On 13 February 2014, the OECD, at request of the G8 and the G20, released a proposed global standard for the automatic exchange of financial account information through their model Competent Authority Agreement (CAA) and Common Reporting Standard (CRS). Like FATCA, the CRS will require financial institutions around the globe to play a central role in providing tax authorities with greater access and insight into taxpayer financial account data including the income earned in these accounts.
Background on CRS
On June 18th 2013, the OECD published a report to the G8 Summit on delivering a standardized, secure and cost effective global model for automatic exchange. Developed by the OECD in cooperation with G20 countries, the CRS will require financial institutions to report information to their own jurisdiction and this information will in turn be passed on to other relevant countries automatically each year. It is not designed to replace any existing basis or any other means of information exchange, but instead intends to supplement current measures.
The OECD proposed the standard as a means of slowing international tax evasion committed by individuals and corporations that utilize tax havens to hide assets. Additionally, the standard targets large global corporations like Apple, which avoid tax liability by circulating their money between countries.
The CRS published in February 2014, sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. The financial institutions required to report under CRS, include not only banks and custodians, but also brokers, certain collective investment vehicles and certain insurance companies. The financial information to be reported in respect of reportable accounts includes all types of investment income, account balances and sales proceeds from financial assets.
The CRS represents another global compliance burden for financial institutions and increases the risks and costs of servicing globally wealthy customers. The good news for financial institutions is that this standards follows in the footsteps of FATCA and is explicitly modeled on the approach taken in FATCA
Dirk De Wolf is a writer and blogger from Aalst, Belgium. He has an BSc in Political Science and an MSc in EU-Studies from the University of Ghent. Dirk wrote his master
