Is everything clear now?

appeared in JEP Law & Accountancy Review, February 2017

Kelly Tadier, PwC  CI- Senior Manager, Tax

Why there is no room for complacency when it comes to transparency in 2017.

The last few years have seen a number of high profile cases paint a picture of harmful tax practices engineered under a shroud of secrecy across the globe. Household names, entities and individuals alike, villainized in the courts of public opinion, with little sympathy shown to those who were, in fact, acting within the confines of relevant legal frameworks.

It now seems that mention of international wealth structuring is met with suspicion, and moves made to combat the lack of transparency in cross-border tax matters are far wider reaching than global brands and high net worth celebrities. Wave after wave of new and updated legislation championing a transparency agenda have drastically altered the obligations placed upon entities, home and abroad, large and small, to gather and disclose detailed information to tax and other regulatory authorities. 

With 2017 posing the toughest ‘transparency’ challenge yet for local businesses, the below might provide a useful snap-shot of some forthcoming deadlines:

Register of Beneficial Ownership and Control

All Jersey corporate and legal entities are required to provide details about ultimate beneficial owners and controllers to the Jersey Financial Services Commission between 1 January and 30 June 2017 for retention on a centralised register (apart from Foundations, which are subject to obligations later in the year). This filing is mandatory; will refresh and verify data that has long been maintained by the JFSC; and is passed to other jurisdictions only upon request.  

This is accompanied by new requirements to notify changes to beneficial ownership to the Commission within 21 days.

US FATCA

There is no reprieve for those suffering from ‘FATCA fatigue’. Even with several bold declarations originating under the Republican Presidency, the agreement to exchange data with the United States (the Foreign Account Tax Compliance Act - or “FATCA” for short) seems to be here to stay.

To comply, entities (including companies, foundations, partnerships, trusts and similar) must determine whether they meet the criteria of a ‘financial institution’. Those who do face a series of additional challenges, with the aim of identifying, valuing and reporting interests held by or on behalf of US Citizens or tax residents. The position, and the process to be undertaken, is not always straightforward, and so it is often advisable that businesses seek technical support or guidance to ensure that they are meeting their obligations in the correct manner.

With 2017 reporting representing the third time that Jersey will send data to the United States, it is expected that all businesses will by now have got to grip with their FATCA obligations (including the additions to data to be included and change of reporting schema). It is more likely that we will see penalties now being levied against those who continue to neglect the requirements. The deadline for submission is 30 June.

CRS

Sharing many similarities with US FATCA, the Common Reporting Standard will see entities classified as financial institutions now required to collate data on all account holders. They must then report an account holder (or in some cases a controlling person of the same) that is a resident of any one of 53 other reportable jurisdictions.  This number almost doubles in 2018, where data will be exchanged with in excess of 100 partner jurisdictions.

Given the narrow targets of US FATCA (and UK FATCA prior to 2017), businesses may find that there is still a mountain to climb in terms of remediating the information they hold, and with only months to spare before this data is first reported, the process is certainly not to be underestimated.

The deadline for submission is 30 June, with reporting made to the Comptroller of Taxes (as with US FATCA).

CbCR Notifications and Reporting

Regulations supporting the BEPS (Base Erosion and Profit Shifting) Country by Country Tax Reporting were adopted by the States Assembly at the end of 2016, introducing an obligation for certain high value multinational enterprises to submit consolidated data on their group entities on an annual basis.

Jersey entities that are part of such a multinational group may be subject to reporting obligations themselves, or may be required to submit notifications to the Jersey Comptroller of Taxes where reporting is taking place outside of Jersey.

The first deadline for notifications was extended to 31 March 2017, but is fast approaching,

UK Requirement to Correct

Whilst not a local obligation, fiduciaries should be alert to the forthcoming ‘requirement to correct’ contained within the UK Finance Act 2017. The legislation will oblige UK tax payers with previously undisclosed tax liabilities, or where an incorrect amount of tax has been paid, to put their past affairs in order. A series of tough penalties face those who do not attend to this in good time.

With HM Revenue and Customs receiving information from a number of sources under the Common Reporting Standard (and previously UK FATCA), local businesses with UK owners, investors, trustees or beneficiaries may be required to assist with compiling information, and may wish to engage with their UK clientele early to ensure adequate resource.    

Jersey Disclosure Opportunity

In a similar vein, the Taxes Office in Jersey is offering residents the opportunity to disclose information surrounding their Jersey tax affairs that may have been overlooked in previous years’ returns. Jersey tax payers who make a disclosure under this opportunity between 3 April and 31 December 2017 (relating to any previous year up to and including 31 December 2015) will not be subject to penalties or interest, provided that the tax position is regularised (a late payment surcharge might apply, if due).

In summary

With transparency being just one of many projects requiring the attention of local fiduciaries, where to start? To assess the scope of obligations, and adequately plan timelines and resource, it is advisable that a thorough review of the local business model is undertaken, including a health check of existing procedures, the group structure (or those of the client base where the business manages the accounts of others), and to identify the location of owners and controllers. Consider not only the work that may be required to meet a disclosure obligation, but also whether your business will be required (or well placed) to assist a client in meeting their obligation in 2017. Engaging suitable advice or support where needed (including outsourcing), and arranging adequate staff training should not be left to the 11^th hour.