CRS

What it means

CRS, the Common Reporting Standard, is the OECD standard for automatic exchange of financial account information between tax authorities. More than a hundred countries have joined, and in the EU it is implemented through the directive on administrative cooperation. The aim is that money in a foreign account cannot be hidden from one’s home tax office.

Banks, investment firms, some insurers and funds establish their clients’ tax residence and once a year report the balance, interest, dividends and sale proceeds on non-residents’ accounts to their own tax authority. That authority passes the data on to the owner’s country of residence.

CRS is the European and global counterpart of the US FATCA. For company accounts it is not only the company’s residence that matters: for so-called passive entities, such as holdings with no activity of their own, the bank also reports their controlling persons, meaning the ultimate beneficial owners.

How it works in practice

When a company opens an account, the bank asks for a tax residence self-certification, the company’s CRS and FATCA classification and details of its controlling persons. The form is part of KYC and the bank may update it periodically. For holdings and companies with mainly passive income we recommend getting advice on classification, because an error leads to incorrect reporting.

For individuals a foreign account is not a problem in itself, but interest, dividends or investment income on it must be declared in the Slovak tax return. The Slovak Financial Administration receives CRS data and compares it with returns.

For crypto-assets a similar exchange is being introduced through DAC8, and for platforms selling goods and services through DAC7. Taken together, the state already sees almost all foreign financial income, and undeclared income comes to light sooner or later.

What to watch out for

The most common mistake is an untrue or incomplete residence declaration, such as a person living in Slovakia giving a foreign bank an address elsewhere. Giving a bank false information is a breach in itself, and any mismatch between the real residence and the report shows up quickly in an audit.

People often assume small amounts are not reported. For individuals’ accounts CRS generally has no minimum threshold, and even a small balance is reported. Undeclared income can then lead to back taxes with penalties and interest for several years.