www.pwc.com Common Reporting Standard Singapore September 2016
1. Setting the scene 2
Asset management in the spotlight FATCA 3
CRS is the next wave of increasing global standards on Tax Information Reporting 2001 2005 2010 2012 2013-2014 2014 QI EUSD US FATCA IGA FATCA UK FATCA OECD Common Reporting Standard (CRS) EU DAC Focused on a US perspective, start of an automatic exchange of information with a yet limited scope but including tax treaty benefits. Mutual exchange of information for the effective taxation of crossborder interest income and certain payments applied by EU member states (with the exception of Austria and Luxembourg) and certain third countries. Focused on a US perspective, a comprehensive automatic exchange of tax information regime was enacted by FATCA. Intergovernmental negotiations concerning the implementation of FATCA lead to bilateral Model Agreements (IGAs) including the opportunity for reciprocity. Bilateral agreements were signed between the UK and Guernsey, Jersey and Isle of Man, which are consistent with the Model 1 IGA to implement FATCA. The OECD received a mandate by the G8/G20 countries to develop a global reporting standard to achieve a comprehensive and multilateral automatic exchange of information (AEOI) in the future. EU Directive on Administrative Cooperation (DAC) has been adopted incorporating the OECD CRS; transformation into local country law by 31 December 2015; EU Savings Directive (EUSD) to be repealed. 4
Non-IGA Agreed in Substance IGA Signed IGA Which countries and when? CRS and IGA status across jurisdictions CRS Early Adopters (Signatories) New Procedures 2016 Reporting 2017 CRS Signatories New Procedures 2017 Reporting 2018 CRS Committed New Procedures 2017 Reporting 2018 Non-CRS Barbados Belgium Bermuda British Virgin Islands Bulgaria Cayman Islands Colombia Croatia Curaçao Cyprus Czech Republic Denmark Estonia Finland France Germany Gibraltar Guernsey Hungary Iceland India Ireland Isle of Man Italy Jersey Latvia Liechtenstein Lithuania Luxembourg Malta Mexico Montserrat Netherlands Norway Poland Portugal Romania San Marino Slovak Republic Slovenia South Africa South Korea Spain Sweden Trinidad and Tobago Turks and Caicos Islands United Kingdom Australia Austria Canada Chile Costa Rica Israel Japan Kuwait Mauritius Nauru New Zealand Saint Kitts and Nevis Saint Lucia Saint Vincent and Grenadines Switzerland Bahamas Brazil Hong Kong Lebanon Panama Qatar Singapore Turkey United Arab Emirates Vanuatu Algeria Angola Azerbaijan Belarus Cambodia Georgia Holy See Honduras Jamaica Kosovo Moldova Philippines Thailand Uzbekistan Vietnam Anguilla Greece Greenland Seychelles Antigua and Barbuda China Grenada Indonesia Malaysia Bahrain Dominica Macao Saudi Arabia Armenia Cabo Verde Dominican Republic Guyana Haiti Iraq Kazakhstan Montenegro Nicaragua Paraguay Peru Serbia Taiwan Tunisia Turkmenistan Ukraine Argentina Faroe Islands Niue Albania Andorra Aruba Belize Cook Islands Ghana Monaco Marshall Islands Russia Samoa Sint Maarten Brunei Uruguay (All other countries) 5
FATCA CRS As a consequence of the multilateral reporting requirement the CRS has an increased complexity compared to FATCA FATCA only bilaterally takes into account the interests of the USA, the CRS in contrary, the multilateral interests of more than 100 jurisdictions; besides, specific and potentially deviating local requirements of the participating jurisdictions may raise further complexity. 6
Word on the street. What Singapore guidance do we have? Practically, what does this essentially mean to asset managers? Singapore wont sign a bilateral treaty with Indonesia or China anytime soon will it? Will Singapore deviate from the OECD proposals? It s just a minor extra step on top of FATCA isn t it? What system changes are required? How will IRAS administer CRS? Will there be concessions? Who s responsibility is it to deal with this? The US is now a tax haven isn t it? Asset managers (and investors) have FATCA fatigue 7
2. The details of CRS and how it compares to FATCA for asset managers 8
CRS requires an approach that is compliant, but minimizes investor impact Projected Timeline 2016 2017 2018 General 1 Jan 2016 New account onboarding 1 Jan 2017 New account onboarding Due Diligence 31 Dec 2016 Due diligence for high value individual accounts 31 Dec 2017 Due diligence for all remaining accounts 31 Dec 2018 Due diligence for all remaining accounts 31 Dec 2017 Due diligence for high value individual accounts Reporting Sep 2017 First exchange of information Sep 2018 First exchange of information 1 st wave 2 nd wave 9
