Private banking is truly becoming a thing of the past with the introduction of the common reporting standard (CRS).
Like the US FATCA, the new global network expects banks and other financial institutions to keep track of the nationality of clients for their tax authorities.
The tax authorities will collect the data and pass the information on to the customer’s home government for cross-checking against tax filings.
CRS will phase in across the world over the next 12 months – but the important point is every nation of economic importance has signed up to the network.
The network means the end of banking secrecy and tax evasion.
Who is the CRS trying to catch?
Any individual or corporation living in a nation signed up to the network who is trying to avoid paying tax by moving cash or assets to another financial jurisdiction
Which countries belong to the CRS?
CRS starts in two phases or tranches – the countries signed up to each are:
Tranche A: Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Chile, Colombia, Croatia, Curaçao, 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, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, the United Kingdom and Uruguay.
Tranche B: Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Belize, Brazil, Brunei Darussalam, Canada, China, Costa Rica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Marshall Islands, Macao (China), Malaysia, Monaco, New Zealand, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Saint Maarten, Switzerland, Turkey, and the United Arab Emirates.
When does the tax data exchange start?
The plan is for information to be transferred in June each year. Tranche A countries start in June 2017, while Tranche B begin in June 2018.
What will the report say?
Essentially, the information will be the data expected on a tax return
What do taxpayers have to do to comply with CRS?
Nothing. Their obligation remains the same – to report the income generated by any offshore savings or investments on their tax filings.
CRS is a game changer because the tax authority will not have foreign data to check filings against to ensure all income and gains are declared and the correct amount of tax is paid.