In recent years, governments and financial institutions have become much more aware of the large amounts of undisclosed wealth held in offshore bank accounts. Concerned that they are missing out on large amounts of unpaid tax they are seeking to remedy this.
In response to a request from the G20 the OECD has developed the Common Reporting Standard (CRS). This provides a framework for jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions.
In an attempt to crackdown on tax evasion via offshore accounts, CRS aims to prevent anybody evading tax by failing to make to make the proper declarations in their country of tax residence. The transparency created by the CRS is meant to be yet another deterrent to taxpayers’ use of offshore accounts to avoid domestic tax liabilities.
A UK expat working and living abroad will often choose to bank in a crown dependent country such as the Isle of Man, or Guernsey for example. Under CRS the banks in these offshore jurisdictions will have to report information on the expat’s bank account to their local tax authority and they must pass it to HM Revenue and Customs if the expat subsequently returns to the UK.
Financial information to be reported includes the owners account balance, sales proceeds from financial assets, interest and dividends.
Over 90 jurisdictions have committed to implement the standard. Those countries to be the first at exchanging information from 2017 include the UK, Jersey, Guernsey, the Isle of Man, the Cayman Islands and the British Virgin Islands.
Expats should be aware that, the clampdown and exchange of information concept is aimed at combatting tax evasion. Lawful tax mitigation is not an issue. However, as ever it is always best to seek professional advice.