The CRS is a global standard for the automatic exchange of financial information between jurisdictions that have agreed to adopt it. The Organization for Economic Co-operation and Development (OECD) introduced CRS as a means to combat tax evasion and to improve cross-border tax compliance.
The CRS came into effect in early adopter jurisdictions from 01 January 2016 and will take effect from 01 January 2017 in late adopter jurisdictions including the U.A.E.
Why is this important?
In countries where CRS requirements have been enacted into local law, compliance with CRS is mandatory.
The Banks must comply with the CRS requirements in accordance with country specific legislation.
Under the CRS, the Bank must collect certain information to establish the country (or countries) of tax residence of each of its clients. The Bank may further be obliged to report certain financial information regarding the financial accounts held by its clients to the tax authority where the account is maintained. This local tax authority may exchange this information with the tax authority of another country, subject to the information exchange agreements that are in place.
In readiness for meeting the CRS requirements as those come into force, your Bank may contact you to collect certain tax-related information and/or documents.
The financial information to be reported with respect to reportable accounts includes all types of
investment income (including interest, dividends, income from certain insurance contracts and
other similar types of income) but also 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.
Offshore accounts will be disclosed to the taxman and you may lose your privacy. This year, many account holders may opt to close overseas accounts to avoid being reported to tax authorities. This amy result in the financial death of many offshore financial institutions and banks.
