CRS for closed accounts - do previous years get reported?

[Recose]

John is tax resident in country A but had a bank account in country B. Country B became a CRS country in 2020. John didn't receive any request to provide tax residency from the bank in 2020. But in early 2021, the bank requested John to provide tax residency. John put Country A as tax residency which is correct. John then closed the account in late 2021.

According to CRS when a depository account is closed, instead of the balance at year-end being reported, only the fact that the account was closed is reported.

So in this situation no balance would be reported for 2021, but would anything be reported for 2020?

 

[EliasIT]

It completely depends on what country A is. I can definitely say that if the tax authorities are after you, it doesn’t really matter what information they get, even if it’s a closed account. They will ask you to provide account statements for that account. If it’s closed and the EMI or bank refuses to send them to you for that reason, it becomes your problem, and you’ll face even bigger issues.

But you might get lucky, of course, and no one looks into it, so your chances are 50/50.

 

[Sols]

The account is still reportable for 2021 in 2022.

 

[Recose]

It completely depends on what country A is. I can definitely say that if the tax authorities are after you, it doesn’t really matter what information they get, even if it’s a closed account. They will ask you to provide account statements for that account. If it’s closed and the EMI or bank refuses to send them to you for that reason, it becomes your problem, and you’ll face even bigger issues.

But you might get lucky, of course, and no one looks into it, so your chances are 50/50.

Australia. For what its worth it was an everyday banking account that barely earned any interest (<$100). They don't receive the value at year end or any of the deposits and withdrawal activity right?

The account is still reportable for 2021 in 2022.

But 2020 would not be reported right?

 

[jafo]

that barely earned any interest (<$100).

Nobody is coming for this....UNLESS you are a multi-millionaire or greater, and they have written "rules" to fine you/levy a penalty against you for NOT reporting it, and the fine/penalty can be anything they can hallucinate.

 

[Forester]

They don't receive the value at year end

They should receive it, it's a fundament of CRS.

But 2020 would not be reported right?

It should be reported, as Country B became a CRS country in 2020. Whether it really happens, it's a question; sometimes CRS does not function perfectly at the very beginning (they should have asked you for your tax residency before 2020-12-31, to have done it correctly) – but definitely, take it as if 2020 is reported.

 

[Recose]

Nobody is coming for this....UNLESS you are a multi-millionaire or greater, and they have written "rules" to fine you/levy a penalty against you for NOT reporting it, and the fine/penalty can be anything they can hallucinate.

This was my thought as well since the amount is so small, but was not sure if just having an offshore account or the fact that it was closed in the year causes the tax authorities to ask questions and pry further.

They should receive it, it's a fundament of CRS.


It should be reported, as Country B became a CRS country in 2020. Whether it really happens, it's a question; sometimes CRS does not function perfectly at the very beginning (they should have asked you for your tax residency before 2020-12-31, to have done it correctly) – but definitely, take it as if 2020 is reported.

From my research it seems f it was closed in the year only the fact that the account was closed gets reported and not the balance at year end. Either way it would be zero at time of closure anyways.

If financial institutions only report the balance at year end what's stopping people from making all the transactions they want in the account and then withdrawing the remainder so that the balance is zero at the end of every year?

 

[JackAlabama]

This was my thought as well since the amount is so small, but was not sure if just having an offshore account or the fact that it was closed in the year causes the tax authorities to ask questions and pry further.

name country?

From my research it seems f it was closed in the year only the fact that the account was closed gets reported and not the balance at year end. Either way it would be zero at time of closure anyways.

If financial institutions only report the balance at year end what's stopping people from making all the transactions they want in the account and then withdrawing the remainder so that the balance is zero at the end of every year?

they report flows. But the flows can be from yourself or from a loan or whatnot and it doesn't mean income. As everything gov related, its a stupid thing.

 

[Recose]

name country?

they report flows. But the flows can be from yourself or from a loan or whatnot and it doesn't mean income. As everything gov related, its a stupid thing.

Australia.

I found a post from another thread , someone from Belgium posted their CRS report. Maybe it depends on the bank and country but seems like its only the interest income and year end balance reported:

N26 Bank - CRS

 

[clemens]

It may indeed depend on the bank and the country of the account holder.

 

[PinkCat]

Australia.

I found a post from another thread , someone from Belgium posted their CRS report. Maybe it depends on the bank and country but seems like its only the interest income and year end balance reported:

N26 Bank - CRS

I also know they just report the balance at the end of the year (not sure which date exactly they use though) and was also wondering how is it made so easy to circumvent. Happened to be at one table with x employee of the local revenue agency and he confirmed that is the case and that it is stupid and probably made so on purpose......
Basically just make sure you have zero balance at the end of december.....however would like some more confirmation on this because it just seems too easy to be true

Also have heard they report just fiat balances, so if you convert your cash to some kind of investment offered by the bank that should not be reported, but again will appreciate additional confirmation on this.

