The Common Reporting Standard (CRS) was developed by the Organization for Economic Co-Operation and Development (OECD).
The CRS requires Financial Institutions to report financial account information of foreign tax residents to the local Tax Authority. Such information is then automatically exchanged annually between jurisdictions where there is a treaty and a basis for such exchange (or retained by the local Tax Authority in the absence of a legal basis for exchange).
Mandatory reporting requirements were introduced to identify and counter offshore structures and arrangements that are designed to circumvent financial account reporting under the CRS.
In South Africa updated CRS regulations were published introducing mandatory disclosure rules on 9 October 2020.
Although the definitional portions of the rules are effective from 1 June 2021, an intermediary’s obligation to disclose a CRS Avoidance Arrangement or Opaque Offshore Structures to the SARS will come into effect on 1 March 2023.
Who needs to report?
- Depository Institutions such as banks, savings/loan institutions, credit unions etc. that accept deposits in the course of a banking or similar business.
- Custodial Institutions, custodian banks, brokers, depositories etc. with ≥ 20% of gross income from holding Financial Assets for others.
- Investment Entities, funds, portfolio managers, investment trusts etc. with holding investments as a primary income source on behalf of customers and receiving income primarily form managing financial assets.
- Specified Insurance Companies, life insurance companies or insurance company making payments on a Cash Value Insurance/Annuity Contracts.
On the SARS website you can see how the CRS was put to work with explanations to structures, detailed processes, and links to document. You can find all this here.
You can also read the latest SARS consultation documents introducing basic structures and concepts below:
- CRS avoidance arrangements and opaque offshore structure – Read here
- Mandatory disclosure rules questions and answers – Read here
- Mandatory disclosure rules – Stakeholder consultation – Read here
- Consultation document, preventing abuse of residence by investment schemes – Read here
- Model mandatory disclosure rules for CRS avoidance arrangements and opaque offshore structures. – Read here