CRS requirements are leveraged from FATCA core components Scope & Governance Though the definition of a Financial Institution is broadly unchanged, local deviations may apply Certain FIs exempted under FATCA (e.g. local FIs) are expected to be in scope Passive NFFE definition widened to certain Investment Entities No Responsible Officer concept foreseen Usage of GIIN possible Tax authority approach to compliance yet to be determined Withholding There is no withholding under CRS No payee concept foreseen requiring a detailed analysis of products/payees Concept of non-participating institutions does not exist No interaction to the QI regime including "Dividend Equivalent Payments" (871 (m)) The OECD TRACE concept may leverage the information exchanged under CRS CRS Customer Due Diligence Number of clients to be reviewed substantially increases (e.g. due to deletion of de minimis thresholds for individual clients) CRS focuses on tax residency, not citizenship Various due diligence procedures for preexisting and new accounts exist; existing AML/KYC procedures may be used "Simplification" of indicia test New concept of "undocumented accounts" and revival of "dormant accounts" Requirement of "Reasonable Efforts" Reporting FIs should report to local authorities, who will exchange the data with partner jurisdictions Reporting is expected to be based on FATCA data schema and elements, however, attributes may vary While CRS sets out data elements to be reported, jurisdictions may take the opportunity to request further information 10
Product classification Legal entity classification Scoping: Deviating definitions and exclusions for financial institutions and financial accounts cause operational complexity CRS versus FATCA Asset Management Identical definition of Custodial Institution, however, the CRS and EUDAC explicitly define the term Financial Asset while the IGAs do not. Treasury Center and Holding Companies is an FI category in Final Regulations but also assumed to be FIs in guidance of some IGA countries. CRS and EUDAC definition of Investment Entity is aligned to Final Regulations definition; IGA wording differs (no explicit primarily-test ). Less explicit exclusions for FIs, no sponsoring concept. Exclusion for low-risk entities according to certain requirements and local legislation. FATCA-related classification of funds and other investment entities in certain jurisdictions has to be modified, e.g. Annex II of the Model 1 IGA excluded only certain investment vehicles. CRS now exempts collective investment vehicles whose interests are held by FIs. Exemption for Investment Advisors and Investment Managers" under some IGAs is not present in CRS, so entities with those classification need to be reviewed. The $50K threshold included in the definition of certain products under FATCA has been removed for CRS. CRS and EUDAC definitions of a Financial Account do not exempt certain debt and equity interests of investment entities and other FIs (removal of the regularly traded on an established securities market exemption). Exclusions for low-risk products according to certain requirements and local legislation Under the CRS certain depository accounts do not create a financial account if the relating requirements are met. Unlike FATCA Final Regulations certain real estate investments and direct investments into real property are excluded from the financial assets concept. IGAs do not define the term, i.e. deviating local guidance possible. 11
Preexisting accounts New accounts Customer review: The impact compared to FATCA is substantial alignment with AML/KYC key to raise synergies with implementation CRS versus FATCA Asset Management Individuals Focus on tax residency in a CRS country instead of status as US tax payer No de-minimis rule Requirement to collect and maintain TIN and date of birth for account holders for prospective reporting (with certain exemptions) Entities Every tax residence in CRS country relevant No de-minimis rule Entities that are not located in a Reportable Jurisdiction and fall within the "managed by" FATCA definition of Investment Entities can qualify as Passive Non-Financial Entities (NFEs) under CRS The number of customers to be identified as Reportable Persons increases substantially. Financial assets definition has become granular under CRS in comparison to the IGA Model 1. So the focus should be on the entity s re-classification before adopting new account holder processes. Elimination of the ETF-exemption should entail CRS customer on-boarding processes between broker-dealers and ETF distributors. Certain Investment Entities that are not located in a Reportable Jurisdiction may have to disclose their controlling persons when holding accounts with CRS Financial Institutions. Individuals Focus on tax residency in a CRS country No de-minimis rule Adjusted indicia analysis: Residence address test prior to indicia check, different self-certification requirements and undocumented accounts rule Entities Every tax residence in CRS country relevant CRS thresholds only exist for preexisting entity accounts (250.000 USD), however monitoring required FIs that are not located in a Reportable Jurisdiction can qualify as Passive Non-Financial Entities (NFEs) under CRS The number of accounts to be reviewed substantially increases under CRS. An FI has to make reasonable efforts to collect a TIN and date of birth. 12
