The Common Reporting Standard (CRS) – Be Prepared…
The Common Reporting Standard (CRS), developed and approved by the OECD Council on 15 July 2014, calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis.
The CRS is an information exchange system released with the aim of combating cross border tax fraud and tax evasion using offshore financial accounts and that of reinforcing the protection of the proper functioning of tax structures.
Influenced by the creation and subsequent implementation of the FATCA regime, the European and global community sought to create a reporting standard to clamp down on unreported and untaxed income through the implementation of the Common Reporting Standard (CRS).
It sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as a substantial amount of due diligence to be followed by financial institutions.
The information to be reported is the account holder’s identity, date of birth, residence, tax identification number, account balance and value at year end, and any income, sale or
CRS affects Financial Institutions (FIs). The Standard does present an extensive amount of operational and business challenges. Failure to comply with CRS, will result in a serious breach of the law and hefty fines.
Entities classified as Financial Institutions, on whom the burden of reporting was placed, bear the same definition under both FATCA and CRS, and are defined as entities which are resident or have a branch in a participating Country, and are engaged in the provision of banking related business, providing custodial account services, brokers, providing services related to certain collective investment vehicles, providing trust or fiduciary services and certain insurance companies.
Financial Institutions are required to understand what the implementation of the CRS entails, and take the necessary steps towards compliance. OECD have published a number of guides and handbook which includes commentaries, FAQs and other relevant information.
Malta has been an early adopter of the implementation of OECD CRS.
In the EU, provisions of CRS were introduced by the amended Directive on administrative cooperation (2014/107/EU amending 2011/16/EU).
On 4 December 2015, Malta has implemented the Directive by publishing LN 384 and therefore officially introduced CRS to the local legal system
The implementation deadline for EU Member States was the 1st of January 2016 and the first reporting deadline would be in 2017. There are 55 confirmed jurisdictions undertaking the first exchanges by 2017 and another 43 jurisdictions will undertake the first exchanges by 2018.
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