Background

The CRS was developed by the Organisation for Economic Cooperation and Development (OECD) 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 followed by financial institutions.

Under the CRS, Malaysian Financial Institutions (MYFIs) are required to collect and report to Inland Revenue Board of Malaysia (IRBM), financial account information on non-residents. IRBM will exchange this information with the participating foreign tax authorities of those non-residents.

More than 100 jurisdictions have committed to exchange the CRS information. 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 will help ensure that residents with financial accounts in other countries are complying with their domestic tax laws and act as a deterrent to tax evasion.

Legislation

CRS obligations are imposed on MYFIs through the operation of the Income Tax (Automatic Exchange of Financial Account Information) Rules 2016 (CRS Rules), Income Tax (Automatic Exchange of Financial Account Information) (Amendment) Rules 2017 (CRS (Amendment) Rules 2017) and Labuan Business Activity (Automatic Exchange of Financial Account Information) Regulations 2018 (CRS Regulations). The implementation timelines are as follow:

Special provision for Pre-existing Individual Account

• Pre-existing Individual Accounts that are high value accounts on 30 June 2017 must be reviewed by 30 June 2018 and if identified as Reportable must be reported to IRBM by 31 July 2018.

• Pre-existing Individual Account that was low value as at 30 June 2017 but meets the high value threshold as at the determination date of 31 December 2017 must be reviewed by 31 December 2018 and reported by 31 July 2019.

• Pre-existing Individual Accounts that are low value accounts on 30 June 2017 must be reviewed by 30 June 2019. However, for any Pre-existing Individual Accounts identified as reportable by 31 December 2017, they must be reported by 31 July 2018. Accounts identified reportable from 1 January 2018 to 30 June 2019 should be reported by 31 July 2019.

Reportable Jurisdictions

MYFIs are required to collect financial account information from all non-residents and report to IRBM those information relating to the Reportable Jurisdictions according to the timeline as stated above.

To ensure that MYFIs are ready to submit the information relating to the reportable jurisdictions within the timeline, MYFIs are advised to prepare the report of all participating jurisdictions and not only the reportable jurisdictions.

The list of Reportable Jurisdictions for 2020 CRS Exchange as at 15 January 2020 has been made final and available here.

List of Participating Jurisdictions

Under the CRS, a professionally managed Investment Entity that is not a Participating Jurisdiction Financial Institution will always be treated as a Passive Non-Financial Entity (Passive NFE). MYFIs must "look-through" the entity to identify its controlling persons and report each reportable controlling person.

For the purpose of this "look-through", " and also for the preparation of CRS reports by MYFIs, Malaysia has updated its List of Participating Jurisdictions as at 02 January 2018. This list will be updated from time to time where necessary.

Reporting

Reporting of CRS Information will be in the OECD's CRS Extensible Markup Language (XML) Schema and reported to IRBM through the IRBM's IT platform.

In order to ensure that a message and a record can be identified and corrected, the MessageRefID and DocRefID must be unique in space and time. For the purpose of domestic CRS reporting, these elements has to be structured in the following format:

A. DocRefID Naming Convention

• 'MY'+MyCRSID +Date +'F' or 'A'+SEQNO

• MY – code 'MY'
• MyCRS ID – will be given upon registration of MYFI with Hasil International Data Exchange Facility (HiDEF)
• Date format – YYYYMMDD
• 'F' for Financial Institution or 'A' for Account Reports
• SEQNO – 4 digits character (0000 – 9999)

B. MessageRefID Naming Convention

• 'MY'+MyCRSID +Date +SEQNO
• MY – code 'MY'
• MyCRS ID – will be given upon registration of MYFI with HiDEF
• Date format – YYYYMMDD
• SEQNO – 4 digits character (0000 – 9999)

Tax residency
A "self-certification" is a certification by the Account Holder that provides the Account Holder's status and any other information that may be reasonably requested by the MYFIs to fulfil its reporting and due diligence obligations, such as whether the Account Holder is resident for tax purposes in a Reportable Jurisdiction. The domestic laws of the various jurisdictions lay down the conditions under which an individual or an entity is to be treated as fiscally "resident". In order to help both account holders and financial institutions to comply with their obligations under the CRS, OECD has provided information on Tax Identification Numbers (TINs) and tax residency rules applicable in jurisdictions that are committed to automatically exchanging information.

Further information

• The OECD's Standard for Automatic Exchange of Financial Account Information in Tax Matters

• The OECD's Standard for Automatic Exchange of Financial Account Information in Tax Matters, Second Edition

• The OECD's CRS Implementation Handbook

• The OECD's CRS FAQs

• The OECD's Automatic Exchange Portal

Contact

If you have any further questions regarding CRS, please send your questions to:

crs@hasil.gov.my