Common reporting standard: Implementation in Asia
Common reporting standard: Implementation in Asia
The Common Reporting Standard (“CRS”) is an internationally agreed standard for automatic exchange of financial account information (“AEOI”) on financial account information, endorsed by the OECD and the Global Forum for Transparency and Exchange of Information for Tax Purposes.
The CRS framework requires financial institutions in participating jurisdictions to apply specific due diligence procedures in order to identify and report to the respective competent tax authority the financial accounts held by tax residents of participating jurisdictions on an annual basis. This information will then be exchanged amongst the participating jurisdictions. More than 100 jurisdictions, including major financial centers such as the British Virgin Islands, the Cayman Islands, Dubai, Hong Kong, Ireland, Luxembourg, Singapore and Switzerland have endorsed the CRS and will commence the AEOI in either 2017 or 2018.
China, Hong Kong and Singapore are scheduled to commence reporting in 2018 with respect to 2017 account information. Due diligence procedures for new accounts will start 1 January 2017.
Hong Kong and Singapore will conclude bilateral Competent Authority Agreements (“CAA”) which specify the type of information to be exchanged between two jurisdictions, the time and manner of exchange as well as the confidentiality and data safeguards to be respected for the exchange of information.
China
The State Administration of Taxation has recently released the Discussion Draft on the Administrative Measures on the Due Diligence Procedures for Non-residents Financial Account Information in Tax Matters that set forth detailed procedures for domestic financial intuitions to collect financial account information held by foreign individuals and entities. China is anticipated to implement the CRS from 1 January 2017 and facilitate the first AEOI under the CRS by September 2018. To note is that the Discussion Draft stipulated that non-compliance by a financial institution could affect its tax payment credit rating and for more severe violations, tax authorities could recommend that the respective relevant bodies in China take further actions (i.e. suspend or revoke business licenses, disqualify the qualifications of directors/senior management or order the financial institution to take disciplinary measures against the responsible directors/senior management).
Hong Kong
Hong Kong has signed agreements with Japan and the United Kingdom to commence the AEOI with these two tax jurisdictions in 2018. The Government has stressed that it will expand Hong Kong’s network of AEOI with partners with which we have signed a comprehensive avoidance of double taxation agreement (“CDTA”) or a tax information exchange agreement (“TIEA”). The Government will commence AEOI discussions with all other CDTA/TIEA partners committed to adopting AEOI, and seek to conclude as many Competent Authority Agreements as practicable within 2017.
Singapore
The Inland Revenue Authority of Singapore (“IRAS”) signed CAAs with nine countries (Australia, UK, Japan, Republic of Korea, South Africa, Norway, Italy, Canada and Finland) on the automatic exchange of financial account information based on the CRS as of 23 November 2016. Singapore and these nine countries will commence the AEOI under the CRS by September 2018. Singapore Reporting Financial Institutions have to submit the first report under the CRS by 31 May 2018 to IRAS but apply due diligence procedures starting 1 January 2017.
