- XML generation: Produces compliant XML files, with summary and exception reports for pre-submission review.
Contact us
