Countries Sign Pact to Implement OECD's Common Reporting System (with Mulcahy Comment)

At a meeting in Berlin on October 29, 2014, 51 countries and jurisdictions signed a multilateral competent authority agreement to implement the Organisation for Economic Co-operation and Development's ("OECD's") new automatic exchange of tax information standard, which is referred to as the Common Reporting Standard ("CRS").

The agreement, which is based on the Model 1 Intergovernmental Agreement developed by the United States under FATCA, allows countries to adopt enhanced due diligence and reporting requirements on their financial institutions in order to collect information and to automatically exchange such information with other countries that signed the same agreement. The countries that signed it have committed to begin exchanging tax information with each other starting in 2017.

Despite its having developed the template for the tax information exchange agreement, the United States was not one of the 51 countries that signed the agreement.

Mulcahy Comment: The United States seems reluctant to commit to a specific timetable for automatic exchange of U.S. account information and has taken the position that it need not agree to the Common Reporting System because FATCA IGAs are essentially equivalent to the CRS agreements. Nevertheless, U.S. financial institutions with operations or subsidiaries in the implementing countries will have to comply with the CRS as implemented in those jurisdictions.

See: OECD Statement.See also: FATCA Specialty Page (available to Cabinet subscribers only).