Common Reporting Standard
Where Common Reporting Standard (CRS) idea comes from ?The concept of agreeing to a universal standardized cooperation system for the fight against tax evasion, is not new and has its roots in the first Convention on Mutual Administrative Assistance in Tax Matters, developed by the OECD and the Council of Europe, in 1988.
Following the 2010 US Foreign Account Tax Compliance Act (FATCA), the Common Reporting Standard (CRS) emerged in May 2014 when forty-seven countries agreed to sign the multilateral agreement on the Standard for Automatic Exchange of Financial Account Information regarding bank accounts for tax purposes across the world.
In 2019 there are 98 signatory countries. However, it is still possible the exchange of information with other jurisdictions. Other ways exist to conduct the transfer of information: either on request or spontaneously. Belgium initiated the exchange of information in 2017. The financial institutions must send the relevant data to the Belgian authority "FPS Finance" (or "SPF Finances", in French). Then the authority shares this information with the other states of the agreement.
OECD is revising constantly its Frequently Asked Questions. You will find the latest version under CRS-related Frequently Asked Questions.
One could note the unique status of the United States, that did not sign the international treaty and that receives information relating to US citizens' accounts from countries due to the compliance requirements of the FATCA act.
CRS regulation in a nutshell
- The information will be exchanged annually between the jurisdictions for which the convention is in force and in effect;
- All financial institutions (banks, brokers and insurance companies) will be reporting the information;
- The information reported concerns individuals and entities;
- Personal details of the account holder, account identification details, account balance and financial information will be reported;
CRS Practical Implications
- Data gathering becomes more important on all levels;
- Data quality is a challenge for all institutions;
- Flexibility is key to keep the pace with changing regulatory demands;
- All financial institutions will be analyzing solutions in house or will buy from the market tools;
- The decision depends on the resources (IT and staff);
Common Reporting Standard technological challenges. Traditional business models tend to become less popular as the new compliance obligations that arise for businesses and financial institutions have underlined the need for technological evolution. CRS has pushed the business to centralise their data and use new data management tools to do the reporting process more efficient.
New technologies will allow businesses and financial institutions to ease the use/management of large amounts of data and in general collect and process faster and more accurately. In the future, it is sure that reporting requirements will become more complex, detailed and demanding, and it is better if businesses prepare themselves for a compliance complex future.
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