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CRS Implementation Challenge for Financial Institutions


UBS AG, the Switzerland’s largest bank was accused by French prosecutors the tax fraud. French prosecutors said UBS sent Swiss bankers to golf tournaments, classical music concerts and hunting parties to solicit new clients illegally and advised them to park their money in Switzerland and offered them methods to shield activities from the French taxman. The court sentenced UBS guilty of illegally soliciting clients and laundering the proceeds of tax evasion on the Feb 20, 2019 and imposed a fine of 4.5 billion euros the highest penalties in similar cases in French history. 

After the global financial crisis of 2007- 2008, national authorities began to crackdown on tax evasion and suspicious activity by

financial institutions.  The Common Claims Guidelines (CRS), known as the Global Edition of the Fatty Terms, and the Global Tax Recovery Order, everyone extremely pay attention and it have made the rich people stunned.

what is CRS?

The Common Reporting Standard (CRS) is an information standard for the Automatic Exchange Of Information (AEOI) regarding bank accounts on a global level, between tax authorities, which the Organization for Economic Co-operation and Development (OECD) developed in 2014.  The main purpose is to establish an international financial account information exchange mechanism and a reporting mechanism for information exchange with the account holder's tax residence country.  At present, the tax residents of 101 CRS participating countries, as long as they hold overseas financial accounts outside the tax residence, will follow the CRS standard and submit the account information to the local competent authority.  Providing information to the competent authorities of tax residents, the transparency of overseas assets is an irresistible world trend.

Why needed CRS?  Due to different tax systems in different countries, lack of information transparency, and many hidden tax havens, many wealthy people moved their assets overseas to avoid tax.  The main spirit of CRS is that governments can exchange information to make global financial accounts transparent, to fight the situation that use overseas accounts for tax evasion and unreasonable tax avoidance, and hidden the overseas income in duty-free paradise.

CRS emphasizes only exchange "financial account" information, that is, only financial accounts, non-financial account information will not be exchanged.  For example, financial account deposits, securities brokerage accounts, wealth management commodities, funds, private equity funds, trusts, and insurance with cash value are information that needs to be investigated and exchanged.

The object is determined by "tax resident", not by a nationality resident.  Therefore, some people will immigrate and obtain tax-free or low-tax nationality.  The CRS requires financial institutions to request the tax residency of their clients and provide information to their local tax authority about any accounts held by tax residents of other countries, rather than individuals to declare.

The new era of global taxation is coming.  In the future, it is impossible to achieve tax reduction, tax avoidance and even concealment of assets through offshore finance.  It is definitely bad news for t corrupt official and wealthy people who evade taxes.  Honesty reported is the best and only policy.

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