FATCA and CRS are two of the most commonly misunderstood compliance obligations in fund management. Most managers know they exist. Few understand exactly what they require. The result is either outsized anxiety — "I need a full tax compliance team" — or dangerous complacency — "my administrator handles it." The truth is somewhere in between, and understanding the basics protects both you and your investors.
What FATCA is
The Foreign Account Tax Compliance Act is a US federal law enacted in 2010 with a simple premise: US persons should not be able to hide assets in foreign accounts to evade taxes. FATCA requires foreign financial institutions — including your fund, if it has any connection to US investors or US assets — to report information about financial accounts held by US taxpayers to the IRS, either directly or through their local tax authority.
In practice, FATCA means your fund must identify which of your investors are "US persons" (citizens, residents, or entities with substantial US ownership), collect the appropriate self-certification forms (W-9 for US persons, W-8BEN or W-8BEN-E for non-US persons), and report account balances and income to the relevant tax authority on an annual basis.
What CRS is
The Common Reporting Standard is the OECD's answer to FATCA — but global. Developed in 2014 and now adopted by over 100 jurisdictions, CRS requires financial institutions to identify account holders who are tax residents of participating countries and report their financial information to the local tax authority, which then exchanges it with the account holder's country of tax residence.
If FATCA is "tell the US about US persons," CRS is "tell everyone about everyone else." The mechanics are similar: collect self-certification forms, identify reportable accounts, file annual reports. But the scope is broader — you are not just looking for US persons, you are classifying every investor by their country of tax residence.
Self-certification forms
The cornerstone of both FATCA and CRS compliance is the self-certification form. This is a document your investors complete during onboarding that declares their tax residency, taxpayer identification number, and — for entities — their FATCA/CRS classification. For FATCA, the relevant forms are W-9 (US persons) and the W-8 series (non-US persons). For CRS, jurisdictions typically use a standardised self-certification form, though exact formats vary.
Collecting these forms at the point of investor onboarding — rather than chasing them retrospectively — is critical. Incomplete self-certification files are one of the most common compliance findings in regulatory reviews.
Annual reporting obligations
Both FATCA and CRS require annual reporting. The exact deadlines and formats depend on your fund's jurisdiction. A Cayman Islands fund reports to the Cayman Islands Tax Information Authority, which exchanges the data with partner jurisdictions. A UK fund reports to HMRC. A US fund reports directly to the IRS. A German fund reports to the Bundeszentralamt für Steuern.
The key data points in each report include account holder identity, account balance or value at year-end, and gross amounts of interest, dividends, and other income credited to the account during the year.
Penalties for non-compliance
Getting this wrong is expensive. FATCA non-compliance can result in a 30% withholding tax on US-source income paid to your fund — a punitive rate that effectively cuts off access to US capital markets. CRS penalties vary by jurisdiction but typically include fines per unreported account, with some jurisdictions imposing criminal sanctions for wilful non-compliance.
Beyond direct penalties, non-compliance creates reputational risk. Institutional LPs conducting due diligence on your fund will ask about your FATCA/CRS compliance procedures. If the answer is vague, they will move on to the next manager.
How Infra One handles this
Our digital investor onboarding collects FATCA and CRS self-certification forms as part of the standard subscription workflow. Investors classify themselves during onboarding, the data is validated automatically, and our compliance team reviews each file before the investor is admitted. Annual FATCA and CRS reporting is prepared by our team and filed with the relevant authorities on your behalf.
The result: you do not need to become a FATCA/CRS expert. You need to choose an administrator who already is one.
If you have questions about tax reporting for your fund, book a call with our team.
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