What is CRS?

Starting from January 1, 2017, both China and Hong Kong will begin to implement the CRS "Common Reporting Standard."

Recently, news related to this matter frequently appears on major websites and WeChat official accounts. It seems to have a great impact on the overseas assets of high-net-worth individuals. So, do you know what CRS is? Let's do a little 科普 first.

Inspired by the US government's Foreign Account Tax Compliance Act (FACTA), in July 2014, the OECD released the "Standard for Automatic Exchange of Financial Information in Tax Matters" (AEOI standard), aiming to combat cross-border tax evasion and maintain an honest tax payment system. The AEOI standard includes the "Competent Authority Agreement" (CAA), the "Common Reporting Standard" (CRS) and its interpretation.

At present, more than 90 countries (regions) have pledged to actively implement and promote CRS. Among them, more than 50 countries (regions) have pledged to conduct the first information exchange in 2017 and implement the new account opening process on January 1, 2016.

China has pledged to become a second batch of countries (regions) implementing CRS. It will implement the new account opening procedure on January 1, 2017 and conduct the first information exchange in 2018.

What is CRS?
CRS (Common Reporting Standard), that is, the "Common Reporting Standard." In 2014, the OECD released the "Standard for Automatic Exchange of Financial Information in Tax Matters," aiming to combat cross-border tax evasion. The standard includes the "Common Reporting Standard" (CRS).

What's the difference between CRS and previous information exchange regulations?
At present, there are about 3,000-plus double taxation avoidance agreements in the world, and the vast majority of them contain information exchange clauses. However, these information exchanges are carried out upon application, not automatically. When applying, tax-related certification materials need to be provided, so their role in practice is very limited. CRS will be an automatic information exchange without the need to provide reasons.

What is the operating mechanism of CRS?
For example, after China and Singapore adopt the "Common Reporting Standard" (CRS), if a Chinese tax resident has an account with a financial institution in Singapore, the personal information and account income of this resident will be collected by the Singapore financial institution and reported to the relevant Singapore government departments, and information will be exchanged with the relevant Chinese government departments. This exchange is carried out once a year. In theory, the Chinese tax department will master the income status of overseas assets of Chinese tax residents.