Guernsey to introduce stricter compliance measures for CRS and FATCA reporting
The new rule is part of a package of measures in the Income Tax (Guernsey) (Amendment) Ordinance 2021 (the Ordinance). The Ordinance helps to demonstrate Guernsey's commitment to a 'robust and effective compliance framework underpinning its regime of automatic exchange of information for tax purposes,' says law firm Carey Olsen. Last week, the Revenue Service published a bulletin setting out the Ordinance's provisions and their effect on FIs.
The jurisdiction is now in its fifth year of exchanging account information internationally, first with the US under FATCA and later with other countries under CRS. Its implementation strategy has been phased, starting with education and establishing the necessary computer systems, then moving on through increased monitoring and compliance activities. The next phase, says Carey Olsen, is to ‘enhancing the Revenue Service's ability to monitor and audit compliance in the finance industry,’ which necessitated the creation of additional powers for the Revenue Service as well as additional obligations for FIs.
The extension of the registration requirements to FIs that do not have FATCA or CRS reporting responsibilities is one such obligation. As well as registering, all FIs will be required to submit an annual validation either confirming that the information it provided remains complete and correct or providing amended information. FIs must also inform the Revenue Service of any change as soon as is practicable after becoming aware of it within a maximum of 14 days. These new rules will apply from 2022, with a probable registration deadline of 28 February. Further information will be provided in a notice to be issued at the beginning of December 2021.
The measure is intended to enable the Revenue Service to identify so-called 'ghost FIs' that qualify as FIs but have not registered as such, either because they have been correctly classified as non-reporting FIs or because they have failed to engage with the reporting system.
The Ordinance additionally grants new powers to the Revenue Service to make on-site inspections of FIs without obtaining their prior consent. Instead, the Revenue Service will only need to give the FI seven days' written notice of the inspection, or alternatively obtain approval from the Bailiff of Guernsey to make the inspection in a shorter notice period.
Where there are serious failings in compliance, for example in carrying out the relevant customer due-diligence or account classification requirements under the CRS or FATCA, the Revenue Service will be able to issue the FI with directions for the purposes of securing compliance. Where the FI is reasonably suspected of having contravened CRS or FATCA obligations, the Revenue Service will also have power to appoint one of more inspectors for the purposes of investigating and securing compliance.
The Revenue Service will be given additional powers to freeze the account of any accountholder who has not provided the FI with a valid self-certification under the CRS or FATCA regime, or whose self-certification is suspected to be incorrect or unreliable. FIs will have to notify the Revenue Service of any recalcitrant accountholders and provide it with any required further information and documents. This is intended to support FIs' efforts to obtain full and accurate self-certifications from account holders. This system will be enforced from January 2022.
New regulations have already been brought into effect increasing the penalties for non-compliance. An initial penalty of GBP300 and daily penalties of GBP50 will apply where there has been 30 days of continual failure to submit a report by the reporting deadline (30 June annually), followed by daily penalties of up to GBP1,000 per day.
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