The CRS prescribes due diligence procedures to be adhered to by financial institutions to identify reportable accounts, which are defined in order to avoid an abusive interpretation of the rules.
Reportable information includes:
- information on the account holder,
- the relevant account number,
- the account balance or value,
- all types of investment income, and
- sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account.
Reporting institutions do not only include banks, but also custodians, certain brokers, collective investment vehicles and insurance companies where contracts have redeemable cash values.
Reportable accounts include those held by individuals, trusts and foundations, with a look through to passive entities to report on the individuals that ultimately own or control them.
The CRS intentionally does not restrict other types or categories of automatic exchange of information; rather it provides a minimum standard in the field of information exchange where some jurisdictions may agree to exchange information beyond the minimum prescription.
In terms of timing, without slippage and subject to domestic arrangements being in place, the first information from the 56 early adopters will be available for exchange in September 2017, for the calendar year 2016. The information will be available annually thereafter, with a rapidly growing number of participants. We should remember that holding wealth overseas is often perfectly legal. It is the non-disclosure of wealth where obliged to do so that is illegal and this is what the CRS is aiming to address.
As the list of participants grows, many Governments have decided to implement complementary measures to encourage those whose affairs are not up to date to regularise them in advance of the first transfer of information. However, it should be noted that financial institutions which are within the early adopting jurisdictions will have taken snapshots of appropriate data as of 1 January 2016, which will ultimately be automatically exchanged. The exact timing will relate to the value at that date, with accounts greater than $1m coming before lower value accounts.
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