Now You Know Automatic Exchange of Information

Welcome to series of Tax educational posts -->Now You Know Automatic Exchange of Information 

Short name AEOI

As usual, this 5 minutes posts explain WHAT, WHY,  and HOW.

What is AEOI

Under the Foreign Account tax Compliance Act's (FATCA), and to counter tax evasion, the AEOI drew up common rules for reporting clients assets and income. These information will be report back to client's home country authorities

  • Scope. Request Financial Institutions (FI)  report new and existing account holders, whether local or foreign owned
  • Reporting Obligation. FI to report information on clients' (i.e. tax residence, asset, income and trade flow) to respective tax authorities during the fiscal year.

 

The Organization for Economic Co-operation and Development (OECD) has proposed a framework, which includes

  • Competent Authority Agreement (CAA), which defines the principles of intergovernmental agreements
  • Common Reporting Standards (CRS), which defines reporting obligations, due diligence and reporting exemptions.

 

Now You Know Automatic Exchange of Information

Overview of CRS

  1. Objective - Identify residents person trying to avoid tax obligations in Malaysia by holding assets in structures and products located in oversea countries.
  2. Oversea Country Tax Authorities - Under AEOI, Report Malaysian taxpayer account holders and controlling person (ultimate beneficiary) account by schedule date, example , every year end
  3. Malaysia Tax Authority (HASIL) - Exchange and report non residence account holder (including the controlling person / ultimate beneficiary) to corresponding tax authorities, under AEOI
  4. Timelines - Beginning Sep 2017
    • 57 countries (primarily EU countries + India & Korea) will commemce AEOI
  5. Timelines - Beginning 2018
    1. 37 countries (primarily Asia countries (i.e. Malaysia, China, Australia, Indonesia, Japan, etc) EU and Norh & South America, and Africa Countries) will commence AEOI.
    2. In Malaysia, starting from Jul 2017, Malaysia FI commence facts gathering under AEOI, especially, 
      • High value existing accounts;
      • New account open from 1 Jan 2017

 

Now You Know Automatic Exchange of Information

Preparation & What Next?

  • Preparation - Source of funds for the financial assets overseas?
    • Match assets with its funding records
    • Fund from 3rd party / Gifts
  • Did the source original from Malaysia
    • Income source, and comparison with Income tax return
  • Request for preparation of capitak statement
  • Readiness of supporting documents
    • Bank statement
    • S&P agreement
    • Loan Agreement
    • Assets Transfer Documents
    • Other documents related to oversea assets

 

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