Now if they do indeed report interest too ( as someone mentioned here) that can be used to calculate your average balance through the year and can be a problem.
Not a problem while most banks are at 0% interest but might be.

 

[Praetorian]

Depends what country you are from and where the bank is located.

If your bank in thailand for example received a request by the IRS or a US law enforcement agency they'd hand everything over, including the activity from years ago.

If that same bank received a request from the Dutch tax authority however, they might just follow standard CRS procedure and give them the last known balance for the account before it was closed. Even better, they might not even play ball and not share anything by fear of revealing lax internal controls.

But again you could be with a bank with a high compliance culture due to previous fines and they might just throw you under the bus for the sake of peace of mind. You cannot predict how things will go unless you have a plug at the bank or you're worth way too much money for them to even bother pissing you off.

 

[PinkCat]

Depends what country you are from and where the bank is located.

If your bank in thailand for example received a request by the IRS or a US law enforcement agency they'd hand everything over, including the activity from years ago.

If that same bank received a request from the Dutch tax authority however, they might just follow standard CRS procedure and give them the last known balance for the account before it was closed. Even better, they might not even play ball and not share anything by fear of revealing lax internal controls.

But again you could be with a bank with a high compliance culture due to previous fines and they might just throw you under the bus for the sake of peace of mind. You cannot predict how things will go unless you have a plug at the bank or you're worth way too much money for them to even bother pissing you off.

CRS is about spontaneous (automatic) exchange of information, specific requests is whole another ball game.
The pain with CRS is that this spontaneous exchange might put you on the radar, if you are ALREADY on the radar they will just do request for you specifically regardless of CRS.

 

[Recose]

I also know they just report the balance at the end of the year (not sure which date exactly they use though) and was also wondering how is it made so easy to circumvent. Happened to be at one table with x employee of the local revenue agency and he confirmed that is the case and that it is stupid and probably made so on purpose......
Basically just make sure you have zero balance at the end of december.....however would like some more confirmation on this because it just seems too easy to be true

Also have heard they report just fiat balances, so if you convert your cash to some kind of investment offered by the bank that should not be reported, but again will appreciate additional confirmation on this.

Now if they do indeed report interest too ( as someone mentioned here) that can be used to calculate your average balance through the year and can be a problem.
Not a problem while most banks are at 0% interest but might be.

Ya it for sure seems too easy to be true. Many bank accounts dont pay interest at all.

If you had overseas rental properties you could easily get your tenants to send payments to your overseas bank account throughout the year then just withdraw the money or transfer it out from the account before December 31 and tax authorities would be none the wiser.

Your CRS report would show zero for interest payments and zero for year end balance so the tax authority would probably not even look into your file.

If this is actually the case then I'm not sure why everyone is so concerned about CRS

 

[SCHLOSSFINANZ]

if an account is closed in between the year in fact the balance is also reported. At least here in Switzerland.

A tax authority would be highly alarmed if they get a ZERO balance report. In most cases they believe its an error
report and would ask for clarification from the taxable person, eg producing bank statemens to prove its in fact zero.

 

[Recose]

if an account is closed in between the year in fact the balance is also reported. At least here in Switzerland.

A tax authority would be highly alarmed if they get a ZERO balance report. In most cases they believe its an error
report and would ask for clarification from the taxable person, eg producing bank statemens to prove its in fact zero.

I dont know about Switzerland specifically but I think most countries would not prioritize looking into someone who has an offshore account with zero interest and zero balance at year end.

Having an offshore bank account is pretty common nowadays and isnt illegal in itself . Tax authorities probably get millions of people's CRS data and dont have the money and resources to inquire about them all.

But I'd appreciate as a data point if anyone actually had experience of getting looked into by tax authorities for having an offshore bank account even if the balance and income was zero

 

[JackAlabama]

I dont know about Switzerland specifically but I think most countries would not prioritize looking into someone who has an offshore account with zero interest and zero balance at year end.

Having an offshore bank account is pretty common nowadays and isnt illegal in itself . Tax authorities probably get millions of people's CRS data and dont have the money and resources to inquire about them all.

But I'd appreciate as a data point if anyone actually had experience of getting looked into by tax authorities for having an offshore bank account even if the balance and income was zero

the more data they have the messier this all gets. Ai cant even help here as the data most likely will be an absolute mess. People move around, have old addresses, banks send it here and there etc etc. The combinations are countless.
I like it that way, the surveillance borg / digital prison can only be brought down by overload.

 

[alain]

John is tax resident in country A but had a bank account in country B. Country B became a CRS country in 2020. John didn't receive any request to provide tax residency from the bank in 2020. But in early 2021, the bank requested John to provide tax residency. John put Country A as tax residency which is correct. John then closed the account in late 2021.

According to CRS when a depository account is closed, instead of the balance at year-end being reported, only the fact that the account was closed is reported.

So in this situation no balance would be reported for 2021, but would anything be reported for 2020?

By now you got reported if you banked in an EMI or Bank with CRS.