The Common Reporting Standard is expected to swing into action in a few weeks – but how does this impact expats and the tax they pay?
To find out, here’s a list of frequently asked questions about the standard:
What is the Common Reporting Standard?
The Common Reporting Standard or CRS is a network of international tax authorities working together to swap personal and financial data about each other’s citizens with bank accounts of investments in their countries.
What is the CRS aiming to accomplish?
The CRS establishes the tax residence of bank customers and investors who have offshore holdings.
Financial institutions, which include banks, building societies, investment funds and trusts, must tell their local tax authority about any foreign customers and their holdings.
The information is passed to the customer’s home tax authority to check against filings to make sure the right of tax has been paid on any interest, dividends or gains.
When does CRS reporting start?
It already has. Early adopters such as the UK and Spain started swapping tax data in September 2017, although the entire network is due to trigger from September 1, 2018.
What is reported under CRS?
Personal details requested by the financial institution expats deal with plus details about accounts and financial products, including the balance of an account or value of investment and the total of any interest or payments credited to them each year.
How many countries are part of the CRS network?
CRS has around 108 member countries with the notable exception of the USA.
The UK, most European countries and the rest of the world’s leading financial centres are all involved. The list includes a host of notable places once considered as tax havens.
Why isn’t the USA involved?
The CRS is based on the US Foreign Account Tax Compliance Act (FATCA).
FATCA already swaps data between the US Internal Revenue Service and foreign tax authorities and will continue to do so outside the CRS.
How does this affect expat tax?
It doesn’t unless an expat has undeclared offshore assets. If they are in a CRS member country, they will be fully disclosed to the expat’s home tax authority for comparison with tax filings.
What do expats have to do under CRS?
Expats do not have to take any action other than fully declaring their offshore assets.
However, any financial institutions expats deal with offshore will ask for personal information, including tax identification numbers.