If you are planning to establish an offshore business or financial institution, you need to understand the CRS (Common Reporting Standard) requirements of the jurisdiction that it will be domiciled in. In today’s CRS era, businesses are now criminally liable if an employee or associated person facilitate tax fraud whilst providing services on their behalf. If you want to start an offshore business, it is essential to understand everything about CRS, from what it is, to how it impacts on your international business.

What is CRS?

CRS is a new standard for Automatic Exchange of Information (AEOI) regarding bank accounts on a global level between tax authorities in certain countries. This regulation is known as the Common Reporting Standard (CRS), which is designed to fight against tax fraud by facilitating global exchange financial account data. Labuan, like any other offshore jurisdictions, is required to comply with the CRS requirements and QX Trust is able to offer effective solutions for your Labuan offshore setup.

Who Will Need to Comply with CRS?

The CRS and the AEOI apply to anyone with financial accounts or responsibilities outside of their country of tax residence. This means that virtually everyone who lives overseas will be dependent to the Common Reporting Standard in Labuan, providing they have a business account in their home country.

Being a part of this, you will probably have noticed that when you open any financial and bank accounts, you will need to confirm information such as your country of origin, Tax Identification Number and so on..

Do You Need to Comply to CRS?

As part of the CRS initiative, financial institutions or banks located in countries (where the Common Reporting Standard and Automatic Exchange of Information agreements are in place) are needed to inform their account holders that their information will be shared with the relevant authorities.

Financial institutions include banks, trust companies, insurance companies, fund managers provide financial account data to the relevant country proficient tax authorities to get a clear understanding of financial assets held abroad by their residents for tax purposes.

Therefore, if CRS applies to you, you will receive a letter or declaration from the financial institution(s) that you hold an account with that your information will be shared with the appropriate tax authorities.

What Information is Required?

Information such as name, nationality, address, date of birth, account balances, account numbers, proceeds from sales, including other relevant information on the source of fund will need to be reported for Common Reporting Standard purposes. Overseas economic accounts and companies held by tax residents may no longer be confidential and private.

How Such a Standard Impacts on International Business?

Currently, over 200 authorities have already started the CRS legal procedure for the exchange of tax and other financial related information with other worldwide institutions to improve its tax and financial transparency. Common Reporting Standard in Labuan are easy to comply unlike other jurisdictions which often lacks infrastructure to help the businesses in building real commercial substance which bringsgreat impact especially on jurisdictions that offer ZERO tax. QX Trust will be able to guide you on how to fulfil the CRS requirements in Labuan.

If the corporate bank accounts are opened in far-away authorities from the registered place, it may attract closure by the bankers to meet their CRS and other internal compliance policies.

The following are three major concerns on commercial substances which may not be easily created / fulfilled in every jurisdiction.

• The cost of operations set-up is too expensive for jurisdictions like Singapore, Hong Kong, and Mauritius;
• Too far a travelling distance for meetings and manage processes in authorities like Malta, Seychelles, BVI, and Cayman; and
• The time difference is an additional stress on top of day-to-day operational matters.

Let’s take a look at six basic commercial constituents for tax proofing your set-up!

• Payment of Taxes
• Key Management Decisions
• Permanent Office
• Local Employment
• Bank Account in That Particular Jurisdiction

What You Need to do

If you have business accounts with financial institutions outside your home country, you must ensure that your tax affairs are correct and declared correctly in all relevant jurisdictions. Failing to declare foreign income and hoping it will not be noticed is simply not an option. This means, if you have any undeclared income from recent, previous years, you must get your affairs in order.

Request a FREE CONSULTATION from QX Trust!

If you are worried about CRS, the sharing of information with tax authorities, have income that you have not declared or you want a peace of mind that everything is OK, QX Trust can help! Our qualified tax consultants possess full understanding of Common Reporting Standard in Labuan will help you get your general CRS questions answered.

How Can QX Trust help?

When you get in touch with us, our consultants will need to understand your overall business in order to recommend a tax-proof structure for your cross border businesses to be set-up in Labuan, Malaysia with the following measures:-

• Help you take appropriate key management decisions;
• Make sure you have a permanent office location;
• Ensure employment of local staff; and
• Make sure your entity has a bank account in that jurisdiction.

At QX Trust, we ensure that your overseas business ventures will comply with CRS regulations at a very cost efficient manner.

If you would like to know more about CRS and how it could impact your international business expansion, contact us at + 60 3 9212 6940 or consultant@qx-trust.com.