What distinguishes FATCA from CRS?

The distinction between FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) mainly revolves around their reporting thresholds and requirements. FATCA indeed has specific reporting thresholds that determine whether a foreign financial institution (FFI) must report on accounts held by U.S. taxpayers. This means that if an account balance exceeds a certain limit, the FFI is required to report that account to the Internal Revenue Service (IRS). This helps ensure compliance and retain tax revenue from U.S. taxpayers with foreign financial assets.

In contrast, while the CRS also requires reporting based on account balances, it typically has broader and more uniform thresholds that differ from those of FATCA and may apply to a wider range of jurisdictions. The implication here is that FATCA specifically stipulates these thresholds, adding a layer of regulatory complexity for FFIs dealing with U.S. clients, unlike the CRS system.

Additionally, the assertion that CRS reports only on local assets is not accurate, as CRS aims to report on financial accounts held by foreign tax residents, providing information across borders, thus fostering greater international tax transparency.

FATCA's reporting obligations cannot be characterized as nonexistent, as this would negate the entire premise of the act. The slight differences in approach between FATCA