Understanding the Common Reporting Standard (CRS)
Summary: It is an initiative to combat global tax evasion by automatically exchanging financial data.
The Common Reporting Standard (CRS) is a worldwide effort to enable the automatic exchange of financial account information among nations to combat tax evasion and ensure tax compliance. Singapore started participating in the initiative in September 2018 as it engages in the sharing of banking data with partner nations.
For Reporting Singapore Financial Institutions (SGFIs), adherence to CRS requires them to register with the Inland Revenue Authority of Singapore (IRAS) and diligently oversee financial accounts while submitting requisite data in an annual report to IRAS.
Individuals holding accounts with Reporting SGFIs may witness diverse impacts from CRS, with comprehensive details accessible in the Financial Institutions’ Basic Information for Account Holders.
How Does Common Reporting Standard Work?
CRS acts as a global agreement facilitating the automatic sharing of financial data between jurisdictions to identify and prevent tax evasion by individuals who employ offshore accounts to elude their tax obligations. It also streamlines reporting processes and reduces costs for countries and their financial institutions. Over 100 jurisdictions, including prominent financial hubs such as Dubai, Hong Kong, Luxembourg, and Switzerland, have adopted CRS, initiating the Automatic Exchange Of Information (AEOI) in either 2017 or 2018.
CRS outlines the specifics of financial accounts to be exchanged, mandates that financial institutions provide this information to tax authorities, identifies the types of accounts and taxpayers encompassed, and necessitates that financial institutions establish customer due diligence procedures.
Singapore’s Income Tax Act includes CRS regulations that mandate Reporting SGFIs to establish processes and systems for collecting financial account information from their clients. This financial account information concerning the tax residents of Singapore’s exchange partners is reported by SGFIs to IRAS, which then shares the collected data with Singapore’s exchange partners.
