WHAT IS CRS?

Economic and financial globalization made it easier for taxpayers to set up and manage investments through financial institutions outside their country of residence, making tax evasion easier, with large sums of money to be held offshore, which can not be taxed in the taxpayer’s home country, resulting in high costs for both financial institutions and governments themselves.

In order to have a more rigorous control of all these transactions, and since the implementation of FATCA in 2010, we have witnessed an increase in the automatic exchange of information between the various financial institutions.

Thus, in 2013, the OECD proposed a new mechanism that would allow a large increase in reported requirements and financial reporting. The Common Reporting Standard (CRS) arises, therefore, from the need for OECD governments to be able to exchange financial data that their institutions hold in relation to potential suspicions of accounts / holders.

To make this mechanism more efficient, there was a need to standardize the information to be reported by financial institutions. Thus, the quality of the information and the ease of access to it by the interested parties is guaranteed.

In order to ensure that this mechanism is as comprehensive as possible, CRS is set to reach three dimensions:

• Financial information to be reported: different types of investments are taken into account (for example: interest, dividends, insurance, financial assets) as well as situations that lead to the belief that the taxpayer is trying to hide part of his capital so that do not be taxed;
• Account holders subject to be reported: in addition to individual entities, CRS intends to reach companies that can serve as a front for these entities, in order to prevent taxpayers from concealing part of their income;
• Financial institutions subject to be reported: in addition to the banks, the CRS covers a wide range of financial institutions that pass through brokers, insurance companies and collective investment vehicles;