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Hansuke Consulting Limited is registered in England and Wales number 10136213 with its registered office at: 71-75 Shelton Street, London WC2H 9JQ. Hansuke Consulting Limited is an accredited and regulated member firm of the Institute of Chartered Accountants in England and Wales (ICAEW).

 

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Alerts

China takes the next step

26 October 2016

On 14 October, China took the next stage towards fully implementing the Common Reporting Standard (“CRS”). The country has now published its implementation plan for its FIs that will be required to undertake due diligence and reporting in respect of relevant customers.

 

Background

 

The incentive for the Chinese authorities to implement CRS is the value of information that they expect to receive from overseas. China, like the US, taxes on the basis of citizenship as well as residence. It anticipates that there are substantial undeclared assets that are held by non-residents. The information that China receives in reciprocation for that it will provide under CRS will be invaluable to it in this regard.

 

How will this impact on FIs outside China

 

There is likely to be considerable concern amongst certain customers who have been living outside China for many years who may not realise that they may still have tax obligations in that country. In addition, many such customers may be completely unaware that information will be exchanged in 2018.

 

Accordingly, FIs will need to carefully consider their customer communication strategies to ensure that this is addressed. When developing the strategy, FIs will need to carefully balance the need to educate their customers, whilst not giving tax advice. In addition, they will also need to develop suitable escalation procedures in the event that any customer admits to committing tax evasion.

 

FIs may also wish to consider whether to notify individual customers of the actual details that have been reported so that customers have the information that they need to hand. What steps must China still overcome In order to be able to receive data under CRS, China must convince the global forum that it will apply suitable standards of data protection. These must be at least the equivalent of those that would apply in the EU to ensure that data could legally be exported. They will also need to develop an inspection and penalty regime covering the obligations of their own domestic FIs.

 

What should FIs do now? FIs will need to plan:

 

  • their customer communications strategy;

  • how they will handle customer queries without giving tax advice; and

  • training of front-line personnel

 

We would be pleased to have a complimentary discussion with you to discuss the potential impact of the Notification Regulations with you in more detail. To arrange a discussion or further information, please contact a member of our team.

Contact us

Ali Kazimi

Managing Director

alikazimi@hansuke.co.uk

Tel: +44 (0) 203 865 0626

Mohsin Talati

Senior Manager mohsintalati@hansuke.co.uk Tel: +44 (0) 203 865 0625

This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Hansuke Consulting Limited would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Hansuke Consulting Limited accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.