On 21 July 2014, the Organisation for Economic Co-operation and Development (OECD) published the Standard for Automatic Exchange of Information in Tax Matters (the Standard).
The Standard consists of the Model Competent Authority Agreement, intended as a template for intergovernmental agreements, and the Common Reporting Standard
(CRS) that contains the reporting and due diligence standard that underpins the automatic exchange of information. There are also extensive commentaries and guidance on technical solutions for information exchange as well as a number of appendices.
The Standard has no direct legal force but it is expected that jurisdictions will follow it closely in adopting local rules and regulations, with many countries already agreeing to early adoption in 2016. There is, however, significant scope for variations to be incorporated as part of that implementation process. The CRS represents an additional global compliance burden for financial institutions (FIs) and increases the risks and costs of servicing globally-mobile customers and non-individual customers in general.
One positive note for FIs is that the OECD has modelled the CRS on the intergovernmental approach to the Foreign Tax Account Compliance Act (FATCA), which means that in part it should be possible to leverage existing and planned FATCA processes and systems. It should be noted, however, that the data required under the CRS is different, and the volumes of customers and clients affected are likely to be significantly greater.
For our full alert which summarises the background to the release of the standard, the process for global implementation and key issues for effected FIs, please click the download link below.