Common Reporting Standard (CRS) / Automatic Exchange of Information on Financial Accounts / Automatic Exchange of Tax Information / GATCA in Kazakhstan.
On 23rd of December 2013 the Republic of Kazakhstan has joined The Multilateral Convention on Mutual Administrative Assistance in Tax Matters and it is expected that Kazakhstan will sign The Multilateral Competent Authority Agreement of Automatic Exchange of Financial Account Information (CRS).
We do not expect Kazakhstan to commence exchange of information earlier than 2018 due to the facts that (a) according to section (3) 3 of the CRS Kazakhstan should adopt legislation requiring financial institutions to report information regarding certain accounts and follow related due diligence procedures and (b) certain IT instruments should be in place to allow Kazakhstan financial institutions to report relevant information to the revenue authorities, as the CRS pays close attention to confidentiality matters.
Nevertheless, the above does not proscribe Kazakhstan from receiving information on foreign accounts of Kazakh residents since adoption of CRS.
Reporting financial institutions in Kazakhstan are banks, custodians and other financial institutions such as brokers and insurance companies.
Reportable accounts are individual accounts and entity accounts:
Individuals
An account held by an individual is a reportable account if the account holder is a tax resident (tax resident) of a reportable jurisdiction. The account holder is called a reportable person.
Examples:
If a citizen of the United Kingdom is a tax resident of Kazakhstan and has an account in Cyprus bank, his account will be reported to Kazakhstan authorities by the authorities of Cyprus.
If a citizen of the United Kingdom is a tax resident of Kazakhstan and has an account in the United Kingdom, his account will be reported to Kazakhstan authorities by the authorities of the United Kingdom.
If a citizen of the Kazakhstan is a tax resident of Kazakhstan and has an account in Latvian bank, his account will be reported to Kazakhstan.
Entities
An entity account is a reportable account if (a) it is held by one or more reportable persons or (b) it is held by a passive non-financial entity (NFE) with one or more controlling persons who are reportable persons.
Example:
If a Cyprus tax resident trading company has an account in Latvian bank, company’s account will be reported to Cyprus authorities by the authorities of Latvia.
If a BVI trading company (with no residence for tax purposes, but with effective management in Kazakhstan) has an account in Cyprus bank, the company’s account will be reported to the Kazakhstan authorities by the authorities of Cyprus.
A passive NFE is a non-financial entity if more than 50% of its gross income for the preceding calendar year is a passive income or if more than 50% of its assets produce or are held for production of passive income.
Pre-existing financial accounts held by reportable entities will not be reported if the aggregate account balance or value doesn’t exceed USD 250,000 as of December 31 of a reportable year. However, the account will become reportable if the account balance exceeds USD 250,000 as of December 31 of any subsequent calendar year.
New financial accounts held by reportable entities will be reported independently of the account balance.
Example:
If a citizen of Kazakhstan is a tax resident of Kazakhstan and owns a company (a passive NFE) in BVI with a corporate account in Latvian bank, the information about this account will be reported to Kazakhstan authorities by the authorities of Latvia.
Information to Be Reported
Account holder’s details:
– name;
– address;
– jurisdiction(s) of residence;
– taxpayer identification number (TIN);
– if a reportable account holder is an individual, date and place of birth;
– if a reportable account holder is an entity, for each of the controlling person the account holder details listed above are reported.
Account details:
– account number or its equivalent in the case of absence an account number.
Financial institution details:
– name and identifying number (if available).
Financial information:
– account balance;
– sales proceeds from financial assets;
– all types of investment income (including interest, dividends, income from certain insurance contracts and other similar types of income);
– currency in which each amount is denominated.
Start of Information Exchange
According to the Common Reporting Standard the information is to be exchanged starting from the years specified in a jurisdiction’s commitment within 9 months after the end of the calendar year to which the information relates.
This means that
(a) for jurisdictions committed to start the exchange in September 2017, financial accounts existing in 2016 and the following years are to be reported;
(b) for jurisdictions committed to start the exchange in September 2018, financial accounts existing in 2017 and the following years are to be reported;
If one jurisdiction committed to start the exchange in September 2017 and another in September 2018, the exchange between this pair of jurisdictions will start in September 2018 and only the accounts existing in 2017 and the following years will be reported.