CRS Explained
In a bid to fight tax evasion and money laundering, the OECD developed CRS, an information exchange mechanism, and managed to convince most of the world’s countries to implement it. In this guide, I cover how CRS works and what is reported.
Simon @ FS / Uji, Japan
How CRS works
Tax Information Exchange Agreements (TIEAs) are fairly common and have been used for many years by countries in their fight against tax evasion. They allow one country to request the financial information of a taxpayer, often to help a tax investigation, from another country. It is important to understand that TIEAs work on a pull basis. In plain English, they are not automatic. CRS, on the other hand, is automatic. If you have a financial account (bank, brokerage etc) in one of the signatory countries, you automatically fall within its scope. Your balances and account details will automatically be reported to the tax authorities of your country of tax residency, every year on reporting day. Contrary to popular belief, however, your transactions history will NOT be reported nor will your income details (beyond interest income and the like).
What is reported
This will vary depending on the type of account and whether it is a personal or business account. For a personal current / checking account, the account details will be reported (account number, type of account, name, address, tax ID, date of birth, country of birth, countries of tax residency) along with the total balance on the day of reporting (usually the 31st of December) and the amount of interests paid to the account during the reporting period (no other financial information is reported). For a brokerage account, the same information will be reported along with information about gains (dividends paid into the account, for example). For most other types of account, annuity accounts for example, the same information will be reported along with the total value of the account and the total value of the payments made from the account. For a business account, the reporting will apply both to the countries of tax residency of the business itself and that of its owner(s).
