Like many other countries, Singapore’s government allows and encourages non-residents and businesses to open accounts and conduct business. These entities, however, are required to register for the Common Reporting Standard, or CRS. As a result, reports containing their account details are sent to their local tax administrators.
The CRS is made to remove tax evasions, and being under the jurisdiction of Singapore, all financial institutions must be registered for it. Therefore, the CRS is consequential for the financial institution as well as non-residents. In this article, the necessary information pertaining to it is adequately discussed.
What is CRS?
Common Reporting Standard (CRS) is a system advanced by the Organisation for Economic Co-operation and Development (OECD). This information exchange regime was first implemented in 2014, allowing participating countries to obtain information about their tax residents’ accounts.
To accomplish this, financial institutions in participating countries obtain the necessary information and forward it to the appropriate authority for further forwarding to fellow participating countries (countries where account holders are tax residents) who demand it. For example, in Singapore, the Inland Revenue Authority of Singapore (IRAS) obtains this information and shares it with countries where the account holder is a tax resident.
Assets owned directly or indirectly by foreign tax residents are reported to the IRAS through financial institutions. These Reporting Financial Institutions include custodial institutions, depository institutions, investment entities, and specified insurance companies. In order to obtain the necessary information, financial institutions restrict some of their policies, allowing access to them only to non-residents who complete the CRS self-compliance forms.
Here’s a more practical example of the above explanation. Suppose you have a foreign account in Singapore. In that case, you will be required to provide information about your account(s) and tax residency in order to access certain financial services.
What Common Reporting Standard (CRS) Aims to Accomplish?
The implementation of this reporting standard follows the emergence of FATCA (Foreign Account Tax Compliance Act), a roughly comparable reporting obligation invented by the US government. In FATCA, financial institutions file details of accounts held by US citizens for all US citizens living abroad and send them to their resident authorities.
The CRS was created for a similar purpose. It ensures that details of foreign tax residents’ taxable assets and accounts are easily and automatically shared with the relevant tax authorities of the participating countries in which they are tax residents. Tax evasion is largely eliminated by providing governments with a comprehensive view of their tax residents’ financial assets outside their own domain. In Singapore, one is heavily penalised for tax evasion.
What is CRS Self-Certification?
Financial institutions are required to obtain information on non-resident account holders and forward it to the IRAS. These institutions obtain this information by requiring account holders to obtain and complete a CRS self-certification form. Existing account holders are contacted and offered the form, while new account holders may be required to fill out the CRS self-certification form when their account is opened.
Existing non-resident clients who refuse to complete the CRS self-certification form have their policies limited. Financial institutions can also use the data they possess in their records to independently determine their client’s country of tax residency. This information, along with the required customer information, is forwarded to IRAS and shared with the country where you are considered a tax resident.
What Information Will You be Asked for on the CRS Form?
The CRS requires financial institutions to obtain the following information from foreign clients:
- Name
- Address
- Place of birth (for Individual and Controlling Persons)
- Date of birth (for Individual and Controlling Persons)
- Tax residence country
- Taxpayer identification number (s)
- Place of registration/incorporation (for Entities)
- Type of Entity (for Entities)
- Controlling Person Type for certain Entity Types (for Controlling Persons)
Some jurisdictions do not require certain information, such as birthplace and date of birth, but clients must present their taxpayer identification number. If the relevant Reportable Jurisdiction did not issue the number, the client must justify its absence appropriately.
Also, if the domestic law of the relevant Reportable Jurisdiction does not demand the gathering of the TIN issued by such Reportable Jurisdiction, or if the client is without a TIN temporarily, they must justify that absence.
The Information Provided to the IRAS by Financial Institutions
Essentially, information that allows clients’ local authorities to gain an understanding of their client’s financial status is shared with them via the IRAS. The following items are typically reported to clients’ local tax authorities:
- Tax Identification Number (TIN)
- Name
- Address (if applicable)
- Date of birth.
- Account number
- Account balance
- Interest
- Dividends
- Other earnings and gross profits
Is the Information Sent Kept Private from the General Public?
Your account information is kept private and will not be released to the public. Instead, these details are forwarded to the local tax authorities of the client’s country of tax residence, like Singapore’s IRAS. The country/countries to which your information is sent are expected to keep it confidential.
How Frequently Should the Information be Provided?
You do not need to periodically provide information about non-resident clients, including their tax residency and relevant data on their foreign accounts. However, if the residence status of account owners changes, the client’s self-certification document must be updated. Typically, the correction must be made within 30 days of the change.
Furthermore, clients must contact their financial institutions to correct such inconsistencies when there is an error in the information provided.
There are consequences for providing incorrect certification
Owners of foreign accounts must provide accurate information to financial institutions. According to the Singapore Income Tax Act, providing incorrect certification is a punishable offence. In terms of the act, anyone who makes a false or misleading statement in a self-certification is punishable by a fine not exceeding $10,000 or imprisonment for a term not exceeding two years, or sometimes both.
Conclusion
Given that Singapore is a CRS participating country, you will be required to complete the CRS self-certification document as a foreigner operating an account in the country. This is true even if your country of tax residence is not a participant of the standard. As such, foreigners are expected to provide this information to various financial institutions and even different units within certain institutions upon request. The information is obtained so relevant authorities can verify your compliance with tax obligations.
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