In an effort to improve the global reporting standard of local tax systems and combat tax avoidance, governments from various jurisdictions will bring the automatic exchange of information in tax matters for all countries up to the same standard. This is referred to as the Common Reporting Standard (CRS).
The CRS has been developed by the OECD (Organisation for Economic Cooperation & Development) who hope to use this as a basis for a global standard for sharing of relevant financial information, for tax authorities to effectively regulate foreign clients who are tax residents in locations other than their country of origin.
Under the regulations as laid out in the CRS, banks and financial institutions are obligated to find out where their clients should be paying taxes as per their relevant tax residency. To obtain such information, banks will combine data already on file and request clients to supply additional data.
If the client is tax resident in a location other in a differing one they have bank accounts, banks have a duty to provide this discrepancy to the local tax authorities. This information will then be exchanged tax authorities of the country where the customer is tax resident.
The EU Council Directive 2011/16/EU will be the chief regulatory legislation for everyone within the EU. The Directive states all necessary procedures for improving the collaboration between the tax administrations and the financial services of each respecting country. The EU Council Directive 2014/107/EU details all later amendments and expands the depth of assistance between the tax authorities concerning the status of the account.
Currently, 56 different jurisdictions, including Cyprus have signed up, essentially committing themselves to be early embracers of the regime, which means they have already implemented these changes as of January 1st 2016. The first instance of exchange is set to go ahead in September 2017 covering the period from 2016.
For another 40 jurisdictions (for example Singapore, UAE, and Belize) who have agreed to be “late” implementers will commence reporting in 2018 for the fiscal year of 2017.
For a full list of participating countries and their respective sign up dates click here.
For any questions on the new reporting standards please get in touch. We would be happy to assist with all your additional reporting requirements. As well as our existing clients who may be asked to supply additional information, prepare early and we will support you through the necessary procedures.