By the end of 2018, the majority of countries in Asia Pacific will start with the exchange of financial information in tax matters with other participant countries – except for India and South Korea, as they will start exchanging information by the end of 2017. Here we give you a quick overview on what the Common Reporting Standard is and how to prepare if you have entities in the region.
Being at the forefront of international regulations is not easy, but if you are a compliance expert or CFO, the Common Reporting Standard or CRS should be at the top of your priorities list. To date, over a 100 jurisdictions have signed CRS agreements for the automated exchange of information and the list is growing – no matter where you are, CRS is likely to affect you this or next year.
CRS in a nutshell
The Common Reporting Standard, approved by the OECD Council on 15 July 2014, sets the Standard for Automatic Exchange of Financial Account Information in Tax Matters that has arisen out of international agreements between governments, tax authorities and global organisations. It gives legal basis for the exchange of tax data among participating jurisdictions and requires financial institutions to perform specific due diligence procedures to collect and transmit financial data on their customers.
Essentially, at some point in the near future, all countries that adopted CRS will implement the CRS framework in their local laws and automatically exchange financial data on reportable accounts. CRS is not fully uniform globally, meaning that governments are introducing local variations and options that differ from country to country.
Which countries are participating?
There are two groups of countries that have signed on to CRS. The “early adopters”, which are countries that will be ready to start exchanging information with other participating countries in 2017; and the “late adopters”, or countries who will start exchanging information from the 2017 calendar year in 2018. Here is a list of the Asia Pacific countries in each group:
Click here to view table.
It is important to note that as part of the initial implementation process, certain countries have shifted reporting dates, in order to allow both governments and those with reportable accounts to properly comply with the reporting and information exchange responsibilities.
What should you do?
If your entities (company, subsidiary, branch, trust, foundation etc.) are established in, or are otherwise, tax resident in any of the above countries, you should first of all assess your entities to determine their CRS status. Not all entities have to do CRS reporting, but all entities have to be classified under CRS.
CRS requires that all entities in participating jurisdictions be classified for CRS purposes, and depending on the classification outcome, a process of due diligence in line with specific criteria defined by CRS will have to be performed in order to establish if reporting is required and what needs to be reported. The outcome of this CRS classification may be that your entity is a "Reporting Financial Institution", a "Non-Reporting Financial Institution", "Active Non-Financial Entity" or a "Passive Non-Financial Entity ".