https://d5nxst8fruw4z.cloudfront.net/atrk.gif?account=pUuXo1IWhd10Ug
logo
Oman to introduce Common Reporting Standards
June 12, 2019 | 4:36 PM
by Ashok Hariharan & Umair Hameed
Ashok Hariharan. - Supplied picture
 
Sharelines

Muscat: Oman, in line with its commitment to align itself with international best practices in tackling cross-border tax evasion and meeting the standards set by the European Union (EU) and the Organisation for Economic Co-operation and Development (OECD), is currently in the process of issuing regulations for automatic exchange of information (AEOI) through Common Reporting Standard (CRS). The Sultanate is also taking steps to ratify the relevant instruments under the Base Erosion and Profit Shifting (BEPS) framework.

In order to meet the deadline for the Automatic Exchange of Information (AEOI) global standard by 2020, banks and other financial institutions have already been mandated by the Central Bank of Oman to ensure collection of CRS related information for new account holders effective from July 1, 2019. It is expected that the existing account holders will also be required to provide the necessary information on tax residency in the later part of 2019.

In April 2019, an Induction Programme for Oman to participate in and benefit from international developments in tax transparency and exchange of information was launched with a visit from the Secretariat of the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) . In addition, the Central Bank and the tax authorities are holding a workshop on June 12, 2019 to educate the banks and financial institutions on CRS and its implementation.

What is CRS?



The CRS, developed by the OECD, is effectively a global version of the Foreign Account Tax Compliance Act (FATCA), introduced by the US Congress in 2010 to prevent offshore tax abuse by residents of such countries. CRS requires financial institutions to report information on accounts held by tax residents of reportable jurisdictions and certain entities controlled by such tax residents.

Impact of CRS?



As per a recent OECD press release, more than 90 jurisdictions participated in the CRS initiative, and have exchanged information on 47 million offshore accounts, with a total value of approximately EUR 4.9 trillion. The voluntary disclosure of offshore accounts, financial assets, and income in the run-up to full implementation of the AEOI initiative resulted in more than EUR 95 billion in additional revenue (tax, interest and penalties) for OECD and G20 countries over the 2009-2019 period (an increase of EUR 2 billion since the last reporting by OECD in November 2018).

Comparison with FATCA

Notable differences between CRS and FATCA include:

CRS do not have a minimum exemption threshold for pre-existing individual accounts for due diligence requirements—unlike FACTA.

Due diligence in CRS is not limited to US tax residence—it covers all residents of reportable jurisdictions.

Different than FATCA, under CRS, new accounts can only be opened once a valid self-certification has been received from the account holder.

Under FATCA, a bank in Oman is registered with US authorities for compliance and reporting. Utilising CRS, reporting is directed to Oman authorities who then share the information with relevant foreign tax authorities.

In case of non-compliance with FATCA, there was a withholding tax on the gross proceeds of the transaction, whereas this isn’t the case with CRS

Implications of CRS

The underlying base for CRS reporting is ‘tax residency’, the definition of which is far more complex than that applied under FATCA. In certain cases, individuals or entities can potentially have more than one tax residency because of differing rules in jurisdictions; status can also change over time. While the account holder is responsible for transmitting such details, reporting entities will need to plan their procedural checks and staff training to ensure accurate collection of information.

Concluding remarks

Reporting entities in Oman who are likely to be covered by CRS should be able to leverage FATCA implementation. However, if FATCA implementation was only tactical or restricted, a gap analysis may be required in order to develop a modified implementation roadmap for CRS. Reporting entities’ IT systems and due diligence procedures should immediately initiate an impact assessment, develop the governance framework for customer on-boarding and training of on-ground resources to aid the implementation of CRS norms.

* Ashok Hariharan (Partner and Head of Tax), Umair Hameed (Partner, Advisory), KPMG Lower Gulf, Muscat, Oman

STAY UPDATED
Subscribe to our newsletter and be the first to know all the latest news