In July 2014, the Organisation of Economic Cooperation and Development (OECD) released a new global standard for automatic exchange of financial account information between governments. The standard has two components: the Common Reporting Standard (CRS) which sets forth reporting and due diligence requirements, and the Model Competent Authority Agreement (CAA) which contains details of how the proposed exchange of information can be effectively executed.
Financial institutions required to report under CRS include banks, custodians, brokers, asset managers, intermediaries, certain collective investment vehicles and certain insurance companies. The information to be reported in respect of reportable accounts include details of the account holder and information relating to the investment income, account balances and sales proceeds from financial assets associated with the account.
As of October 2016, in excess of 100 countries have declared that they will commit to implementing the standard. This requires financial institutions located in first wave participating jurisdictions to collect information beginning 2016 and report it to the local tax authority beginning 2017.
On 30 June 2016, the tax legislation on implementing the CRS in Hong Kong was gazetted and became effective. As a second wave participating jurisdiction, Hong Kong financial institutions are to collect information beginning 2017 and report this to the Hong Kong Inland Revenue Department in 2018 to facilitate the commencement of information exchange by the end of the same year.
If you would like to know more about CRS, the potential impact it will have on your institution and the available solutions then please contact one of our experts.