Over the last few months, a number of jurisdictions have been reviewing, adjusting, and publishing new guidance regarding Automatic Exchange of Information (AEoI) as a way to curb and deter noncompliance. Reporting financial institutions (FIs) must be aware of these new rules and penalties as they prepare to report 2021 information in 2022. Here are a few, but certainly not all, new rules:
Hong Kong. October 29, 2021. The Inland Revenue Department (IRD) published punitive provisions to sanction FIs, service providers, and others for CRS offences. There are three main categories of penalties that the IRD will impose to sanction noncompliance, submission of incorrect returns, and defrauding with intent. The levels of penalties can range from a monetary penalty to imprisonment for six months or three years. Further, in making a self-certification which is collected by a financial institution, if a person knowingly or recklessly makes a statement that is misleading, false, or materially incorrect, then they will be liable on conviction to a fine at Level 3 or $10,000. Check out the IRD website here: https://www.ird.gov.hk/eng/tax/aeoi/dta_comp.htm
Jersey. Revenue Jersey is in the process of publishing a program of compliance activities it will undertake during 2022. Among many activities, the 2022 Compliance Program will include imposing behavioural penalties for an inaccurate declaration. Check out the Jersey website here: https://www.gov.je/taxesmoney/compliance/pages/rj2022complianceprogramme.aspx
Panama. November 11, 2021. In Panama, the Minestry of Economy and Finance (MEF) published Law Number 254, which amended transparency measures and imposes AEoI penalties for improper reporting. Check out the text of the new law in the Official Panama Gazette published on November 11, 2021, here: https://www.gacetaoficial.gob.pa/pdfTemp/29413_A/88359.pdf
United Kingdom. November 30, 2021. HMRC is seeking views on draft regulations requiring disclosure of certain arrangements that, among other rules, circumvent CRS legislation or exploit the absence of CRS legislation. These regulations require promoters, service providers, and taxpayers to send information to HMRC about reportable arrangement and structures. They are intended to provide HMRC with early information about these arrangements and structures to help deter noncompliance, assist in identifying and challenging evasion, and support HMRC and other tax authorities in developing policies and tools to address loopholes. Check out the Consultation here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1037442/HMRC_consultation_Mandatory_Disclosure_Rules.pdf
Singapore. December 1, 2021. The Inland Revenue Authority of Singapore (IRAS) published increased penalties for CRS nonregulation and nonfiling offences, which have increased to $5,000 upon conviction, and an additional fine of $100 per day for a continuing offence. IRAS strongly encourages Singapore FIs to implement controls to file returns on time. Check out the IRAS website here: https://www.iras.gov.sg/taxes/international-tax/common-reporting-standard-(crs)/crs-overview-and-latest-developments Also, the IRAS has implemented a voluntary disclosure program, where Reporting Singapore FIs that have made errors on their returns may come forward as soon as they become aware of the errors or omissions. Further, if they are aware of any potential AEoI noncompliance, including the use of abusive schemes to circumvent AEoI reporting they may provide information to IRAS. Check out the IRAS voluntary compliance rules for FATCA here: https://www.iras.gov.sg/taxes/international-tax/foreign-account-tax-compliance-act-(fatca)/fatca-compliance
And the IRAS voluntary compliance rules for CRS here: https://www.iras.gov.sg/taxes/international-tax/common-reporting-standard-(crs)/crs-compliance As FIs look to report AEoI information in 2022, they must have a look at the new rules and potential penalties in each jurisdiction in which they report. Ask a local tax expert to help explain these rules where required. Further, they should have a look at their own controls, processes, and procedures related to AEoI reporting. Because each jurisdiction may change their local rules from year to year, it is a good idea for FIs to align their own controls, processes, and procedures with those rules as well. While penalties continue to increase and become more serious, FIs must stay vigilant.
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