The Common Reporting StandardMEDIA ROOM
Influenced by the creation and subsequent implementation of the FATCA regime, the European and global community sought to create a reporting standard to clamp down on unreported and untaxed income through the implementation of the Common Reporting Standard (CRS).
Heavily influenced by the FATCA regime, CRS mirrors the principles laid out by FATCA. Entities classified as Financial Institutions, on whom the burden of reporting was placed, bear the same definition under both FATCA and CRS, and are defined as entities which are resident or have a branch in a participating Country, and are engaged in the provision of banking related business, providing custodial account services, brokers, providing services related to certain collective investment vehicles, providing trust or fiduciary services and certain insurance companies.
Directive 2014/107/EU was already transposed into Maltese law, thereby implementing the CRS regime and increasing the compliance burden for pre-existing accounts and imposing further due diligence obligations on Financial Institutions when on boarding new clients who pay taxes in CRS participating Countries.
As at today, 44 jurisdictions have committed to implement the CRS, with the result that Financial Institutions should have already introduced new procedures in order to enable them to meet their reporting obligations.
The ‘early adopters’, among them Malta, will be reporting to other adhering countries in 2017, and should have introduced the new procedures as from 1st January 2016.
The information to be reported under both regimes is the account holder’s identity, residence, tax identification number, account balance and value at year end, and any income, sale or redemption proceeds. In the case of CRS the account holder’s date of birth, must also be reported.
The adaptation of the duties and obligations imposed by CRS should be a somewhat smoother process for Financial Institutions than the implementation of FATCA, owing to their similarity. While compliance is likely to be marginally increased, financial institutions have the option to mirror their efforts done for the implementation of FATCA in order to use as a solid foundation for the upcoming CRS reporting.