Common Reporting Standard – coming soon to a jurisdiction near you
The Organisation for Economic Co-operation and Development (OECD)’s Common Reporting Standard, or CRS, starts in Australia, Singapore and Hong Kong on 1 January 2017 and is already live in some jurisdictions such as Jersey and the Cayman Islands.
Below we review what CRS means for fund managers and fund administrators.
What is CRS?
Common Reporting Standard (“CRS”) is a global tax initiative introduced by the Organisation for Economic Co-operation and Development (OECD).
90+ countries have signed up to CRS and its associated customer identification and reporting procedures.
What is the aim of CRS?
CRS aims to reduce tax evasion by taxpayers through the automatic exchange of financial account information in tax matters between participating countries
How is CRS different to FATCA?
FATCA is US tax initiative introduced by the Inland Revenue Services (IRS) to restrict tax evasion by US citizens and tax residents. 100+ countries have signed up so far to FATCA.
By contrast, CRS is a global tax initiative introduced by the OECD to reduce tax evasion by the taxpayers of the 90+ countries that have signed up to CRS. Notably, the United States is not a participant.
What is required by financial institutions?
Financial institutions need to identify clients that are tax residents of the CRS zone countries when opening new accounts. All reportable account holders identified must then be reported to the local authority on an annual basis.
Additionally, financial institutions should look at undertaking a comprehensive review of their pre-existing account holders to identify tax residents of the CRS zone countries.
How is CRS being rolled out?
CRS is being rolled out in three phases:
- Phase 1 (“early adopters”), compliance commenced 1 January 2016. 56 countries are in Phase 1, including Cayman Islands, Jersey and EU member countries.
- Phase 2 compliance commences 1 January 2017 with the first exchange of information in 2018. 40 countries, including Singapore, Australia and Hong Kong, are in Phase 2.
- Phase 3, with commencement dates yet to be confirmed.
What is the impact on new and existing account openings?
Under CRS, accounts opened on or after 1 January 2016 (or 2017) must provide tax residency information within 90 days.
The due diligence on existing accounts depends on the account opening date and value of the account holding.
Mainstream can assist with registering investors with the applicable jurisdiction and compiling and reporting applicable accounts.
Investment managers need to carefully assess the impact and deadlines of CRS to stay on top of their funds’ compliance obligations.
If you have any questions regarding CRS, please speak with your compliance officer.
To learn more about the actions Mainstream is taking, please contact us.
This article is not intended to be financial advice and is of a general nature only that does not take into account your individual objectives, financial situation or needs. While all efforts have been made to ensure the information contained in this article is accurate, errors may occur.