Reporting requirements Reporting: Although reporting is the last on the timeline, its impact on other processes should be considered from the start of the project CRS versus FATCA Asset Management The CRS XML Data Scheme is conceptually based on the FATCA XML Data Schema, however, various divergences exist; additional data items: place of birth and jurisdiction of tax residence. Individuals First Name Last Name Address ResCountryCode CountryCode City BirthInfo (date/place) TIN Entities Name Address ResCountryCode TIN Amounts to be reported Account balances Dividends, interest and other income Redemption payments Gross proceeds Place of birth does not have to be reported if it is not existing in the data of the FI or it does not have to be reported according to the respective partner country legislation (not a required item under FATCA). TIN and date of birth not to be reported if not existing in the data of the FI, and if not required to be collected according to domestic law (date of birth not a required item under FATCA unless TIN unavailable in records). Data that is already collected under FATCA Data has to be reported under CRS but not under FATCA As under FATCA, FIs may use service providers for reporting but must satisfy the requirements contained in domestic law and remain responsible for their reporting and due diligence obligations. For reliance on service providers an investment fund may use the fund manager to perform both, due diligence and reporting, on behalf of the fund. Many investment funds may not be an Exempt Collective Investment Vehicle and be obliged to report. Nil reporting requirements could have substantial compliance impacts. 13
3. How you might tackle CRS 14
A holistic view Achieve operational efficiency, meet regulatory requirements and ensure client satisfaction Exposure to penalties Reputational issues Compliance Overall tax and regulatory compliance Trust Banking secrecy / data protection One-stop shop convenience Expert advice Curing of contradicting data Transparency through information reporting Client satisfaction CRS Cost Costs for business implementation Cost of internal controls and governance Cost of IT implementations Costs for customer and employee communications including customer letters and tracking Cost of manual processes and activities Costs for managing complaints Costs for customer inquiries 15
Key elements for a successful delivery There are many dimensions to an effective delivery of a programme. If undertaken well, these 12 elements of delivery excellence can contribute significantly to overall success. Clear scope Embedded lifecycle assurance and learning Engaged stakeholders Governanceenabling decision making Focused benefits management Managed risk and opportunities Key Elements of Delivery Excellence Smart financing Delivery - enabling plans Highperforming teams Integrated suppliers Agile change control Active quality management 16
Immediate next steps 1. High level impact analysis 2. Stakeholder engagement 3. Confirm readiness of any relevant third parties 4. Consider investor impact (e.g., self-certification forms) 5. Plan a response (e.g., working backwards from key dates) 17
Questions? Brendan Egan Denise Lim Christina McNamara Partner Partner CRS specialist Singapore Singapore Singapore The information contained in this presentation is of a general nature only. It is not meant to be comprehensive and does not constitute legal or tax advice. PricewaterhouseCoopers Singapore Pte Ltd ("") has no obligation to update the information as law and practice change. The application and impact of laws can vary widely based on the specific facts involved. No reader should act or refrain from acting on the basis of any material contained in this presentation without obtaining advice specific to their circumstances from their usual client service team or their other advisers. The materials contained in this presentation were assembled in September 2016 and were based on the law enforceable and information available at that time. 2016 PricewaterhouseCoopers Singapore Pte Ltd. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. 18