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Imminently! There are in fact two start dates ... 2017 & 2018 being the implementation dates by the respective countries. An OECD table may be found here.
For the 50 “early adopters” forming the 2017 group, relevant information will be collected between now and September 2017, and a year later for those forming the 2018 group (currently another 50+ countries, not all of which have passed the necessary legislation).
This falls into two categories: -
Stage 1. The collection of information being primarily identification of account holders, their residency status and their residential address. As financial institutions (largely banks) already know where their clients live, this will take the form of updating information already on file. There will also be requests for TINs (Tax identification numbers). Note the word request, TINs are not mandatory to provide under CRS (although the same information will be requested every year). However, we foresee that many (perhaps most) banks will insist on this under the cover of “due diligence” or “compliance”.
Stage 2. At annual intervals, the banks will provide summaries, we assume separated by country of residence and sorted by TIN and/or name of the “subject” being reported on, of the balance owned/held or controlled by that person.
This information will be provided in a common format that both the reporting institution and the foreign Revenue Authority can “read”.
One may only assume that in most high tax jurisdictions, the local tax authorities will be ready (in the first instance) to send out “Enquiry letters” asking if the taxpayer has “forgotten” to declare any overseas income/assets. From that point things will only get worse.
Again, this falls into two categories:
Accounts already in place before 31 December 2016.
$250,000 (or equivalent) is the balance that will trigger a report. Those with balances below that (in theory) will not be reported. However, whatever the theory, banks may decide to collect and report balances of any amount even if not required to do so.
Accounts opened after 1 January 2017
There is NO de minimis balance below which balances (and connected names) need not be reported. Tax authorities may, at their discretion, choose not to follow up on very small balances. If nothing else, the sheer volume of reports may allow very small balance holders to escape the net.
As the first reports have not yet been filed, and no disclosures have been challenged this is a moot point. It is conceivable than in countries with strong privacy laws the use of such information may be challenged as the subject of the report may argue that his consent was not sought for the transfer/dissemination of what is clearly private data. However, and given that CRS is, in every country to which it applies is backed by national legislation; this question will probably only be resolved at Supreme or Constitutional Court level following challenges in individual countries.
Perhaps more importantly, CRS does not apply to:
Important note. Banks in some countries have advised us informally that they are only considering balances held by investment holding companies as being reportable. I.e. balances held in trading companies will not be reportable. Therefore the treatment of different types of balance may well be dealt differently between jurisdictions, according to their respective national laws.
Simply, and unequivocally, if you reside in a high tax country and hold funds (whether directly of through a company) in a low/zero tax jurisdictions you should be very concerned. This is exactly what the OECD is seeking to achieve.
The biggest problem is the “blurring of the lines” between the individual (as owner/shareholder etc) and the corporate entity that legally owns those assets. In the case of a single member company, it may often be assumed that the 100% owner can draw on and use those funds held by the company as his own. Legally even this presumption is on shaky ground as companies have a ‘life’ as a ‘legal person’ and funds paid to the owner should be formally agreed by way of dividend or salary.
If, however, an individual owns 25 -
We foresee protracted and bitter legal argument in the application of CRS in many countries that may yet lead to its collapse.
Actually quite a lot! ... and we can assist in many (but not all) cases. (Contact us)
Probably the best way to defeat CRS is to live somewhere where having your assets reported is not an issue. There are a number of possibilities. Among these, three countries (Cyprus, UAE and Malaysia) stand out for residency schemes that do not require a permanent move, and we can assist with all three.
Please visit our Residency and Citizenship page for more information.
If this is not practical, there are other steps that can be taken to minimise the effect of CRS including structuring your company.
Structure your company to have each shareholder holding LESS than 25% of the shares. (e.g. 5 shareholders of 20%, or 4 at 24.99% with 0.4% being held by a trusted third party). Although slightly clumsy, this should mean that none of the shareholders is reportable.
As can be seen, the various solutions can involve complexity either in your personal life or in your company. We offer consultancy service where these and other issues can be confidentially discusses. Please contact us.
Forming a company in the right jurisdiction(s) is an important decision as mistakes made now could be expensive to correct later.
We offer general and specific advice on banking matters to provide the best choice for your circumstances. We also offer pre-
The Common Reporting Standard (CRS), is a new regime requiring for the automatic exchange of information (AEoI) set forth by the Organisation for Economic Cooperation and Development (OECD). By November 2016, over 100 countries -
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