The Organization for Economic Cooperation and Development (OECD) works to support policies that will improve both the social and economic wellbeing of people around the world. 34 democracies with market economies participate in the OECD, along with 70 other non-state actors, in order to promote economic development and sustainable economic growth. The OECD sets standards for a range of global financial issues, including financial reporting.
In July 2014, the OECD delivered the Common Reporting Standard (CRS), developed in response to a G20 request. Formally known as the Standard for Automatic Exchange of Financial Account Information, the CRS outlines some general reporting requirements Understanding the common reporting standards can seem overwhelming. Luckily, we’re here to break down the basics. Here is what every company should know about the OECD Common Reporting Standard.
What is the purpose of the OECD Common Reporting Standard? Developed following the implementation agreements of the USA Foreign Account Tax Compliance Act (FATCA), the OECD Common Reporting Standard is an agreement between 47 countries to share information on their residents’ assets and income. This information is distributed between these countries routinely in accordance with the standards set in the agreement. The goal is to prevent tax evasion. Previously, countries agreed to share information on their residents’ assets and income upon request, but this made it much harder to detect instances of tax evasion. Because information is distributed automatically with the Common Reporting Standard, it is much harder for residents to evade tax obligation in one country even if their assets are in a different country.
Who has endorsed the Common Reporting Standard? The Common Reporting Standard has been endorsed by all 34 of the OECD countries, as well as 13 additional countries. These 13 additional countries include Argentina, China, Brazil, Colombia, India, Costa Rica, Indonesia, Lithuania, Latvia, Malaysia, Singapore, Saudi Arabia, and South Africa.
What information is exchanged as part of the Common Reporting Standard? Information pertaining to residents of the 47 endorsing countries will be shared as part of the Common Reporting Standard. This information includes the personal information of the resident (name, address, TIN, and date and place of birth), the account numbers of bank accounts and the information of the financial institution at which the accounts are held, and the account balance or value of each of these accounts at the end of the calendar year. However, it should be noted that each state is allowed to negotiate which information the other countries share with it about its citizens.
When does the Common Reporting Standard go into effect? It should be noted that the start date of information sharing varies between countries. Roughly half of the 47 participating countries will begin reporting in 2017, while the other half will begin reporting in 2018.
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