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IRAS commencing CRS compliance reviews
It has been just over a year since the Inland Revenue Authority of Singapore (IRAS) published the first edition of the CRS Compliance Guidelines on 23 July 2019 (the “e-Tax Guide”). The e-Tax Guide aims to support Reporting Singaporean Financial Institutions (SGFIs) to comply with their CRS obligations.
Since the release of the e-Tax Guide, and despite the disruption to business operations from COVID-19, the IRAS has commenced conducting reviews on Reporting SGFIs’ compliance with the CRS requirements in Singapore. Reporting SGFIs should already have established clear compliance standards in implementing the CRS, and they are expected to undertake periodic CRS compliance reviews as part of their existing internal risk management framework, with such reviews performed by independent reviewers who are not involved in the policy formulation and day-to-day CRS operations of the Reporting SGFIs (e.g. internal compliance teams, internal auditors or external auditors).
The IRAS’ risk-based approach also includes its own reviews on Reporting SGFIs for their compliance with the CRS. The IRAS’ reviews will be guided by the following key elements, each of which is elaborated further in the e-Tax Guide on the IRAS website. You may also refer to our commentary on the guidelines for more information.
Regular reviews conducted by the IRAS on Reporting SGFIs usually include desk-based and/or on-site reviews
Desk-based reviews would involve the identified Reporting SGFI responding to the IRAS’ questionnaires and clarification.
On-site reviews would typically involve the IRAS visiting the premises of the identified Reporting SGFI and face-to-face interviews with relevant personnel to understand the CRS controls, processes and documentation.
There are three key aspects that the IRAS would focus on in the CRS questionnaire:
Entity Level Controls
Business model and processes, type and number of Financial Accounts, CRS risk management process and outsourced CRS functions (if applicable)
Processes Level Controls
New and pre-existing accounts (corporate and individual), account monitoring and closing procedures
Reporting Level Controls
Data extraction, preparation, review and submission of returns, management of errors and amendments of returns
Reporting SGFIs are expected to adopt the following approach when managing their CRS regulatory risks and demonstrating their compliance with the CRS requirements in Singapore
- Ensure sufficient and robust internal controls are in place
- Ensure sufficient documentation is maintained in accordance with the requirements of the CRS in Singapore
- Undertake a programme of periodic CRS compliance reviews by independent reviewers
- Follow up on any recommendations by the IRAS and/or independent reviewers to correct any systemic failures with respect to their systems, policies or procedures
Key actions to take in preparation for an IRAS review
- Review your existing processes and controls; conduct a gap analysis and implement a controls framework based on the IRAS CRS Compliance Guidelines
- Conduct pre-existing accounts due-diligence reviews and remediation exercises
- Organise CRS training programmes to ensure the team is clear on the reporting requirements
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