To align with international standards for tax transparency and deter taxpayers from engaging in international tax evasion, Taiwan began implementing the OECD Common Reporting Standard (CRS) in 2019. Under CRS, also known as Taiwanese FATCA, Taiwanese financial institutions have been required to conduct CRS reporting since 2020 and the Ministry of Finance’s (MoF) National Taxation Bureau (NTB) have conducted annual audits of these institutions since 2022.

CRS Implementation in Taiwan

Taiwan faced numerous challenges in implementing CRS. The primary challenges today include accurately identifying and reporting the financial accounts of non-resident customers and, for MoF and NTB, ensuring that financial institutions comply with CRS regulations. To address these challenges, Taiwanese financial institutions need to establish effective internal control procedures to ensure the accuracy and completeness of information. Additionally, financial institutions must regularly update and verify customer data to meet CRS requirements.

CRS Implementation in Hong Kong

Similar to Taiwan, Hong Kong has also implemented CRS (2016), requiring financial institutions to report reportable accounts of non-residents to the Hong Kong Inland Revenue Department (IDR). Hong Kong financial institutions must conduct due diligence in accordance with CRS standards to ensure that all relevant account information is correctly reported to the tax authorities. The Hong Kong tax authority regularly performs audits and reviews to verify that financial institutions comply with the CRS regulations.

Common Issues and Challenges in Taiwan and Hong Kong

1. Internal Control Procedures: To comply with CRS requirements, financial institutions should establish and be able to demonstrate robust written documented policies and procedures that define how the institution meets its CRS obligations. This should include, for example:
1. Does the firm allow non-residents to open accounts (policy) and if so, what documentation must be             collected over and above KYC/AML (procedure)?
2. Does the firm mandate that due diligence procedures must be in place, documented and trained into staff (policy) and if so, who is ultimately responsible for compliance to these standards and when does it occur (procedure)?

2. Onboarding: Collecting and verifying self-certification documents during account opening to determine tax residency.

3. Ongoing Monitoring: Regularly requesting updated self-certifications (for change in circumstance), renewals (for
natural expiry) and relevant supporting documentation throughout the customer lifecycle. This is crucial to identify
material changes in circumstances that might impact tax residency status, such as:
1. Change in address
2. Change in employment location
3. Acquisition of foreign residency

4. Data Reporting Accuracy and Integrity: Financial institutions MUST ensure the accuracy of the reported account
information. This includes verifying the accuracy and completeness of customer personal information, account
information, and transaction records. It also means monitoring the relevant xml reporting standard and ensuring that
report data is properly formatted and submitted to the correct authority on time.

5. Customer Data Confidentiality: Financial institutions must ensure the confidentiality of account information and
comply with relevant data protection laws and regulations to prevent unauthorized third-party access to account
information.

Conclusion

Financial institutions in Hong Kong and Taiwan can significantly improve reporting accuracy and compliance by strengthening internal controls and customer due diligence (CDD) processes. This includes staying up-to-date on the latest CRS developments and ensuring reporting procedures meet international standards. The Tax Compliance Toolkit (TCT) and the Investor Self Declaration tool (ISD) can effectively assist in this effort. These digital solutions provide comprehensive tools for managing compliance with international tax regulations including CRS, FATCA and QI. The ISD is a digital, electronically signed substitute of FATCA and CRS self-certifications that can help the Financial Institutions in Hong Kong and Taiwan gather valid electronically signed self-certifications by means of a simple online questionnaire. APIs improve efficiency by transferring ISD data directly to a financial institution’s internal systems.
If you are interested in more information, contact us.

Hong Kong
Marco Zawar MBA | LL.M
[email protected]
+852 6526 3007

Taiwan
Amanda Hsu
[email protected]
+886-912-651396
Head office (UK)

Ross McGill
[email protected]
+44 (0)1252 413551
+44 (0) 7515 356050