In order to protect the integrity of tax systems and the fight against tax avoidance, governments around the world bring the standard automatic exchange of information in tax matters called Common Reporting Standard (CRS).
The CRS is a set of global standards for the automatic exchange of financial information, developed by the Organization for Economic Cooperation and Development (OECD) as the basis for the Automatic Exchange of Information about foreign clients who are tax residents – conducted between tax authorities.
Acting in the light of the CRS, banks are obliged to determine where its customers should pay taxes (which often involves specifying their tax residence). In order to obtain this information, banks will use the data they already have on customers or may also ask them to provide missing data.
If it turns out that the customer is tax resident in a country other than the one in which they are carried out his bank accounts, bank shall provide such information to the local tax authorities. The tax authorities can then exchange this information with the tax authorities of the country where the customer is tax resident.
In the European Union, a major piece of legislation to be entitled to exchange such information is the EU Council Directive 2011/16/EU on administrative cooperation in the field of taxation. The Directive sets out above all the necessary procedures for better cooperation between the tax administrations in the European Union. The Directive was amended by introducing EU Council Directive 2014/107/EU, thus expanding the scope of cooperation between the tax authorities of automatic exchange of information about the status of the account.
56 jurisdictions, including Cyprus have committed to be early adopters to the CRS, which means an implementation date of 1 January 2016. In his case the first exchange of information will take place in September 2017 – covering 2016.
For other 40 countries (e.g. Belize, United Arab Emirates, Hong Kong, Singapore, Marshall Islands) which have committed to be late adopters, reporting will start in 2018.
For the complete list of participating jurisdictions please see OECD website: http://www.oecd.org/tax/transparency/AEOI-commitments.pdf
Our customers may be asked to complete the self-certification form and send it via IBCCS to the relevant bank. New customers who wish to open accounts will be asked to complete the new form together with all information requested during the account opening process.
Author: Ms. Jowita Jablonska, Compliance & AML Officer at IBC Corporate Solutions Ltd.
