The Organisation of Economic Cooperation and Development (OECD) developed the Common Reporting Standard (CRS). CRS establishes the automatic exchange of tax information as the new global Standard (Standard for Automatic Exchange of Financial Account Information). The automatic exchange of information involves the systematic and periodic transmission of ‘bulk’ taxpayer information from the country which is the source of the payment to the taxpayer’s country of residence. CRS imposes obligations on financial institutions across the financial services market to review and collect information in order to identify an account holder’s country of residence and then to provide specified account information to the home country’s tax administration. Under the OECD Standard for Automatic Exchange of Financial Account Information, jurisdictions obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis.
For exchanges between EU Member States, the EU transposed the OECD CRS by virtue of the Council Directive 2014/107/EU of 9 December 2014 amending Council Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC as amended by Council Directive 2014/107/EU of 9 December 2014).
Other relationships for exchanging CRS information will typically be based either on a bilateral agreement, such as a double tax treaty or a tax information exchange agreement, or on a multilateral agreement.
Latvia country joined an early adopter group of over 55 jurisdictions. To provide the framework for automatic exchange of tax data, Latvia amended the Taxes and Charges Act (Par nodokļiem un nodevām), the Credit Institutions Act (Kredītiestāžu likums) and the Cabinet Regulations. Early-adopter jurisdictions will see the first exchanges of information by the end of July 2017, including EU Member States, Argentina, India, Korea, tax havens such as Barbados, Gibraltar, Cayman Islands, Isle of Man, Jersey, Guernsey, and others. Other jurisdictions will start exchanging information in 2018.
Starting from 1 January 2016, financial institutions of the Republic of Latvia, including Baltic International Bank, are required to identify the residency of all their reportable customers (residence for tax purposes, taxpayer identification number). Starting from 2017, the financial institutions will be required to annually provide the financial account information to the National Revenue Authority [Valsts ieņēmumu dienests] of the Republic of Latvia. The due diligence requirements will not affect daily customer service. To satisfy the requirements, Bank has developed and implemented a new questionnaire. When filling out their questionnaires, the customers will be obligated to provide the required information to be further submitted by Bank to the National Revenue Authority. Bank will continue to protect the confidentiality of customers’ personal data and financial transactions while complying with stringent law, rules and regulations.