Reporting All Domestic Tax Residences Under CRS

Understanding CRS 2.0: New Requirements for Reporting Multiple Tax Residences

Overview of CRS 2.0 Changes

The CRS 2.0 initiative introduces significant amendments to the Common Reporting Standard (CRS), encompassing an expanded array of reportable accounts and enhanced due diligence and reporting obligations for financial institutions.

Notably, the scope is broadening to include all domestic residences.

Specifically, CRS 2.0 mandates that financial institutions report accounts to all jurisdictions of tax residence as certified by the account holder, thereby eliminating the option to employ tiebreaker rules to select a single jurisdiction for reporting.

In essence, CRS 2.0 imposes the requirement for full disclosure and reporting of all tax residencies, ensuring that individuals cannot evade their reporting obligations by declaring only one country of residence.

This change enhances transparency and ensures all relevant tax authorities receive the necessary account information.

Reporting Tax Residencies

Under CRS 2.0, if an account holder is a tax resident in multiple jurisdictions (i.e., holds dual or multiple tax residencies), the financial institution must self-certify and report all jurisdictions of tax residence. This marks a significant change from previous practices.

The updated commentary explicitly states that financial institutions can no longer rely on tiebreaker rules (such as those in tax treaties) to determine a single jurisdiction of residence for reporting purposes. Instead, the account holder must be treated as a tax resident in all self-certified jurisdictions.

In particular:

All tax residences must be reported: If an account holder is a tax resident in multiple jurisdictions, CRS 2.0 requires financial institutions to report the account to all jurisdictions of tax residence self-certified by the account holder. This means that dual or multiple residences must be disclosed and reported, rather than just a single "primary" residence.

No Reliance on Tiebreaker Rules: Under previous guidance, some institutions or account holders might have used tax treaty tiebreaker rules to choose a single jurisdiction for reporting. CRS 2.0 eliminates this option; financial institutions cannot apply tiebreaker rules to determine which residency to report. Instead, all self-certified tax residencies are regarded as reportable.

Self-Certification and Documentation: Account holders must declare all countries where they are tax residents and provide the relevant Tax Identification Numbers (TINs) or equivalents, along with supporting documents if necessary. Financial institutions must collect and verify this information as part of their due diligence process.

Effective Date

CRS 2.0 is set to take effect on 1 January 2026.

Singapore has finalised the Addendum to the CRS Multilateral Competent Authority Agreement and is set to commence exchanges under the revised CRS by 2027.

However, financial institutions must prepare for these changes by January 1, 2026.

Practical Effects of CRS 2.0 Adjustments on High-Net-Worth Individuals (HNWIs) and Ultra High-Net-Worth Individuals (UHNWIs)

As noted, under CRS 2.0, financial institutions are required to gather and report more comprehensive data, including the type of account (e.g., depository, custodial, equity interest), self-certification status, and joint account information. This enhances the detail and applicability of the reported information for tax authorities.

The practical impacts are as follows:

Enhanced due diligence, which includes stricter alignment with anti-money laundering (AML) and know-your-customer (KYC) rules, will make it more difficult to obscure beneficial ownership through complex structures or shell entities.

High Net Worth Individuals (HNWIs) and Ultra High Net Worth Individuals (UHNWIs) may face increased compliance requirements, as their financial institutions will require additional documentation and conduct more rigorous checks to ensure accurate reporting.

The enhanced reporting will provide tax authorities with a more comprehensive insight into an individual's global and local financial assets, thereby increasing the probability of audits, investigations, and enforcement measures. This transparency bolsters global initiatives aimed at establishing minimum tax standards for ultra-high-net-worth individuals (UHNWIs), as indicated in recent policy proposals, and could be utilised to reinforce wealth tax initiatives or other progressive taxation strategies.

In short, as the risks of detection and penalties increase, high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs) should reevaluate their tax residence and asset-holding structures.

Conclusion

CRS 2.0's requirement to report all domestic residences marks a significant shift in global tax transparency.

For HNWIs and UHNWIs, this means: