Governments worldwide are continuing their search for additional tax revenue. The Common Reporting Stand (CRS) allows countries to obtain information from their Financial Institutions (FIs) and automatically exchange that information with other countries with the stated aim of increased tax transparency and the prevention of tax evasion. So far, over 90 jurisdictions have signed up to CRS. In this short report, Global Mobility tax experts at Alliott Group, an international association of accounting and law firms, explain the basics of CRS, what’s happening in their jurisdictions and why expatriates (and high net worth individuals) need to take particular note.
Demands for more standardised levels of tax reporting compliance at the international level have been increasing over the last decade. First there was the Foreign Account Tax Compliance Act (FATCA) in 2010, implemented in the United States to tackle tax evasion by its citizens holding assets offshore, legislation that has also affected expatriates living in the USA. And now we have what some refer to as “global FATCA” in the shape of the Common Reporting Standard (CRS). Established in 2014 by the Organisation for Economic Development (OECD), CRS is a genuine “game changer” and was introduced in response to a request by the G20. Unprecedented levels of financial account information are to be exchanged between many national governments as they look to clamp down on tax evasion, put an end to banking secrecy and address the perceived leakage of tax to other jurisdictions.
What is the Common Reporting Standard?
The CRS is an internationally agreed standard for the automatic exchange of financial account information (“AEOI”) that obliges a jurisdiction’s financial institutions (such as banks, trust and insurance companies, and corporate service providers) to report to their respective tax authority specific information on an annual basis about the financial accounts held by non-residents and entities including companies, partnerships, trusts and foundations based in countries that have implemented CRS. It works on a reciprocal “I’ll show you mine if you show me yours” basis. As an example, an expatriate who is tax resident/paying taxes outside the country where he or she banks, should be aware that their bank will give their personal account information to the local tax authority, which may
then be shared on an annual basis with the tax authority where he or she is tax resident.
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