An Overview The Common Reporting Standard (CRS)

TABLE OF CONTENTS

What information is required for reporting purposes?

What is the primary objective of CRS reporting?

Common Reporting Standard (CRS) reporting is a global initiative aimed at reducing tax evasion and promoting transparency in the financial sector. It was developed by the Organisation for Economic Cooperation and Development (OECD) in 2014 as an information standard for the Automatic Exchange Of Information (AEOI). Under the CRS, financial institutions must report the financial accounts of customers who reside in other countries to their local tax authorities.

What information is required for reporting purposes?

The CRS reporting framework is based on the automatic exchange of financial account information between participating countries. The Automatic Exchange of Information (AEOI) works by requiring financial institutions, such as banks, to collect information about the financial accounts of their customers who are non-residents of the country where the financial institution is located. This information includes the account holder’s name, address, tax identification number, account balance, and income earned.

The financial institutions then report this information to the tax authorities of the country where the financial institution is located. The tax authorities then share this information with the tax authorities of other participating countries through a secure and automated system.

The exchange of information occurs on an annual basis, with each participating country sending and receiving information about its own residents’ foreign financial accounts held in other participating countries. This enables the tax authorities to identify cases of tax evasion and take appropriate enforcement action.

What is the primary objective of CRS reporting?

Some of the primary objectives of CRS reporting include:

Facilitate the exchange of information between tax authorities to prevent tax evasion,
Ensure that individuals and companies pay the appropriate amount of taxes in their country of residence,
Provide a standardized reporting framework that is secure,
Decrease cost and complexities associated with the exchange of information, as everyone is working within the same standards.
Increase transparency in the financial industry to promote fair competition and reduce the potential for illegal activities to go undetected.
Improve the effectiveness of tax collection and reduce the administrative burden on tax authorities.

Who is obligated to comply?

Common Reporting Standard reporting applies to financial institutions in over 100 countries worldwide. As of 2021, more than 100 jurisdictions have committed to implementing the CRS reporting framework, with many already exchanging information automatically. The information exchanged through CRS reporting is kept confidential and is only used for tax purposes. A full list of complying countries/jurisdictions can be found here on the OECD website.

Financial institutions are required to have safe and secure systems and procedures in place to ensure compliance with CRS reporting requirements. Failure to comply with Common Reporting Standard reporting requirements can result in financial penalties, harm to reputation and legal consequences.

Authority Software has supported Common Reporting Standard reporting for many years.

See how XML Authority can help you can streamline your reporting.