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The Organisation for Economic Co-operation and Development (OECD) has introduced Common Reporting Standard (CRS) to put a global model of automatic exchange of information into practice for the purpose of tax compliance. It sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be adhered by financial institutions.
Under the CRS, Financial Institutions in Malaysia are required to collect financial account information on non-residents and report to Inland Revenue Board of Malaysia (IRBM). IRBM will exchange this information with the participating foreign tax authorities of those non-residents.
Malaysia has committed to exchange the CRS information from 2018 and would also be receiving financial account information on Malaysian residents from other countries’ tax authorities. This is a move towards ensuring that residents with financial accounts in other countries are complying with their domestic tax laws and act as a deterrent to tax evasion.
CRS obligations are imposed on Financial Institutions in Malaysia through the operation of the Income Tax (Automatic Exchange of Financial Account Information) Rules 2016 (CRS Rules). The implementation timeline are as follow:
Under the CRS Rules, Financial Institutions of Malaysia are required to collect financial account information from all non-residents and report to IRBM the information relating to the Reportable Jurisdictions by 30 June annually beginning 2018. List of Reportable jurisdictions will be published by 15 January 2018 and will be revised accordingly by 15 January in the following years.
Reporting of CRS Information will be in the OECD’s CRS Extensible Markup Language (XML) Scheme and reported to IRBM through the IRBM’s IT platform.
The CRS will lead to the disclosure of offshore financial assets of Malaysian tax residents by the relevant participating jurisdictions’ tax authorities to the IRBM. The IRBM will have access to information on Malaysian tax residents’ financial assets kept outside Malaysia. Malaysian tax residents, especially high net worth individuals and businesses must be prepared to provide evidence to support their tax position.
