Updated on: June 12, 2024
The Common Reporting Standard (CRS), established by the OECD Council, and the Foreign Account Tax Compliance Act (FATCA) are two pivotal frameworks in the international finance and taxation realm.
What is CRS?
CRS is an information standard for the automatic exchange of tax-related financial information globally. It mandates financial institutions to report account information, including account holders' tax residency, to local tax authorities, which is then exchanged annually with tax authorities in other jurisdictions.
Purpose of CRS
CRS aims to combat offshore tax evasion. It provides a standardized framework enhancing efficiency and reducing costs in the exchange of tax information. Unlike FATCA, which is based on citizenship, CRS focuses on tax residency.
Reportable Entities Under CRS
Financial institutions are required to identify customers’ tax residency status and report accounts held by non-residents. This involves a self-certification process where customers declare their tax residency details.
Difference Between FATCA & CRS
Information Reporting
The self-certification form provided to financial institutions includes information such as account balance, interest, and payment credits.
Compliance
All financial institutions in participating countries, including banks, insurers, and asset management firms, must comply with CRS.
Submission Frequency
The CRS form is valid until there's a change in tax residence status or if the provided information becomes incorrect. Account holders must inform their bank within 30 days of such changes.
CRS enhances global tax transparency by requiring financial institutions to identify and report accounts held by non-residents. Its comprehensive approach differs significantly from FATCA, mainly in its broader scope and the lack of exemptions, underscoring the need for distinct compliance strategies for each standard.
To learn more, contact your Gen II Client Service Manager or email tax@gen2fund.com
Published on: March 5, 2024
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