What is CRS?
The Common Reporting Standard (CRS), established by the Organisation for Economic Co-operation and Development (OECD) in 2014, is a global framework designed to prevent cross-border tax evasion through the Automatic Exchange of Financial Information (AEOI). This standard requires financial institutions, such as banks, investment funds, and certain trusts, to collect data on non-resident accounts and share it with the tax authorities of countries where the holders are tax residents. More than 100 jurisdictions, including Georgia, participate in this system to promote tax transparency.
Implementation in Georgia
Georgia signed the Multilateral Agreement of Competent Authorities (CRS MCAA) on November 9, 2022, committing to the automatic exchange of financial information, with the first exchange planned for September 2024. This commitment is based on the Convention on Mutual Administrative Assistance in Tax Matters. To confirm the latest dates and details, check official sources such as the Georgia Revenue Service or the list of CRS MCAA signatories.
Data Collected and Exchange Process
Financial institutions in Georgia are required to collect detailed information about non-resident accounts, including:
- Name, address, tax identification number (TIN) and tax residence jurisdiction of the holder.
- Account number and name of the financial institution.
- Balances, securities, and income generated, such as interest or dividends.
The exchange process follows these steps:
- Data collection: Banks and other entities use “Know Your Customer” (KYC) and anti-money laundering (AML) procedures to collect the required information.
- Reporting to the Revenue Service: Financial institutions submit data to the Georgia Revenue Service (RS) by June 30 of the year following the reporting period.
- International Transfer: The RS shares the information with the tax authorities of the holder’s tax residence jurisdiction, if the holder participates in the CRS.
Determination of Tax Residence
Tax residency is determined according to the holder’s usual address, which must be supported by official documentation, such as passports, utility bills (e.g., electricity or water), or tax residency certificates issued by the competent authorities. Financial institutions apply due diligence procedures to verify this information, following CRS guidelines. Since documentation requirements may vary, it is recommended to consult with a tax advisor to ensure compliance.
Relationship with FATCA and the European Union
In addition to the CRS, Georgia complies with the U.S. Foreign Account Tax Compliance Act (FATCA), which mandates reporting information on U.S. citizen accounts to the IRS, as stipulated in the Georgia Tax Code (sections 43.2^1, 49.1.n, 70.3^1, and 71.1.h). Unlike CRS, the US does not participate in this standard, using FATCA as its own system. The European Union, for its part, implements the CRS through agreements that include non-member countries such as Georgia, facilitating the exchange of data with member states.
Key considerations
It is essential to clarify something: opening a bank account in Georgia does not mean that you can avoid paying taxes in your country of residence. Under the Common Reporting Standard (CRS), an international agreement to which Georgia is a signatory, Georgian banks are required to report non-residents’ financial information to the tax authorities of their respective countries.
This means that if you are a tax resident in a European country, the income generated in a bank account in Georgia must be reported and, if applicable, taxed in your country of residence. Failure to do so may constitute a crime of tax evasion.
In summary, although Georgia offers a more flexible and less regulated banking environment compared to Europe, this does not exempt it from complying with international tax obligations. Any attempt to hide assets or income could trigger serious legal and tax penalties in your country of residence.
Georgia’s adherence to the CRS reinforces its commitment to global financial transparency, affecting individuals and companies with bank accounts in the country. It is crucial to understand how your financial information is shared and its potential tax implications. Given that the implementation of the CRS depends on the transposition into national legislation and specific agreements, it is advisable to consult with our tax advisors at Tu Empresa en Georgia for the most up-to-date information, as the planned dates may have changed or still be in transition.
