CRS: how the automatic exchange of tax information works

The international law firm Antwort Law has been helping entrepreneurs and individuals find reliable and effective solutions in legal, tax and banking matters for more than 8 years. We understand how important it is today to conduct business or manage capital transparently, while protecting your interests.

One of the topical topics that we are increasingly being contacted about is the automatic exchange of tax information (CRS). This standard raises many questions and even concerns: who transfers data? How does this affect financial privacy? Which countries participate in the exchange and which do not? We know that each client is unique, and we are ready to analyze CRS to the smallest detail to make this complex mechanism understandable and safe for you.

CRS (Common Reporting Standard) is an international standard for the automatic exchange of tax information, developed by the Organization for Economic Cooperation and Development (OECD). Its goal is to ensure transparency in tax matters between countries and combat tax evasion. This mechanism has changed the approach to holding funds and managing assets abroad, making the process more transparent.

How does CRS work?

CRS requires financial institutions, such as banks, investment companies and insurance companies, to collect and transmit information about their clients' accounts to tax authorities. These authorities exchange data with tax authorities in other CRS member countries. The process involves several steps:

1. Data collection: financial institutions identify the client's tax residency and collect data about their account.
2. Data transmission: information is transmitted to local tax authorities.
3. International exchange: national authorities send data to tax authorities in countries where the resident is considered a taxpayer.

What data is collected?

Financial institutions are required to provide:

• Name, address, date and place of birth of the client
• Taxpayer Identification Number (TIN)
• Account balances and their movements
• Data on interest income, dividends and proceeds from the sale of assets.

Myths about CRS

Myth: CRS covers all countries in the world

Reality: CRS does not cover the whole world, today more than 100 countries participate in CRS, including:

• EU: Germany, France, Italy, Spain and others
• Asia: Singapore, Hong Kong, India
• Oceania: Australia, New Zealand
• Middle East: UAE (from 2024).

Some countries remain outside the CRS or participate partially:

• USA: uses FATCA and exchanges information only within the framework of bilateral agreements
• Maldives, Kuwait: limited participation or no full exchange.

For example, the USA applies its own FATCA standard.

Myth: CRS only applies to banks

Reality: CRS applies not only to banks, but also to investment companies, insurance companies and certain trusts and funds. However, payment systems generally do not participate in CRS, although they can provide information upon request.

Myth: Information is transferred without verification

Reality: All data undergoes strict KYC (know your customer) and AML (anti-money laundering) checks to avoid errors and breaches of confidentiality.

Who must submit data?

Must participate in the exchange:

• Banks
• Mutual funds
• Insurance companies
• Trust companies and funds under certain conditions

Must not participate:

• Payment systems (e.g. PayPal, Stripe).
• Cryptocurrency exchanges (CRS does not yet cover cryptocurrencies directly).
• Companies that work exclusively with fiat currencies within a single country.

Practical examples

Company with international clients:

The company does business in several countries using international bank accounts. CRS may require banks to provide tax authorities with data on the movement of funds, making transparency of financial transactions an important condition.

Individual with foreign investments:

A private investor with a bank account in another country should consider that CRS obliges the bank to transfer information to the tax authorities of his country of residence.

How to prepare for CRS?

1. Tax residency analysis: identify the countries where you are required to declare income
2. Data transparency: make sure that all sources of income are declared
3. Strategic planning: optimize your tax burden taking into account international agreements on the avoidance of double taxation.

Antwort Law provides the following services within the framework of CRS:

• Tax residency analysis and liability advice
• Support for KYC/AML procedures in banks and investment structures
• Development of international corporate structures that minimize the tax burden
• Assistance in opening accounts in countries where CRS is applied or not, taking into account your goals.

CRS is a powerful tool that changes the approach to asset management and business. However, its application requires a professional approach to avoid risks and optimize taxes. Antwort Law is ready to become your reliable partner to ensure the clarity and efficiency of your international operations.

Lidia Ivanova

International lawyer
Antwort Law