The goalposts in international tax reporting are moving rapidly.
In conjunction with the G20, the OECD developed the Common Reporting Standard (CRS) as a global standard for the automatic exchange of information. The OECD Council approved this on in 2014 and, since then, over 100 jurisdictions have confirmed adoption of the CRS by signing a multilateral competent authority agreement.
It is vital that individuals are aware of the potential tax consequences of reporting under the CRS. If the relevant income or gains that have to be reported have not previously been reported in their country of residence (even for legitimate reasons), they are likely to be investigated by the local tax authorities and could face a large tax bill or worse. No matter which country they live in, putting any tax irregularities right or simply explaining their overseas assets to the tax authorities before the new reporting starts is always likely to be the best option.
Our interactive map shows which jurisdictions began to exchange data at which time, and which jurisdictions are yet to set a date. You can also find more information on the latest CRS developments on the OECD’s Automatic Exchange Portal.
How it works
Financial Institutions (FIs), which include banks, insurance companies, trusts and TCSPs, will be compelled under domestic law to provide their local taxation authorities with financial data on relevant persons (ie the beneficial owners of bank accounts and those with an interest in trusts and other entities) who are resident in other participating countries. This data will be passed automatically to the relevant countries (within nine months of the end of the relevant calendar year) in a standard format that can easily be imported into the taxpayer databases of each country. The data will be analysed to identify those who may have evaded or
avoided tax and even those who may simply have made an error in their tax returns.
As with FATCA, the FIs that must provide data include banks, other depository and custodial institutions, investment entities and some insurance companies. However, unlike FATCA, there are fewer exempt institutions.
Local reporting FIs will have due diligence obligations which differ for new and existing accounts, high and low value accounts as well as individual and entity accounts. The obligation will include a review of electronic data for evidence of where each of their customers is resident (including PO boxes, ‘care-of’ addresses, ‘hold mail’ instructions and standing instructions to send funds to resident based accounts) but could also include a ‘paper search’ of existing documents, self-certification by the client and an ‘actual knowledge’ test for client relationship managers.
View our interactive map to get a wider picture of global adoption of the CRS.