CRS – The Common Reporting Standard
What is CRS (Common Reporting Standard)?
CRS, more formally known as the Standard for Automatic Exchange of Financial Account Information, is an information standard for the automatic exchange of information (AEoI), developed by the Organisation for Economic Co-operation and Development (OECD). It is a globalised version of the USA’s Foreign Account Tax Compliance Act (FATCA) initiative, although the USA does not participate due to already having FATCA in place. The legal basis for the exchange of data is the Convention on Mutual Administrative Assistance in Tax Matters.
To date 56 jurisdictions (including Guernsey) have committed, as “early adopters”, to start reporting in 2017 with a further 46 jurisdictions (“fast followers”) reporting from 2018.
Over a transitional period the CRS will replace the UK version of FATCA (also known as CDOT, which stands for Crown Dependencies and Overseas Territories) and is similarly expected to replace the EU Savings Directive (EUSD) under which savings income was exchanged between both EU member states and certain associated territories (including Guernsey).
How does CRS work?
CRS sets out a framework for reporting between participating jurisdictions. Each financial institutions (FI) in a reporting jurisdiction must provide their home tax authority with information about the financial accounts of their clients who are tax resident in other reporting jurisdictions. Each tax authority then forwards the information received, on a consolidated basis, to each other reporting jurisdiction.
Determining which participating jurisdictions are reporting (or being reported to) is based on the date each has agreed to report from. Reporting performed in 2017 will be performed by each early adopter jurisdiction and they will exchange information with other early adopter jurisdictions only. Similarly, reporting performed in 2018 will be performed by each early adopter and fast follower jurisdiction and they will exchange information with other early adopter and fast follower jurisdictions. The obligation to report builds as each new wave of jurisdictions adopts CRS.
What information is reportable?
- The name, address, taxpayer identification number (where applicable and/or required) and date/place of birth of the Reportable Person
- The account number
- The name and identifying number of the Reporting Financial Institution
- The account balance or value as at the end of the relevant year, or the fact that the account was closed (if applicable)
The information required and format are governed by a hugely detailed standard, which runs to hundreds of pages. This also details the determination of who is a Reportable Person, as well as the treatment of entities such as companies, partnerships and trusts.
What work is required to implement CRS?
A financial institution generally has four stages to their CRS implementation project, which follow similar lines to projects for other AEoI initiatives (such as FATCA & CDOT):
- On-boarding – ensuring forms are updated with new fields and new accounts are reviewed to determine whether they are reportable
- Entity Classification (particularly the split between a Financial Institution (FI) and a Non-Financial Entity (NFE))
- Pre-Existing Account Searches – remediation of existing accounts to determine whether the account holders are reportable
- Reporting – the process of transforming data into the required format for transmission to the home tax authority
Midshore are able to help provide advice, project management, or procedures for your organisation to successfully implement necessary policies and practices to ensure your CRS compliance. We can also provide CRS Awareness training for your staff.
Please contact us to discuss your needs.