Newsletter
MOF Clarifies Financial Institutions' Obligations to Perform Due Diligence and to Report Information under Taiwan CRS Regulation
In order to cope with the Common Reporting Standard (CRS) promoted by the OECD, which regulates the international tax information exchange, the Ministry of Finance (MOF) in Taiwan promulgated the "Regulations Governing the Implementation of the Common Standard on Reporting and Due Diligence for Financial Institutions" ("Taiwan CRS Regulation") on November 16, 2017. According to the Taiwan CRS Regulation, a financial institution shall perform due diligence on and report information for all the new financial accounts opened after January 1, 2019. For the financial accounts opened before December 31, 2018, the financial institution shall complete the due diligence and report the information before 31 December 2019 for personal "High Value Account" (with an aggregate balance or value that exceeds USD 1,000,000 as of December 31, 2018), and the financial institution shall complete the due diligence and report the information before December 31, 2020 for the other financial accounts.
According to the Taiwan CRS Regulation, the regulated financial institutions include the depository institutions, the custodial institutions, the investment entities, and the specified insurance companies; the regulated financial accounts include the depository accounts, any equity or debt interest in an investment entity, the custodial accounts, the cash value insurance contracts, and the annuity insurance contracts.
On January 31, 2019, the MOF promulgated an administrative ruling (Reference No. Tai-Cai-Gi-Zi-10724521950), stating that financial institutions, including the depository institutions, the custodial institutions, the investment entities, and the specified insurance companies, have obligations to perform due diligence and to report the information for "all" the financial accounts managed by such financial institutions (including depository accounts, custodial accounts, any equity or debt interest in an investment entity, cash value insurance contracts, and the annuity insurance contracts), regardless of whether or not the financial accounts correspond to the business of the such financial institutions.
The MOF further explained the purpose of the abovementioned administrative ruling: for example, a depository institution has an obligation to perform due diligence and to report the information not only for the depository account, but also for all the financial accounts managed by such a depository institution. If a bank, a securities investment trust enterprises, a securities investment consulting enterprise, a securities brokerage agency, or an insurance company concurrently conducts the trust business, then such a financial institution should also perform due diligence on and report the information for the custodial account through which it holds financial assets for the benefit of the beneficiaries due to the trust business.
According to the Taiwan CRS Regulation, from 2020, a reporting financial institution shall, within the period from June 1 to June 30 of each calendar year, report to the tax authorities the information of each reportable financial account and undocumented financial account according to the records of the previous calendar year.