FATCA and CRS Compliance for Businesses in Guernsey: A Simple Guide
What Businesses Need to Know About FATCA and CRS in Guernsey
International tax rules can be tricky, especially for businesses in Guernsey. Two important regulations businesses must understand are the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). These rules aim to stop tax evasion by encouraging countries to share financial information. Here’s what businesses in Guernsey need to know about FATCA and CRS.
What Is FATCA?
FATCA is a U.S. law that requires foreign financial institutions (FFIs) to report details about accounts owned by U.S. taxpayers. The goal is to stop U.S. citizens from hiding money abroad to avoid paying taxes.
In Guernsey, financial institutions must comply with FATCA. The government of Guernsey signed an agreement with the U.S. in 2013, which means businesses in Guernsey must report information about U.S. taxpayers to the U.S. tax authority, the IRS.
What Is CRS?
CRS is a global standard for sharing financial account information between countries. It was created by the Organisation for Economic Co-operation and Development (OECD). Countries that follow CRS share account information with each other automatically to reduce tax evasion.
Guernsey follows the CRS rules, and local financial institutions must report account details to Guernsey’s tax authority, which then shares the information with other countries that follow CRS.
Who Needs to Comply?
FATCA and CRS mainly affect financial institutions, such as:
- Banks and deposit-taking institutions.
- Investment firms.
- Some insurance companies offering certain financial products.
- Trusts and companies that act as financial institutions.
However, other businesses may also need to comply if they manage financial accounts that fall under FATCA or CRS rules.
Key Compliance Requirements
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Due Diligence: Financial institutions must check their accounts to find those that need to be reported. This includes:
- Identifying account holders who are U.S. taxpayers (for FATCA) or live in CRS-participating countries.
- Collecting documents like tax identification numbers (TINs) and self-certification forms.
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Reporting:
- Under FATCA, institutions report information to the U.S. IRS through Guernsey’s Revenue Service.
- Under CRS, institutions report information to Guernsey’s Revenue Service, which shares it with other countries.
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Record Keeping: Financial institutions must keep records of their due diligence and reports for a set number of years (usually six years).
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Registration: Institutions may need to register with the IRS for FATCA and ensure they meet CRS standards.
Consequences of Not Complying
If businesses don’t follow FATCA and CRS rules, they could face:
- Fines from Guernsey’s Revenue Service.
- Damage to their reputation.
- Trouble accessing global financial services.
How Can Businesses Ensure Compliance?
- Know Your Requirements: Make sure you understand if your business qualifies as a financial institution under FATCA or CRS.
- Set Up Good Systems: Invest in systems that help with due diligence, reporting, and record-keeping.
- Stay Informed: Keep up with any changes in FATCA and CRS rules, as they may change over time.
- Get Expert Help: Talk to tax and accounting experts who can help with international compliance.
Benefits of Compliance
While following these rules may seem like a lot of work, it helps your business stay in good standing in the global financial system. It also shows that Guernsey is a transparent and cooperative place for international finance.
Conclusion
FATCA and CRS are essential for keeping international finance transparent. For businesses in Guernsey, it’s important to understand and follow these rules. If you need help with FATCA or CRS compliance, contact experts who can guide you through the process and make sure you meet all the requirements.
Breaking the Mould Accounting Limited specializes in helping businesses with tax compliance. Contact us today for advice on FATCA, CRS, and more.
