In response to a mandate from G20 leaders, aimed at reinforcing action against tax avoidance and evasion, the OECD has recently presented a draft of a new single global standard for the automatic exchange of information between tax authorities worldwide.
As with the Foreign Account Tax Compliance Act (FATCA) the CRS model imposes obligations on financial institutions to identify reportable accounts and obtain the account holder identifying information that is required to be reported for such accounts with their local tax administration. It also provides the scope of the information to be collected and exchanged with the account holder's residency country.
A total of 42 countries (including the Czech Republic and Slovakia) have committed to adopting the CRS so far and the expectation is that at least some of these agreements will be entered into later this year. The documents recently released by OECD do not yet include any specific timelines, but it is likely that the financial institutions in countries which adopt the standard will be required to undertake the necessary due diligence obligations in 2016 with reporting starting in 2017.
The financial information to be reported with respect to reportable accounts includes all types of
investment income as well as account balances and sales proceeds from financial assets. The financial institutions that are required to report under the CRS do not only include banks and custodians but also other financial institutions such as brokers, certain collective investment vehicles and certain insurance companies. Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the standard includes a requirement to look through passive entities to report on the individuals that ultimately control these entities.
The CRS draws extensively on the intergovernmental approach to implementing FATCA however it does deviate in certain aspects. The OECD is currently developing commentary to accompany the CRS which is expected to be published in June. This will hopefully explain how the CRS is to be implemented and strike a balance between what's workable in practice and minimizing the costs of implementation.
In the Czech Republic, we have built a team of specialists with multidisciplinary background (Consulting, Tax, Assurance, and Law) who have a strong background and excellent credentials from the FATCA projects concluded in the past. We pay special attention to reducing the administrative backlog connected with regulatory implementations and providing solutions tailored to financial institutions operating on the Czech market. We will help you build a tailor made solution leveraging your current systems and processes where virtually possible.
To help you prepare and successfully implement the CRS regulation with a minimum possible impact on your current business model, PwC has a network of specialists in key markets throughout the world. These professionals are part of our Global Information Reporting (GIR) practice, which brings together specialists who know the intricacies of the international tax law as well as the specifics of the local jurisdictions, rules and regulations.
For support with CRS implementation and information on the most up-to-date developments of the respective legislation, do not hesitate to contact our Prague regulatory team:
Mike Jennings at +420 251 152 024
Vincent Santamaria at +420 251 152 071