BDO held a conference on “Complying with Automatic Exchange of Information” recently in order to address the Common Reporting Standard issue. Yusuf Abdoollah talks about the benefits of this standard for Mauritius.
BUSINESSMAG. Why did BDO organize a conference on “Complying with Automatic Exchange of Information (Foreign Account Tax Compliance Act and Common Reporting Standard)”?
The aim of this conference was to make Mauritius-based financial institutions aware of the wide ranging implications of the Common Reporting Standard. Given that non-compliance to CRS obligations can lead to serious consequences that range from heavy penalties to six months imprisonment, BDO Mauritius, through its international network, wishes to share with the local finance community its knowledge about the pitfalls to watch out for.
BUSINESSMAG. As from the 1st January 2017, new regulations will be in force and Mauritius-based financial institutions will have to report on accounts held by their customers. Could you tell us more?
Two things. The CRS has been locally adopted into our legal system so that the international regulations pertaining to it now form part of our local domestic laws. Secondly, only the accounts of non-residents are to be shared, on an annual basis. For example, if a Mauritius-based bank has an Indian resident as customer, the aforesaid bank will have to report the account balances of this person to the Mauritius Revenue Authority (MRA), which will in turn communicate the information to the Indian tax authorities.
BUSINESSMAG. What are the reasons behind the setting up of the CRS?
The underlying aim of the CRS is to fight money laundering and provide greater visibility to jurisdictions where non-residents are keeping their money and/or investments. In consequence, the regulations attached to this standard touch a wide range of products and entities.
BUSINESSMAG. What is the link between the FATCA and the CRS?
It all started when a Swiss banker reported that a large number of American residents chose to keep their money on Swiss bank accounts so that they could avoid disclosing their revenues to the Inland Revenue Service (IRS) in the United States (US). This situation eventually lead to the enactment of the FATCA by the US. According to that law, financial institutions around the world have to register with the IRS so as to share information about US citizens’ revenues. Subsequently, the European Union, under the aegis of the Organization for Economic Cooperation and Development, caught up with the FATCA and introduced the CRS.
BUSINESSMAG. Which financial institutions does the CRS target?
The targeted institutions include banks, insurance companies, trusts, hedge funds, private equity funds, licensed brokers, fund administrators, gambling companies, investment funds, real estate investment funds, corporate trustees, investment mana-gers and advisors and charities.
BUSINESSMAG. How will the CRS impact on the image of Mauritius as a financial center?
I think the CRS will have a positive effect on the island as a financial center. The fact that Mauritius is a signatory of such international agreements demonstrates its willingness to promote itself as a tax transparent jurisdiction. So all the myths about Mauritius being a tax haven will gradually fade out. Having said that, investors will now be looking at how equipped our financial institutions are in terms of policies, procedures, compliance frameworks and information technology systems so as to share their personal information whilst observing their data privacy protection.
This process has to bemanaged carefully. We are talking about international compliance and Mauritius surely wants to be neither best nor last in class. Best in class might be putting too much of an administrative burden on the local financial institutions and, in addition, increase the risk of data privacy laws being viola-ted. On the other hand, given that the vision of the government is to sell Mauritius as a tax transpa-rent jurisdiction and to encourage more foreign direct investment, being last in class would certainly not be an advantage.