The Common Reporting Standard (CRS) is an initiative by the G20 and Organization for Economic Co-operation and Development (OECD) aimed at detecting and deterring tax evasion by taxpayers through the use of offshore accounts. The CRS is an internationally agreed standard for automatic exchange of information (AEOI) endorsed by the OECD and the Global Forum for Transparency and Exchange of Information for Tax Purposes. Jurisdictions that commit to the CRS must adopt its requirements via local legislation and/or guidance.
The CRS 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 the customer due diligence procedures to be followed by the financial institutions. More than 100 jurisdictions, including major financial centers such as Singapore, Luxembourg, and Switzerland, have endorsed the CRS and have commenced AEOI in either 2017 or 2018.
Hong Kong will also commence AEOI under the CRS in 2018. Financial institutions in Hong Kong will be required to identify and report financial account information of reportable persons to the Inland Revenue Department (IRD). Reportable persons include individuals and entities that are tax residents in jurisdictions outside of Hong Kong with which Hong Kong has entered into a bilateral competent authority agreement (CAA) for the AEOI of financial account information.
Financial institutions will need to conduct due diligence procedures to identify reportable accounts, which include all types of financial accounts held by reportable persons. The due diligence procedures should be conducted in accordance with the guidance issued by the IRD, which sets out the requirements for identifying reportable accounts and reportable persons, and the procedures for obtaining and verifying their information. Financial institutions will be required to report the financial account information of reportable persons to the IRD on an annual basis.
The information to be reported includes the account holder’s name, address, tax identification number, date of birth (for individuals), account number, account balance or value, and any interest, dividends, or other income earned on the account. The information will be automatically exchanged with the tax authorities of the jurisdictions in which the reportable persons are tax residents.
Financial institutions in Hong Kong that fail to comply with the CRS requirements may face penalties and reputational damage. It is important for financial institutions to ensure that they have established adequate compliance procedures and systems to meet the CRS requirements.
Global CPA has extensive experience in assisting financial institutions and taxpayers to comply with AEOI requirements, including the CRS. Our team of professionals can provide guidance on the CRS requirements, conduct due diligence procedures to identify reportable accounts and reportable persons, prepare and submit reports to the IRD, and assist with any queries or challenges from tax authorities. We can also provide advice on the potential impact of the CRS on your tax position and help you to manage any risks or opportunities arising from the CRS. With our expertise and knowledge of the CRS, we can help you to navigate the complex regulatory landscape and achieve compliance with confidence.