The Common Reporting Standard (CRS) impacts Irish funds from 1 January 2016. The CRS framework represents a globally coordinated approach to the disclosure of income earned by individuals and organisations in order to combat tax evasion. It emerged from the Organisation for Economic Co-operation and Development (OECD) in February 2014 following meetings of the G20. To date, more than 90 jurisdictions have publicly committed to implementation, many of which are early adopter countries, including Ireland. Section 891F of the Taxes Consolidation Act 1997 implements CRS on an international basis under Irish law (while section 70 of the Finance Bill 2015 provides for the implementation of CRS in the context of EU member states) and regulations are expected to be enacted before the end of the current year.
From 1 January 2016 there will be a new requirement to identify and confirm the tax residence status of all new and existing Investors in a reporting Irish fund under CRS. This requirement will operate alongside the current requirement to identify and confirm the status of investors under FATCA (i.e. broadly, whether such investors are US Specified Persons or not). It will also be necessary to undertake due diligence with respect to pre-existing accounts (i.e. accounts opened prior to 1 January 2016) by 31 December 2017. That date may change once the final Irish regulations issue.
In respect of new investors, the CRS due diligence procedures require that self-certifications should be obtained and validated at account opening stage. Where it is not possible to validate on day one, validation of the self-certification should be completed within 90 days. Only in a limited number of exceptional circumstances, where it is not possible to obtain a self-certification on day one, should such self-certification be obtained later provided it is validated as quickly as feasible and, in any event, not later than 90 days. The Irish Revenue Commissioners have confirmed that failure to obtain a validated self-certification within 90 days will result in the account being reported. The Irish Revenue Commissioners have also indicated that if Financial Institutions return a significant number of undocumented accounts in their annual report that this will be an area of focus in compliance reviews.
Data Protection Notice
From 1 January 2016, the Data Protection Commissioner requires that all new customer applications should contain appropriate data protection customer information notices. This is required to facilitate funds in collecting data relating to the country of residence and the Tax Identification Number (TIN), from all non-resident investors (i.e. not only residents of jurisdictions with which Ireland has an exchange of information agreement). These Customer Information Notices must include the following information;
- Why the data is being collected
- What will be done with the data
- What information will be reported to the Irish Revenue Commissioners and informing that the Irish Revenue Commissioners may exchange information with other Tax Authorities
- It should also outline where the customer can obtain further information, namely The AEOI (Automatic Exchange of Information) webpage on revenue.ie will contain more information in this regard
Updates to Documentation
In terms of on-boarding new investors from 1 January 2016, Funds will need to obtain self-certifications regarding the CRS status of such investors. To this end, the Irish Funds FATCA/CRS Working Group circulated appropriate self-certification forms for both individuals and entities which incorporate the requirements under both FATCA and CRS and which new investors will need to complete and provide to the Fund.
Separately, and as noted above, Funds will need to undertake certain due diligences (broadly akin to the FATCA due diligence procedures) on pre-existing accounts (i.e. those accounts opened prior to 1 January 2016) provisionally by 31 December 2017. The above is subject to implementation of domestic regulations (due to be finalised by year end). Funds will need to update subscription forms and on-boarding processes to comply with the ‘Wider Approach’ under CRS.
Funds may also wish to review (and possibly update) their constitution, prospectus disclosures and definitions as well as subscription form warranties. Funds may also consider updating any FATCA services agreements they may have with service providers which currently cover reporting and due diligence for FATCA purposes and which may be extended to cover CRS requirements or enter into separate CRS services agreements with those service providers.
Irish Funds FATCA/CRS Working Group have been working with the Irish Revenue Commissioners in relation to the obligations that CRS imposes, with a view to obtaining clarity on fund specific issues. It is expected that most issues will be clarified in the OECD CRS Commentary and Frequently Asked Questions (FAQs), which can be found on the OECD AEOI Portal. A number of Irish specific issues will be dealt with through FAQs to be issued by the Irish Revenue Commissioners.