Differences Between Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS)

It is essential to understand certain international tax legislation particularly as clients will have a global footprint. When it comes to the exchange of tax information, professionals worldwide must be familiar with two significant tax compliance standards: Common Reporting Standards (CRS) and The Foreign Account Tax Compliance Act (FATCA).

Difference 1:

CRS: The goal of CRS is to give governments a more transparent view of the financial assets their citizens hold in foreign accounts.
FATCA: The goal of FATCA is to ensure that Americans are compliant with all tax regulations, even when their assets are abroad.

Difference 2:

CRS: Common Reporting Standard (CRS) is a global policy for the automatic exchange of information.
FATCA: 113 foreign jurisdictions — including Bermuda, the Cayman Islands, and Switzerland — have agreed to comply with FATCA in exchange for similar compliance from U.S. institutions.

Difference 3:

CRS: The reach of CRS is more extensive than FATCA in terms of specific onboarding, remediation, and reporting enhancements and processes.
FATCA: FATCA does not apply to every American with a foreign bank account, and not all countries observe the regulation.

Difference 4:

CRS: Account scope is greater than FATCA because there are fewer thresholds applicable under CRS.
FATCA: Account scope is less than CRS because most thresholds are applicable under FATCA.

Difference 5:

CRS: CRS does not impose a withholding requirement.
FATCA: FATCA imposes a withholding requirement.

Image Source: https://www.eisnerampergovernance.ky/cayman-islands-fatca-crs/