Common Reporting Standards - How it Works for Expats Living and Working Abroad
Common Reporting Standards -
How it Works for Expats Living and Working Abroad
ProACT Sam highlights the changes in exchange of informatio and what Expats should consider about the way they report tax income and capital.
Exchange of financial information has been around since 2005 when any savings or investment income was required to be reported by the bank/investment fund to their local tax authorities.
From the start of 2016 a new level of exchange of information was introduced. Called the Common Reporting Standard (CRS) by 2018 102 countries (including every one of 28 EU countries) have committed to CRS exchange of information.
Cyprus and the UK were early adopters of CRS from January 2016. The USA are not party to CRS but have their own version of Common Reporting Standards exchange of information.
The aims of CRS are:
1. to crack down on offshore tax jurisdictions that facilitate tax evasion,
2. Increase tax transparency
3. Prevent overseas tax evasion
4. Collect more tax.
How it works
CRS starts with the financial institution that is paying earnings, interest, dividends, rental income, royalties, pensions, debt / interest, equity.
The financial institution (FI) could be a bank, investment company, property agent or professional.
Each FI must know their client including their ID or passport record, proof of address, and the tax number of the account holder and beneficiary.
The account holder may be different to the beneficiary, in which case the FI must know all parties - account holder and beneficiaries.
Under Common Reporting Standards the FI must report any payments to the tax authority in the country in which they are based.
This means that tax authority now has a record of the income, name ID, address, and Tax number of the account holder.
Then in September the following year, the tax authority exchanges that information with the account holder and beneficiaries tax authorities - that is their home tax residence.
Bank Stress Tested
Clearly the game is raised when the FI has a different tax residency to the account holder. The liability to report under Common Reporting Standards is behind many banks and savings institutions changing their own rules as to whether they will deal with expats living and working abroad, and with a different tax residency to that of the FI. This has forced many expats to change banks or investment accounts.
ProACT can offer a Free Review of investment and account holders.
Who will the Tax Man Look Out For?
Business and Contractors Working Abroad will be subjected to due diligence to classify their status and highlight turnover and balances held in accounts.
Individuals holding assets or receiving income across borders are now subject to additional scrutiny due to the exchange information.
This may be overseas property owners, or contractors working in one country, living in a second, and investing or receiving a pension in a third. All 3 tax authorities will share all the data
Free Review - the Impact on Common Reporting Standards
Your tax affairs may be correct at the moment. Or you may not be declaring worldwide gains and income. You may have a questionable, discreet tax planning approach that works because the tax authorities don't know what you are doing.
The new Common Reporting Standard is designed to help them find out.
ProACT Expat Experts offer a Free Review of how Common Reporting Standards could impact your Income, Business, Property and Investment.
Who Will This Review help:
1. Contractors Working Overseas
2. Families Owning Overseas Property
3. Businesses using Offshore Companies
4. Retired People with investments offshore
5. Overseas Investors in Business and Property