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I'm trying to understand how the automated exchange of tax information works between countries. I'm vaguely aware of the OECD's Common Reporting Standard "activating" this year and introducing some additional reporting responsibilities of customer's accounts for financial institutions, but I don't understand the details or know to what extent the automated exchange has been working already and what the CRS changes in terms of that.

What I'm mostly interested about is, what kinds of institutions are required to report information about their customers and to what extent? I understand that things like banks or brokerages have to share account information. But what about all the other various kinds of companies that in some way process payments/hold some funds of their customers?

For example, what about "online wallets" like Paypal/Neteller/Skrill? Do those share their customers' account information? What about all the sports betting sites, do they have to report? How about online marketplaces, where for example people sell/buy games, virtual items and so on among each other? The list could go on, but I think you understand my point - are only the "traditional" forms of financial insitutions required to report all this information, or do all these businesses that in some way process payments, participate in the automatic exchange of information?

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In general terms:

  1. The CRS has defined terms 'Reporting Financial Institution' and 'Reportable Account' which are really the key to your question. It gets reasonably complicated but if you treat it as a network of defined terms that refer to each other then you can pretty quickly get a feel for what is and is not covered. Generally speaking CRS is about what might be called 'traditional' financial institutions.
  2. It is open to any pair of revenue authorities to negotiate any automatic exchange of information (e.g. cash on deposit at a hardware store, bitcoins, etc), and they may or may not publicise this. Indeed CRS is just a standard, so it is open to specific pairs of revenue authorities to implement it differently or not at all.

For the CRS, look for the chapter entitled 'Common Reporting Standard' in the OECD publication 'Standard for Automatic Exchange of Financial Account Information in Tax Matters' available at http://www.oecd.org/ctp/exchange-of-tax-information/standard-for-automatic-exchange-of-financial-account-information-for-tax-matters-9789264216525-en.htm

In addition to CRS there is FATCA ('Foreign Account Tax Compliance Act'), which is a US law which applies in any country where banks wish to transact with American banks. FATCA does the same thing as CRS, but only for accounts held by US residents. The definitions are slightly different to CRS but broadly the same.

  • Were some forms of the autimatic exchange working between EU countries before this year? I was under an impression that there were, but when I'm reading about CRS, it sounds like it's going to be the first such thing. – user1633011 Apr 2 '17 at 14:20
  • CRS is a big deal because, among other things, it saves authorities and financial institutions from potentially having 200 different versions of 'is this account relevant to foreign jurisdiction X' (see, as an example, the differences between the rules in FATCA and CRS). But it's not the first instance of automatic exchange of information. – Patrick Conheady Apr 4 '17 at 11:11

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