Get ready for the Common Reporting Standard

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Even now, the “CRS” acronym isn’t yet familiar to everyone in the global financial services community. 

Nevertheless, as Geoff Woodhouse of Moore Stephens, London, points out here, the Common Reporting Standard is on its way into the regulatory compliance offices of financial institutions around the world. (With the exception, of course, of financial institutions in the US, which says it doesn’t see why it needs to participate in the CRS, as it has FATCA…) 

The OECD published the Common Reporting Standard, the Automatic Exchange of Financial Account Information, on 13 February 2014 – setting in motion a game-changing undertaking, in the global fight against tax evasion.

Financial institutions resident in CRS countries will soon need to report account holder information to their local tax authorities, who will then exchange information with countries where these account holders are tax resident.

More than 90 jurisdictions have already committed to adopting CRS, and there are more than 50 “early adopters”, with the first automatic information exchanges to happen in 2017.

CRS will work in a similar way to the US FATCA regulations, although it does not itself impose withholding taxes for non-compliance. In the European Union, CRS will be implemented through the Directive on Administrative Cooperation.

While the US has no immediate plans to adopt CRS, meanwhile, it is already receiving financial account information through the FATCA regulations.

Otherwise, there are very few hold-outs that have not yet agreed to adopt the CRS – namely Bahrain, the Cook Islands, Nauru, Panama and Vanuatu.

General reporting requirements

Reporting financial institutions have an obligation to review their financial accounts, in order to identify “reportable accounts” by applying due diligence rules. They then must report the relevant information from those they find to their local tax authority.

Reporting financial institutions must report the following information on each reportable account:

• name, address, jurisdiction of residence, Taxpayer Identification Number (TIN) and date of birth of each reportable person, and, in the case of an entity, each controlling person who is a reportable person;

• account balance or value as at the end of the relevant year (or on date of closure of the account);

• for custodial accounts, interest, dividends, other income, gross proceeds from sale or redemption paid or credited during the year;

• for depository accounts, gross interest paid or credited in the year;

• for other accounts, the gross amount paid or credited during the year.

There are some exceptions. For example, where a TIN is not issued by the relevant jurisdiction, or where financial institutions are not required to obtain dates of birth under domestic law.

Moore Stephens is a London-based global accountancy and advisory network. Geoff Woodhouse, the author of this article, is a  London-based Moore Stephens partner,  specialising in assurance and advisory services for family offices and international corporates. His clients include institutional and family wealth funds, as well as specialist investment funds and global corporates in the shipping sector.