Hong Kong Underpins its Commitment to Improve CRS Tax Transparency - Dion Global ...
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Hong Kong Underpins its
Commitment to Improve CRS
Tax Transparency
CRS Due Diligence and
Report ing Obligat ions for
2020 & Beyond?
Interested in Understanding Dion?s
Approach to Support (Mandatory
Provident Fund) MPF & Occupational
Retirement Schemes Ordinance (ORSO)
and Credit Unions to Meet their CRS
Due Diligence and Reporting
Obligations for 2020, and Beyond?
Contents 1. Abstract 2. Introduction 3. Requirements established in 2019 and beyond by ?2020-covered institutions?? 4. List of reportable jurisdictions 5. How Dion?s TRAC Solution can help you to be CRS compliant? 5.1. TRAC End-to-End Solution 5.2. TRAC Reporting Only Solution 5.3. TRAC Reporting Services based on AWS Cloud Platform 6. Take-aways
1. Abst ract
The Inland Revenue Department of Hong Kong (IDR) gazetted Inland Revenue
(Amendment) (No. 2) Ordinance 2019 (Amendment Ordinance). Under the Amendment
Ordinance Mandatory Provident Fund Schemes, Occupational Retirement Schemes and
Credit Unions are mandated to establish CRS due diligence procedures by not later than 31
December 2019 to identify offshore account holder tax resident in a CRS reportable
jurisdiction, with the first reporting deadline of 31 May 2021.
The timeline puts a lot of pressure on such financial service providers during the year 2019
to establish relevant procedures to meet the 31 December 2019. The paper provides a
high-level overview about the key tasks which needs to achieve and illustrates how Dion?s
TRAC (Tax Reporting and Compliance) Solution can help you to ensure CRS compliant
procedures by 31 December 2019.
2. In t r odu ct ion
Globalisation of the financial sector now
On 01 March 2019 The Inland Revenue
makes it much easier for individuals and
Department of Hong Kong announced that
entities to hold money and assets outside of
the Inland Revenue (Amendment) (No. 2)
their jurisdiction of tax residence. While the
Ordinance 2019 (Amendment Ordinance) was
great majority comply with their tax
gazetted. This follows the passage of the
obligations there are some who will use the
Inland Revenue (Amendment) (No. 7) Bill 2018
availability of offshore financial structures
that passed the Legislative Council on 20
to evade tax. CRS is about improving
February 2019.
transparency in the fight against tax evasion
and in so doing protecting the integrity of The Amendment Ordinance classifies:
the tax systems of the participating - Mandatory Provident Fund Schemes
jurisdictions.
- Occupational Retirement Schemes
Hong Kong as a responsible member of
- Pooling Agreements
the international community and a leading
financial center has implemented the CRS - Approved Pooled Investment Funds
standards and commenced the first - Credit Unions
information exchanges based on the as 2020-covered Institutions, which are
standards by 2018. required to establish CRS due diligence
procedures by 31 December 2019 and to
provide a first CRS fiscal report by not later
than 31 May 2021.2019 2020 2021 2022
Establish CRS due diligence procedures
for new
individual & legal entity accounts
Establish CRS due procedures
for pre-existing
individual & legal entity accounts
31.12.2019
CRS readiness
Due diligence on Due diligence on Due diligence on
new new new
individual and legal entity accounts individual and legal entity accounts individual and legal entity accounts
Execute due diligence on Enhanced due diligence on certain Enhanced due diligence on certain
pre-existing Pre-existing Pre-existing
high-value individual accounts high-value accounts high-value accounts
Prepare
31.05.2021
Establish CRS Reporting Procedures CRS
First reporting
Reporting
Execute due diligence on pre-existing
lower-value individual accounts
Due diligence on
pre-existing legal entity accounts exceeding
the threshold of USD 250K on 31 Dec 19
Due diligence on Pre-existing legal entity Due diligence on Pre-existing legal entity
accounts exceeding the threshold accounts exceeding the threshold of
of USD 250K on 31 Dec. 2020 USD 250K on 31 Dec. 2020
Prepare
CRS 31.05.2022
Reporting First full reporting4. List of
Report able
Jurisdict ions
With the Amendment Ordinance the number of reportable jurisdictions is
increased from 75 for reporting year 2018 and 2019 t o 126 report able
jurisdict ions in 2021 (for reporting year 2020).
