Taxpayers with offshore assets as well as financial institutions that hold them, will all face new challenges under the OECD’s updated Common Reporting Standard (CRS). The CRS, formally the Standard for Automatic Exchange of Financial Account Information in Tax Matters, seeks to establish a global methodology for the sharing amongst tax authorities of data in relation to financial assets. The transparency created by the CRS is meant to be yet another deterrent to taxpayers’ use of offshore financial accounts, assets, etc. to avoid domestic tax liabilities.
100 Countries already signatories of the Automatic Exchange of Information (AEI).
AEI is set to become the most comprehensive and powerful tool to date, of tax authorities worldwide with approximately 100 countries already signatories or committed to implementing and applying this Standard. Financial institutions will disclose not only the account holder but also any beneficial owners, controlling persons or even in certain cases “relevant persons” of entities and trusts. Reporting involves individuals who own or control accounts in financial institutions either directly or through companies, trusts, foundations and in certain cases insurance policies. Financial institutions include banks, trusts, brokers, collective investment vehicles, custodians and insurance companies.
For the nearly 60 “early adopters”, Automatic Exchange of Financial Account Information will commence from 2017 on an annual basis between participating countries in respect to their tax residents, and in certain cases domicile persons.
How AEI works.
Overall, the AEI is facilitated by having financial institutions in each participating country collect and report to their local tax authorities tax relevant information regarding their clients who are resident in another participating country. In turn, the local tax authorities automatically exchange this information on an annual basis with their counterpart in the participating countries.
Account information to be reported
Information to be reported includes account number, account balances and gross earnings in respect of any payments through the account, including but not limited to any investment income such as dividends or funds from insurance companies, income earned from assets and sale profits from financial assets.
The information on each reportable person includes name, address, country of residence, national insurance and tax identification numbers, place and date of birth.
Beneficial owners and ”relevant persons” of entities and trusts
Financial institutions will also need to disclose not only the account holder but also any beneficial owners, controlling persons or even in certain cases “relevant persons” of entities and trusts.
Early adopter countries undertaking first AEI by 2017
Anguilla, Argentina, Austria, Barbados, Belgium, Bermuda, Bulgaria, British Virgin Islands, Cayman Islands, Chile, Colombia, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos, Uruguay, United Kingdom.
Late adopter countries – undertaking first AEI by 2018
Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Bahamas, Belize, Brazil, Brunei Darussalam, Canada, Costa Rica, China, Grenada, Hong Kong, Indonesia, Israel, Japan, Macao, Malaysia, Marshall Islands, Monaco, New Zealand, Qatar, Russia, Saint Kitts & Nevis, Samoa, Saint Lucia, Saint Vincent, Saudi Arabia, Singapore, Saint Marten, Switzerland, Turkey, United Arab Emirates.
Countries that have indicated interest but without commitment yet
Bahrain, Cook Islands, Nauru, Panama, Vanuatu. FATCA is complied by most countries now
[box type=”note” size=”large” style=”rounded” border=”full”]NOTE: Although the USA is not a participating country on this AEI process, information regarding US tax residents is automatically exchanged towards the USA through FATCA, which is already being complied with by most countries.[/box]
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