U.S. legislators fueled the movement towards creating a globally standardized process surrounding the communication and sharing of tax and financial information with the introduction of FATCA.
The Foreign Accounts Tax Compliance Act (FATCA) set the foreign financial sector in motion when it was initially passed in 2010. Since that time, financial institutions across the world have been working to understand the requirements and implications of complying with FATCA. The law requires foreign financial institutions to share information regarding U.S. account holders with the IRS. Those who fail to comply face penalties such as a 30% reduction in international monetary transfers from U.S. sources. The effects of the law have had a wide reach, as other countries and world leaders are also seeking to establish a more standardized information exchange process among tax authorities across the world.
International Movement towards Information Standards
One international group in particular which has spearheaded these efforts is the Organization for Economic Cooperation and Development (OECD). This group is advocating for one global standard regarding the exchange of information among countries and financial institutions for tax purposes. The council adopted a declaration on the automatic exchange of information in tax matters and is moving towards finding effective strategies for creating and implementing such a standard. They have already experienced an increase in support from other countries and institutions around the world.
The Common Reporting Standard (CRS)
One example of standardized reporting is found in the Common Reporting Standard (CRS) which has already been adopted by 65 jurisdictions. This agreement outlines standards for collecting information from financial institutions and exchanging the information with partner jurisdictions and tax institutions worldwide. This effort is part of a global focus on preventing tax evasion and could go into effect as soon as 2015 or 2016.
FATCA Leads the Way
As it stands, FATCA has already gained some support from other countries. Currently, 42 jurisdictions have signed agreements with the United States, and more are expected to do so in the future. Although the law went into effect on July, 1 2014, the U.S. government has said that it will work with institutions and individuals as they begin to navigate the documentation and reporting process. Specific processes have been outlined for individuals and institutions who have failed to report income or assets in past years and who need to bring their reporting into compliance.
For those who are concerned about FATCA compliance, law firms such as Freeman Tax Law are available to represent clients before the IRS and assist with the filing of necessary documentation, forms, disclosure letters, and more. Penalties for non-compliance with FATCA include substantial fines or even jail time, so it is imperative that individuals and institutions identify and iron out any potential for non-compliance.
About Freeman Tax Law
Freeman Tax Law (FTL) is a boutique law firm consisting of a multi-disciplinary team of tax professionals including tax attorneys, CPAs and a professional staff that have vast experience with foreign tax compliance and regulatory matters for financial institutions. FTL consults with both FFIs and USFIs with regard to Foreign Account Tax Compliance Act (FATCA) and related regulatory matters and assists them developing procedures on how to comply with these laws. FTL provides a multidisciplinary approach for filing offshore voluntary disclosures. Working to help clients prevent future tax headaches we offer a complete wealth management and estate planning team. As an experienced firm with wide reach, Freeman Tax Law provides immediate assistance to our clients planning for and resolving all tax related challenges.
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