Centaur reviews Common Reporting Standards (CRS) and outlines key points to enable funds to successfully transition to this new regime.
The Common Reporting Standard (CRS) was developed by the OECD (Organization for Economic Co-operation and Development) to combat cross-border tax evasion. This framework is a globally coordinated initiative that requires funds to collect and report specified account information about an account holder’s tax residency. More than 90 jurisdictions have publicly committed to implementing these regulations, contained within the ‘Standard for the Automatic Exchange of Financial Account Information in Tax Matters’. Early adopter jurisdictions, which have agreed to implement CRS from 1 January 2016, include the Cayman Islands, UK, Bermuda, the BVI and Ireland.
CRS requires funds in participating jurisdictions to establish and report the tax residence status of all new and existing investors to their local tax reporting authority. As a result, financial institutions now have substantially increased reporting responsibilities with potential sanctions for non-compliance down the line. Although the goal is to have a common global standard, local implementation of regulations and requirements will invariably differ between jurisdictions and this can sometimes create further headaches for financial institutions who are trying to standardize their business practices.
Many of the jurisdictions in which Centaur Fund Services operates are early adopters of CRS. As a result, Centaur has launched new self-certification forms Individuals and Entities to facilitate CRS compliance and which are being completed by all new investors. To facilitate the transition to CRS, Centaur has also committed to reviewing all pre-existing account holders though 2016 in accordance with applicable regulations to establish their tax status for CRS compliance and reporting purposes. Finally, to ease reporting commitments, Centaur assists with documentation reviews and will report to boards on CRS alongside existing FATCA standards.
“Since FATCA in 2010, obligations on funds to exchange investor and financial data have increased significantly. CRS aims to bring this one step further as the industry facilitates the flow of information between tax authorities on a global scale.” says Tracy Tookey, Head of Risk and Compliance at Centaur.
She continues, “To this end, we are seeing due diligence and reporting requirements radically increased for financial institutions. At Centaur, we are guiding clients through this complex landscape by offering CRS compliance services, including investor due diligence, tax classification, monitoring and reporting.”
Karen Malone, founding partner of Centaur comments “The CRS model has been long anticipated in the industry. It is far more than an enhanced version of FATCA and brings along a whole new set of complexities for financial institutions. Centaur is at hand to enable clients to adapt to these new standards and fulfil their regulatory requirements.”
For the early adopter jurisdictions (there are approximately 50), the first CRS reports will be need to be submitted to the local tax reporting authorities in 2017 (31 May in the case of the Cayman Islands) for the reporting period ending 31 December 2016. Tax reporting authorities in those jurisdictions must then exchange the information, in line with the CRS, no later than September 2017. Other participating jurisdictions will report in 2018.