New reporting requirements FATCA and FBAR have added increased monitoring and reporting requirements to global treasury organizations. And that’s only part of the problem. It’s all confusing, too.
At issue particularly is what how one rule impacts another. According to the IRS, the FATCA Form 8938 does not replace or otherwise affect a taxpayer’s obligation to file FBAR Form 114. But in some cases, both forms may be necessary (see related story here, here and here). At The NeuGroup’s Global Cash and Banking Group (GCBG) meeting in May, members voiced concerns about what will be required for those in their departments that manage bank accounts globally.
Based on pre-meeting survey results, most treasury organizations are responsible for the data collection for FATCA, or Foreign Account Tax Compliance Act and FBAR (Report of Foreign Bank and Financial Accounts), which includes bank and account signer details. This, along with the increased scrutiny of counterparty risk exposures and increased levels of documentation for audits, means that treasury staffs are spending a significant amount of time collecting compliance data. Most agreed that the task of compliance is becoming a full-time job.
For the most part FATCA and FBAR interpretation put GCBG members on opposite ends of the spectrum. The rules state: “US persons….that have an interest in foreign financial accounts (or specific foreign financial assets) …” must report bank account details based on certain thresholds. The problem for many is the definition of “have an interest in,” which is where members are disconnected on the interpretation. Most have interpreted it to mean that all individuals who have access to a bank account, including those with electronic banking authority, must file the appropriate document with their individual tax return. Others have viewed the ruling more broadly and are not including this full list of individuals.
Still, because of the continued ambiguity in the interpretation of the IRS guidelines, many organizations have decided to over-report because it is seen as the more conservative response to the regulations and comes with no penalty attached. Several members are including those who have initiation authority on e-banking platforms as part of the overall FBAR reporting.
New IRS reporting requirements continue to cause confusion with the ambiguous language used in the definition of the new guidelines. Many members are taking a conservative approach to the interpretation and are, in many cases, over-reporting individual signer details to the IRS. Treasury is responsible for collecting the appropriate data for these new IRS guidelines and the tax group most often has responsibility for filing the reports and/or forms.