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FATCA & CRS

1. FATCA – what is it?

FATCA (Foreign Account Tax Compliance Act) is an Act passed on March 28, 2010, by the American Congress on the fulfillment of tax obligations in respect of accounts held abroad. To subject Polish financial institutions to the FATCA regime, the Government of the Republic of Poland has concluded an international agreement with the Government of the United States (hereinafter: the “Agreement”). It obliges Polish financial institutions to verify whether a client using their services is not an American tax resident.

  1. Entities required to provide information

It needs to be clarified that in the Agreement, a “financial institution” is defined as:

a) a custodial institution, which is an entity that accepts, as a substantial portion of its business, financial assets,

b) a depository institution, which is an entity that accepts deposits in the ordinary course of a banking or similar business,

c) an investment entity, which is an entity that conducts as a business (or is managed by an entity that conducts as a business) in the field of trading in money market instruments, currencies, etc., as well as in the field of managing individual or collective portfolios of assets or other forms of investing, managing or disposing of cash or non-monetary assets on behalf of others,

d) an insurance company.

  1. List of information; procedure for and date of its submission

If an inspected entity is positively verified in respect of the US tax residence, it results in an obligation for the Polish financial institution to provide a range of information about that entity to the US Internal Revenue Service. A closed list of information to be provided is stipulated in the text of the Agreement and includes:

  • the surname of a natural person or the name of an entity,
  • that entity’s address,
  • the American tax identification number,
  • the account number (or its equivalent),
  • the name and number of the reporting financial institution,
  • the account balance or value determined as of the end of the calendar year or other appropriate reporting period,
  • depending on the account type, detailed data on interest, dividends, income and revenues.

A Polish financial institution wishing to provide information to the US Internal Revenue Service is required to open an account on the government website of the IRS. The time limit to provide the information specified in the Agreement is quite long and lasts 9 months from the end of the calendar year to which the information pertains.

A failure by a Polish financial institution to fulfill the information obligations may result in the US authorities notifying Polish authorities, which will be obliged to discipline the indicated institution by applying Polish laws and regulations (including possible sanctions).

  1. CRS – what is it?

CRS (Common Reporting Standard), also known as EURO-FATCA, is a standard for the automatic exchange of information on taxation among countries that have signed relevant agreements. It has been created to protect the integrity of tax systems, as well as to reduce the phenomenon of non-payment of taxes.

  1. Polish CRS regulation

In Poland, the CRS was implemented by the Act of March 9, 2017, on Exchange of Tax Information with Other Countries. The Act entered into force on May 1, 2017, and imposes an obligation on Polish financial institutions to obtain information from their clients about their tax residence. If the residence is in a country other than Poland, the Polish financial institution is obliged to provide information on accounts of such clients, called “reportable accounts”, to the Head of the National Revenue Administration by June 30 of the year following the year to which the information pertains. The information on reportable accounts includes, in particular:

  • the first name, surname, date and place of birth of a natural person or the name and address of other entity, accordingly,
  • the country or countries of tax residence,
  • the TIN (taxpayer identification number, for example, NIP, PESEL) of the reportable person who is the account holder,
  • the account number or its functional equivalent,
  • the name, address and TIN (if any) of the reporting financial institution,
  • the account balance or value.

Then, local tax authorities provide the indicated information to a relevant tax authority of the country where the financial institution’s client is a tax resident. In Poland, the authority competent to exchange information with relevant authorities of the Member States is the Head of the National Revenue Administration.