WHY HAVING A PHYSICAL PRESENCE IS IMPORTANT

 

1 - Demonstrate economic activities in the Jurisdiction.

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2 - Ensure management and control remains within the Jurisdiction.

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3 - Evidence that operation exist and nominees are not exercised. 

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4 - Maintain and ensure control of your own business.

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BACKGROUND | FATCA

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The Foreign Account Tax Compliance Act (FATCA) was introduced by the United States in 2010 as part of the HIRE Act with the purpose of reducing tax evasion by their citizens. FATCA requires financial institutions outside the US to report information on financial accounts held by their US customers to the Internal Revenue Service (IRS). The information to be reported by foreign financial institutions is equivalent in substance to that required to be reported by US citizens in their US tax returns. 

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If financial institutions do not comply with the US Regulations, a 30% withholding tax is imposed on US source income and gross proceeds paid to that financial institution, both on its own US investments and those held on behalf of its customers. Financial institutions are also required to close accounts where their US customers do not provide information to be collected by the financial institution. 

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The US recognised that in some jurisdictions there are legal barriers to implementing FATCA as well as some practical difficulties for financial institutions in complying with FATCA. Two model intergovernmental agreements (Model I and Model II IGAs) were developed to overcome the legal issues and to reduce some of the burden on the financial institutions. 

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Developments in the area of automatic exchange of information have progressed quickly, so it is extremely important that individuals and companies are advised appropriately. 

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Our network of Tax Specialists are on hand to advise accordingly. 

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BACKGROUND | CRS

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The Common Reporting Standard (CRS), developed in response to the G20 request and approved by the OECD Council on 15 July 2014, calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.

 

The CRS was designed with a broad scope in terms of the financial information to be reported, the Account Holders subject to reporting and the Financial Institutions required to report, in order to limit the opportunities for taxpayers to circumvent reporting. It also requires that jurisdictions, as part of their effective implementation of the Standard, put in place anti-abuse rules to prevent any practices intended to circumvent the reporting and due diligence procedures.

 

As with FATCA, our network of Tax Specialists are on hand to advise accordingly. 

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