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Diving deeper into the heart of international banking: Demystifying CRS

2/3/2024 8:00:00 AM
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Since its implementation, CRS has been a big question mark for many. Having an international bank account today means that you have to deal with CRS banking, but this doesn't have to be as intimidating as it sounds.

International business banking is ideal for those who want to have access to new currencies and investments. If you're thinking of international banking as your solution for the new year don't let CRS stop you. Mundo has prepared this CRS FAQ for those who need to understand this concept and how it can impact their expat banking activities.

CRS FAQ for an optimal international banking approach

Am I supposed to report all my money or assets held in my international bank account?

While all assets that you hold in your international bank accounts must be reported this doesn't mean that it has to be reported by you. The bank is in charge of reporting to your country of origin or the country where you have tax residency. This is why when opening an account in top international banks, and in any bank, you will be asked to point out the countries where you are taxable.

Does this include only banks?

No. Entities subject to CRS are financial institutions, in other words, any entity that handles deposits, custody, investments, or that holds financial assets on behalf of a third party. The CRS reaches all entities independently if they work with collective or individual portfolios and if they work with assets in any way (management, investments, or transactions).

Must the bank report all my expat banking activities?

No. Accounts are reported when they reach a certain threshold and depending on the account holder's tax residency as not all jurisdictions demand reporting. For example, in some cases, a country may not require such reports. There's also the case with territorial countries, which only tax assets generated domestically. In this case, the report happens but the person is not taxable for foreign income. A clear example of territorial taxation is Panama. 

If I have more than one nationality will the bank report to all of them?

Naturally, all top international banks, and actually almost all the banks in the world, work with CRS, however, this question has no simple answer. It's worth noting that under CRS banks report to the country of tax residency which may or may not be the same country where the account holder has citizenship.

Let's illustrate this with a hypothetical example. 

Jane has an Australian passport but lives in Panama and has legal tax residency here. She decides to open a company and bank account in the Cayman Islands. The income generated by this company will be taxable in Panama because that's where she lives, independently if she has an Australian passport. Moreover, in this case, she won’t be taxed because in Panama this is considered foreign income and hence is not taxed.

Nonetheless, if Jane decides to live in Australia again, as this country has residency-based taxation, she will have to pay taxes for the dividends of the Cayman Islands company.

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The matter is entirely different when the account holder has tax residency based on citizenship and not exclusively in the place he or she lives. We've recently explained the different types of tax residencies, their conditions, and examples in this article.

However, for American citizens, CRS does not apply as they have implemented FATCA, a regime for American citizens opening accounts abroad or operating with international business banking.

Can the bank share my information without my consent?

Absolutely yes. CRS stands for Common Reporting Standard, and it's based on automatic exchange of information. Thus, any bank, even top international banks, not only report your information without your consent but they are obliged to do it. In a way as the applicant opens an international bank account he or she is consenting to this mandatory exchange because they fill out the CRS forms. It's worth noting that the CRS is mandatory in most countries hence in most banks.

Are all the countries subscribed to CRS?

No, and surprisingly one of the few countries that is not subscribed is the US. It may be interesting to point out the irony in the fact that the US may be considered the only tax haven in our days. Looking at the bright side of things it becomes clear that The US is a great banking jurisdiction for non-US account holders.

Demystifying international banking and opening an international bank account 

Expert Banking, i.e., international banking or what was formerly known as offshore banking is an interesting tool for investors who want to go global. This CRS FAQ shows us that there's nothing to worry about when it comes to this standard. Account holders' only responsibility is to provide correct and honest information when they open the account. In other words, they need to be open when it comes to the country or countries where they are taxable. If this is done correctly and responsibly everything else is in the bank's hands as they will be doing the reporting. In a way, this helps keep the international business banking sector transparent and free of shady deals and tax evasion. All top international banks provide high-end services, and this includes a responsible approach to CRS and keeping the account compliant.

Disclaimer: this article presents general information about CRS, however, conditions and regulations may change and they should be considered in each case specifically and in all the countries involved. The fact that the bank will automatically report doesn't exempt the account holder from presenting tax returns in their tax residency country or countries. This article is only informative and doesn't replace a legal consultation. We strongly recommend asking for advice from certified professionals specialized in local and global taxation.

International business banking hand in hand with Mundo

We have contacts in the most relevant banking jurisdictions and are connected with top international banks worldwide. We are happy to introduce countries like Panama, Seychelles, the Cayman Islands, the Bahamas, and the US for safe international banking.

Our experts and consultants will be delighted to guide you through this journey until you have your international account 100% established and in full compliance. Type your message by clicking the button below!

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