What is CRS? How does it relate to trusts?
CRS is a global regulatory framework aimed at attaining greater transparency across jurisdictions with a view to detect and deter money laundering, tax evasion and tax non-compliance. The framework generally operates on the basis of the multilateral disclosure of information on financial accounts held by individuals and organisations outside their jurisdiction of tax residence.
This is similar to the reporting regime introduced by the US Foreign Account Tax Compliance Act (FATCA). But unlike FATCA, whereby information need to be disclosed to competent authorities in the US, the disclosure of information under CRS will be made to all participating jurisdictions. As at August 2017, 102 jurisdictions have committed to CRS.
The trust industry is being impacted by the additional reporting requirements, which include accounts maintained or held by trusts. Institutions responsible for reporting on such accounts are required to look through passive entities to report on individuals that ultimately control these entities. This sends out a clear signal that trusts cannot be used to shield against reporting requirements.
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