The deadline for the submission of the first FATCA report had originally been June 30; this was pushed back to the end of this week, July 31, but entities now have an extra month to get their affairs in order.
“From a practical point of view, the extension of the FATCA deadline is mainly due to delays related to the ratification of the IGA [intergovernmental agreement] by the Luxembourg Parliament,” said Gilles Sturbois, director at Atoz – Taxand Luxembourg.
The deadline shift is not unexpected.
“These announcements are not a complete surprise as there have been late changes to the technical submission requirements for FATCA reporting (the formats and validation rules that firms must use, and so on) in a number of countries,” said Thierry Haensenberger, Luxembourg entity manager at AxiomSL, a global provider of regulatory reporting and risk management solutions.
“This extension is the result of both operational and administrative setbacks that have slowed down the implementation process by the Luxembourg tax administration. This has led to delays in the preparation of the circulars and the technical notes required to collect information in an efficient way,” explained Sturbois.
Given the implementation struggles, and successive deadline postponements, taxpayers cannot operate with the certainty that the deadline will not move again.
“The burning question on everyone’s mind is now whether this deadline extension is the last of its kind,” said Sturbois.
Regardless of whether the date will see further change, taxpayers are welcoming the additional time to get their affairs in order.
“The postponement of FATCA reporting in Luxembourg and Mauritius will be welcomed,” said Haensenberger. “However, the truth is that most firms will not need to submit a large number of reports for FATCA this year, as the scope of reporting is limited to accounts that were opened by US taxpayers and citizens between July and December 2014.”
Luxembourg and Mauritius are not the only jurisdictions to have altered FATCA deadlines as the reality of implementation has settled in.
“In our view Luxembourg is not the only black sheep in the herd. Most tax administrations faced delays to handle the administration process,” said Sturbois. “In France, for example, financial institutions that fall within the scope of FATCA are currently providing information to the French tax authorities on the basis of a technical note drafted by the information and technology department of the French tax authorities. Administrative circulars (BOFIP) and other regulatory instruments have yet to be fine-tuned and published. The French tax authorities have also extended their deadline.”
Workload underestimated
The reason for this series of delays seems to be a lack of realisation of quite how many resources need to be devoted to FATCA implementation.
Sturbois said that, based on his firm’s experiences in advisory roles to the OECD on the treaty relief and compliance enhancement (TRACE) and common reporting standard (CRS) projects, his impression is that most tax authorities have not fully considered the consequences of FATCA.
“This extends to the practical implications and the further discussions with the IRS based on the transferred data. Going beyond FATCA, the next expected deadline for Luxembourg is December 31 2016 and the implementation of the automatic exchange of information (AEoI) directive, an even larger and more sophisticated project than FATCA.”
CRS challenges to come
Haensenberger agreed that next year will represent an even tougher task from a compliance perspective.
“The real challenge will come in 2016, when firms will also need to report on accounts opened before July 2014.”
“Next year will also see the beginning of reporting under the British equivalent of FATCA (UK FATCA) and the beginning of preparations for the implementation of the CRS, a global version of FATCA. With this in mind, I expect to see firms migrating to more robust, automated solutions for the reporting of their FATCA and related returns next year,” added Haensenberger.
With such related challenges on the horizon, it is hoped that the unforeseen obstacles delaying full FATCA reporting implementation now will leave tax administrations better prepared for the global rollout of CRS.
“FATCA reporting could be considered, in this respect, a true ‘stress test’ for many tax authorities in dealing with this type of legislation,” said Sturbois. “With CRS coming into view at the OECD level, with a scope as broad as the OECD itself, one is left wondering whether many tax authorities are ready, from an operational point of view, for extensive reporting.”
