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Corporates can expect greater global tax reporting from January 2016

Things are about to get a whole lot more complicated in terms of tax and reporting, for both corporates and the institutions they hold accounts with.

Banks are just getting to grips with the US Foreign Account Tax Compliance Act (Fatca), which requires them to send data on US account holders outside the US to the Internal Revenue Service (IRS). These extra reporting duties will entail more data generation, cross-border coordination and resources for banks.

But there's more to come. The Organisation for Economic Co-operation and Development (OECD) and the G20 are supporting the Automatic Exchange of Information (AEI), which aims to set a global standard for sharing tax-related data between institutions and authorities in different countries. It takes the premise of Fatca and applies these principles globally – hence it has been dubbed 'Gatca' (or Global Fatca).

More than 60 countries have already given their official support to Gatca. Many have also signed up to be early adopters, including the United Kingdom, France, Germany, India, South Korea and South Africa. Financial institutions in these countries will be required to provide client information for new accounts as early as January 2016. From 2017, full Gatca reporting and exchange of data via platforms will be introduced. Canada, Australia, China, Hong Kong and Japan are expected to comply with Gatca in 2018.

The OECD's base erosion profit shifting (BEPS) initiative is also seeking to stamp out tax havens and ensure that corporate income tax is paid in the jurisdiction in which the income arises. The combination of these three initiatives means a greater level of scrutiny than ever before on corporate bank accounts, income and tax.

There is no escaping the fact that banks are getting ready not just for Fatca but also for Gatca. While reporting duties for banks are getting more complex, corporate bank accounts, no matter where they are in the world, are about to become a whole lot more transparent.


CTMFile take: Smart corporate treasurers will be looking for ways to make this work for them. Their banks are facing increased reporting duties under Fatca and Gatca, and many banks won't be happy. Corporate treasurers need to be aware of this and maintain banking relationships where needed. Treasurers can also make use of the IRS's database, which details bank structures, subsidiaries and services offered in each jurisdiction, including cash pooling structures, treasury centres, captive finance companies, in-house banks, factoring and forfeiting companies as well as hedging activities.

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