2020-covered Institutions are required to report tax resident in the above listed
jurisdictions:
Albania, Andorra, Anguilla, Antigua & Barbuda, Argentina, Armenia, Aruba,
Australia, Austria, Azerbaijan, Bahamas, Bahrain, Belgium, Bermuda, Brazil, British
Virgin Islands, Brunei Darussalam, Bulgaria, Burkina Faso, Cameroon, Canada,
Cayman Islands, Chile, China, Colombia, Cook Islands, Costa Rica, Croatia, Curacao,
Cyprus, Czech Republic, Denmark, Dominica, Dominican Republic, Estonia, El
Salvador, Faroes, Finland, France, Gabonese Republic, Germany, Georgia, Ghana,
Gibraltar, Greenland, Grenada, Guatemala, Guernsey, Hellenic Republic (Greece),
Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Jamaica, Japan,
Jersey, Kazakhstan, Kenya, Korea, Kuwait, Latvia, Lebanon, Liberia, Liechtenstein,
Lithuania, Luxembourg, Macao, Macedonia, Malaysia, Maldives, Malta, Marshall
Islands, Mauritius, Mexico, Moldova, Monaco, Montserrat, Morocco, Nauru,
Netherlands, New Zealand, Norway, Nigeria, Niue, Pakistan, Panama, Paraguay,
Peru, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saint Kitts
and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Saudi
Arabia, Senegal, Seychelles, Singapore, Sint Maarten, Slovak Republic, Slovenia,
South Africa, Spain, Sweden, Switzerland, Trinidad and Tobago, Tunisia, Turkey,
Turks and Caicos Islands, Uganda, Ukraine, United Arab Emirates, United Kingdom,
Uruguay, Vanuatu.RFI Source Systems TRAC-CRS Backend
Client Account Financial
Data Upload Customers
Data Data
Account & Financial
Informa on
TRAC Storage Report Storage
Automated
XML
Data Ingestion Temp
File Temp
Report Data
Collec on
TRAC-CRS Front End
TRAC-CRS Front End
Remediate
Report Scheme Reporting
Validation Cases Cases
Remediate Fail
Ingestion
Data Validation
Cases Cases Display Fiscal
Report Data
Report Data
Collection Fiscal Report
Storage Modify Fiscal
Report Data
Pass
Display Static &
Account Data Generate & Transmit
Client Account, No fica on Fiscal Report
Financial Data Storage
Modify Static & (Classified by Source)
Account Data
CRS & FATCA
Repor ng XMLThe system will be integrated into your system and the relevant data will be ingested into TRAC based on an XML Ingestion API. The CRS due diligence procedures evaluate based on indicia the tax residency status of each account holder and finally classifies them as CRS reportable to each reportable jurisdiction identified. For customers which could not classified unequivocally, e.g. documentary evidence was not provided, a case will be generated and assigned to either a group of employers or an individual employer to re mediate the case. TRAC comes with an immutable Audit trail functionality. The audit trail logs each action taken to classify an account in accordance to the CRS guidelines. TRAC supports the generation and transmission of CRS fiscal reports to the Internal Revenue Department. The Fiscal Report generation follows a sophisticated lifecycle based on 4-eyes-principles. The details of the generated fiscal report can be retrieved, so that additional checks are possible prior to the transmission. 5.2. TRAC Report ing Only Solut ion TRAC operated as reporting only solution, supports your CRS and FATCA fiscal reporting obligations. This operating model needs to be implemented in the IT Landscape. To perform the fiscal reporting it is required to ingest CRS pre-classified data. The report generation and transmission follow the same procedures as in the End-to-End Solution. 5.3. TRAC Report ing Services based on AW S Cloud Plat form For the reporting session 2019 and onwards, Dion Global Solution offers CRS & FATCA fiscal reporting services based on AWS Cloud Platform Services. Instead integrating TRAC into your IT Landscape, the reporting information will be provided based on a pre-formatted Excel file. The file will be ingested automatically into TRAC and will executed in the identical way as the XML import. The solution is a cost efficient and sustainable alternative for institutions, with only a limited number of reportable accounts.
6. Take-aways It is Dion?s understanding that there is a tide timeline to implement CRS due diligence and reporting procedures. Small and midsize institutions might face issues triggered by the small number of available resources to monitor the constant changes affecting the CRS due diligence and reporting schemes. Dion Global Solution with his team of CRS experts monitors the changes on legal requirements and provide on-time release updates to ensure that our Clients are always CRS compliant.
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