On 1 July 2014, the implementing regulations for the Foreign Account Tax Compliance Act (FATCA) came into operation in Ireland. Ireland signed an intergovernmental agreement with the United States to implement FATCA, and since then all Irish financial institutions are obligated by law to comply. Less onerous responsibilities also exist for non-financial institutions in Ireland.
FATCA requires foreign financial institutions (FFIs) to identify and document all financial accounts and annually report those held by US persons and certain non-compliant account holders, and potentially withhold on certain withholdable payments to non-compliant account holders. Failing to do so will result in penalties and other potential sanctions as well as a 30% withholding tax on certain US-sourced payments, such as dividends and interest, and gross proceeds from the sale of relevant US assets and foreign passthru payments.
Further to the introduction of the Foreign Account Tax Compliance Act (FATCA), on 15 July 2014, the OECD introduced the Common Reporting Standard (CRS) which acts as the single global standard governing the automatic exchange of information between tax authorities of tax jurisdictions that have signed up to the Standard.
Ireland fully supports the move towards global tax compliance and tax transparency, including the automatic exchange of information for tax purposes, and is an early adopter of CRS, having implemented these rules into Irish law in December 2015. As persons in an early adopter country, all Irish entities and Irish branches of foreign entities must ensure that they are compliant with Irish Common Reporting Standard Regulations (Irish CRS Regulations) from 1 January 2016.
The OECD leveraged FATCA to design the CAA and CRS and as such the Standard is broadly similar to the FATCA requirements, albeit with numerous alterations. However a major difference is the significantly higher number of reportable persons due to the increased instances of potentially in-scope accounts and the inclusion of multiple jurisdictions to which accounts must be reported. In addition, where entities were not previously classified as in-scope FIs by FATCA, significant investment may be required to assist with the implementation of compliance programs under CRS.
With the global shift to greater tax transparency comes continuous developments in the AEOI area, including the implementation of a Worldwide Disclosure Facility containing beneficial ownership information of legal entities and arrangements which opened on 5 September 2016.