A blog article summarizing the common reporting standard in Singapore and what it means for FATCA reporting.
What is FATCA Reporting?
The Foreign Account Tax Compliance Act (FATCA) is a United States federal law that requires all financial institutions to report information about their American customers to the Internal Revenue Service (IRS). The purpose of FATCA is to combat tax evasion by Americans who have offshore accounts.
Under FATCA, financial institutions must provide the IRS with information about their American customers, including account balances and account activity. Financial institutions that fail to comply with FATCA can be subject to steep penalties, including a 30% withholding tax on payments made to them by American taxpayers.
The Common Reporting Standard (CRS) is a global standard for the automatic exchange of financial information between governments. The CRS was developed by the Organisation for Economic Co-operation and Development (OECD) in response to calls from the G20 for enhanced tax transparency.
Singapore has committed to implementing the CRS, and will begin exchanging information with other jurisdictions in 2018. Under the CRS, financial institutions in Singapore will be required to report information about their foreign customers to the Inland Revenue Authority of Singapore (IRAS). This information will then be exchanged with other jurisdictions on a reciprocal basis.
The CRS will complement Singapore’s existing efforts to combat cross-border tax evasion, and will help ensure that taxpayers pay the correct amount of tax on their income and gains.
What is the Common Reporting Standard (CRS)?
The CRS is an international standard for the automatic exchange of financial information between tax authorities. The CRS requires financial institutions to collect and report information on the accounts of their customers who are citizens or residents of participating countries. This information is then exchanged between the tax authorities of those countries. The CRS is designed to help tax authorities identify potential cases of tax evasion and ensure that taxpayers pay the correct amount of tax on their income and assets.
In Singapore, the CRS came into effect on 1 January 2016. Financial institutions are required to collect and report information on account holders who are citizens or residents of CRS-affected jurisdictions. The Inland Revenue Authority of Singapore (IRAS) will exchange this information with the tax authorities of other CRS-affected jurisdictions on a reciprocal basis.
Under the CRS, each financial institution must identify its account holders who are resident for tax purposes in another jurisdiction (“Reportable Persons”). They must then report certain information about these Reportable Persons to IRAS. This includes information such as the account holder’s name, address, date of birth, country of residence for tax purposes, and account balance.
IRAS will then exchange this information with the relevant foreign tax authorities on a quarterly basis. The first exchange of information under the CRS had taken place in September 2018.
Who needs to report under CRS?
Generally, all Singaporean financial institutions are required to report information about their account holders to IRAS. This includes banks, insurance companies, investment funds, and stockbrokers.
However, there are some exceptions. For example, businesses that provide only occasional banking services, such as moneylenders and pawnshops, are not required to report under CRS. Similarly, religious organizations and charities are exempt from reporting.
What information is reported?
The information that is reported varies depending on the type of account involved. For example, bank accounts typically require the reporting of account holder name(s), address(es), date of birth, country(ies) of citizenship or residence, and account number(s). More detailed instructions on what information needs to be reported can be found on IRAS’ website.
Information that you need to provide in a CRS Report?
The CRS report must include the following information:
- The name, address, and country of residence of the Reporting Person;
- The jurisdiction(s) in which the Reporting Person is tax resident;
- The TIN or equivalent identifier issued by the jurisdiction(s) in which the Reporting Person is tax resident;
- The account number (or other unique identifier) assigned to the account by the Reporting FI
5. The account balance or value as of the end of the reporting period.
When do I file a CRS Report?
CRS returns (including nil returns) should be submitted to IRAS by 31 May of the year following the calendar year to which the return related.
How do I prepare a CRS Report?
To prepare a CRS Report, you will need to gather information about your financial accounts and activities for the year. This includes information such as account balances, interest and dividends paid, and any transactions made during the year. Once you have this information, you will need to complete a self-certification form which will be used to determine your CRS Reportable Jurisdictions. Finally, you will need to submit your CRS Report to the IRAS.
Conclusion
The CRS is a set of international guidelines for the exchange of financial information between different jurisdictions. FATCA reporting in Singapore requires that financial institutions report certain information about their clients to the IRAS. The CRS has been implemented in Singapore since 2017, and all financial institutions must comply with it.
FATCA reporting can be a complex and daunting task, but it is important to ensure that your financial institution is compliant with the CRS. If you are unsure about how to comply with the CRS, you should seek professional advice.