The CRS CDOT Due Diligence Combo
As we enter the final months of Y2016, it is a good time to review some aspects of the UK FATCA/CDOT and CRS transition.
The transition from CDOT to CRS began as of January 1, 2016 with the first report due to local tax authorities on March 31, 2017 (Turks & Caicos). As a reminder, the following jurisdictions participate in CDOT:
• Anguilla • Bermuda • British Virgin Islands • Cayman Islands • Gibraltar • Guernsey • Isle of Man • Jersey • Montserrat • Turks & Caicos Islands • United Kingdom
The CRS CDOT combo does not result in double reporting or double due diligence. Financial Institutions are not required to make separate returns for CDOT and CRS. Additionally, it is not necessary to repeat due diligence for CRS which has already been undertaken for CDOT purposes. The following charts compare the effective dates for the implementation of CDOT and CRS due diligence:
From this simplified view, it is clear that Financial Institutions should already have completed a significant amount of their CRS due diligence as a result of their CDOT due diligence efforts. This is great news for those Financial Institutions that have implemented comprehensive due diligence compliance programs. For those who have not, this lack of effort may not sit well with tax authorities.
CDOT Financial Institutions should have already prepared for three rounds of reporting. Given Financial Institutions’ experience with US FATCA and CDOT, CDOT tax authorities are not likely to be as flexible this year as they have in the past two years if a Financial Institution fails to adequately prepare for reporting.
During the 2016 reporting season, CDOT reporting was done under only the CDOT requirements. For 2017 reporting, there is a mix of information which blends the CDOT and CRS requirements. Then, from 2018 onwards only CRS requirements will apply. The rule to follow during the 2017 reporting season is that wherever CDOT or CRS requires more reporting, then the greater amount of information should be reported. This means that for those dragging their feet, it is time to get plans in motion to timely complete due diligence.