Investment structures and CRS / FATCA reporting

> What risks for the client and for the bank?
> Which lawful structuring decisions can optimize reporting?

MISTAKES RELATED TO CRS / FATCA REPORTING OBLIGATIONS

The mistake of believing that reporting in a foreign jurisdiction exempts an entity from performing a CRS classification analysis at the level of the relevant structure:

How is this fundamental distinction the source of numerous unintentional non-compliance cases?

Lack of awareness of the multiple CRS and FATCA obligations applicable to complex cross-border investment structures

• At which level do these obligations actually arise: fund, management entity, investors?
• Example: international partnership investing in a regulated fund – obligations arise at GP level and not solely at fund level.

Frequent classification errors leading to reporting mistakes

How can the recurring confusion between FI and NFE be explained? Example: investment holding with limited substance incorrectly classified as a passive NFE, whereas an FI classification may be required under CRS.

Why are incomplete or inconsistent reporting flows observed in multi-entity structures?

Example: investment vehicles with intermediate holding companies generating multiple reporting chains and errors in identifying beneficial owners.

What are the main CRS / FATCA risks identified depending on the type of structure?

• Investment holdings: risk of incorrect CRS classification.
• Multi-vehicle structures: lack of alignment in reporting chains.
• Trusts with multiple parties involved: unclear allocation of reporting obligations.

AVOIDING RECLASSIFICATION RISKS AND COMPLEX REPORTING CHAINS

Why does integrating CRS, FATCA and DAC6 at the structuring stage reduce the risk of reclassification and avoid complex reporting chains?

• How does each structuring decision (jurisdiction, vehicle, governance) influence:
  • the reporting perimeter,
  • the future operational burden,
  • the overall risk profile?
• How does proactive compliance become a tool for tax and reputational risk mitigation in an increasingly transparent international environment?

The risk of challenging a CRS / FATCA classification (FI vs NFE) due to inconsistencies between substance, governance and the business rationale of the structure

• Interaction between international taxation, substance, governance and business rationale:
  • What is meant by real substance and how must it be demonstrated?
  • How can coherent governance aligned with the real economic activity be ensured?
  • Why must the business rationale be formalized and documented?

POSITIONING REPORTING AT THE APPROPRIATE LEGAL AND OPERATIONAL LEVEL

To report or not to report (legally)? How should reporting be positioned at the correct legal and operational level?

• Is the real question to avoid reporting?
• Why do certain structures allow for a single, coherent reporting, while others generate multiple chains leading to administrative complexity?
• How does ex ante reflection on “who reports” make it possible to optimize the administrative burden without breaching CRS / FATCA rules?

Key principles of declarative design:

• What are the potential reporting entities?
  • When and how should reporting be centralized?
  • How can duplication and inconsistencies be avoided?
  • Why and how should classification choices be documented?
• Practical illustrations:
  • How to choose the most reporting-efficient jurisdiction without altering economic substance or business rationale?
  • How do different legal vehicles present distinct levels of transparency and CRS / FATCA exposure?