July 2017 - Common Reporting Standards – AEOI Standard/CRS in China
The OECD common reporting standard (CRS) has been applied in China as of 1 July, 2017. The final rules (“Due Diligence Procedures on Financial Account Information in Tax Matters for Non-residents”) were issued by the State Administration of Taxation (SAT), the Ministry of Finance (MOF) and financial regulatory bodies on 19 May, 2017 as Announcement (2017) No 14 (hereinafter referred to as the “Announcement 14”). The Announcement addresses financial institution (FI) reporting, what is to be reported, the so-called reportable financial accounts and due diligence procedures to be carried out by the FIs.
In 2014, the OECD addressed the concern that taxpayers were concealing reportable income in offshore assets and accounts in order to evade taxes in their home jurisdiction, being the country in which the taxpayer is a resident, by releasing a global standard for exchange of information: Automatic Exchange of Financial Information in Tax Matters (AEOI). As of today, more than 100 countries, including China, have signed off to implement AEOI, which includes the “Multi-lateral Competent Authority Agreement on Automatic Exchange of Financial Information in Tax Matters” containing the detailed rules on the exchange of information, and the Common Reporting Standard (CRS), which sets out the reporting and due diligence rules to be imposed on the financial institutions.
On 14 October 2016, the SAT published a draft version of the CRS rules for public consultation. The final rules implementing CRS in China were issued in Announcement 14.
Announcement 14 requires FIs to undertake due diligence procedures to identify specified financial accounts held by non-residents and report specific information on the accounts to the SAT. The SAT will then exchange the information with the tax authorities of jurisdictions in which the account holders are residents.
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