Exchange of Financial Information for Non-Residents in Georgia

What is CRS and Why is It Needed?

CRS (Common Reporting Standard) is an international standard created to enhance financial transparency and combat tax evasion. The goal of the standard is the automatic exchange of tax information between participating countries. As of the end of 2023, 120 countries have joined CRS, though some states, such as Albania, Armenia, Belarus, Bosnia and Herzegovina, Serbia, and the United States (which operates under its own FATCA standard), are not yet participating in the exchange.

Georgia officially joined CRS in 2022, with 2023 being the first reporting year. Information for 2023 will be transmitted by Georgian banks to the tax authorities of CRS member countries in September 2024.

According to CRS, financial institutions in Georgia, including banks and other financial entities, are required to collect and share the following information about accounts held by clients who are tax residents of CRS participating countries:

1. Identification of Account Holders:

• Individuals: First name, last name, date and place of birth, Tax Identification Number (TIN), country of tax residence, and address of the account holder.
• Legal Entities: Company name, country of registration, TIN, country of tax residence, and information about controlling persons, if applicable.

2. Identification of Controlling Persons:

For legal entities or structures without legal personality, financial institutions must identify controlling persons (beneficial owners) who effectively control or own the entity. Information reported includes the name, date and place of birth, country of tax residence, TIN, and address of the controlling persons.

5. Tax Residence:
Banks are required to identify the country of tax residence of the account holder and provide data for all specified jurisdictions.

6. Tax Identification Number (TIN):
The number issued by the country of residence for tax purposes.

7. Account Currency:
The currency in which the account is opened and transactions are conducted.

8. Income from Assets:
If the account contains investment assets such as securities or investment fund shares, financial institutions report income, including dividends, proceeds from sales or redemption of securities, and other investment income.

9. Account Closure Information:
The date of account closure and the account balance at the time of closure, if the account was closed during the reporting period.

10. Data Accuracy:

Banks are required to conduct regular data checks to update information about account holders and identify changes in tax residency status.
Banks use KYC questionnaires or self-declaration forms to collect this information when opening accounts or updating records. If a client’s tax residence is determined to be in another country, the information is transmitted to the Georgian Revenue Service for further exchange with the tax authorities of the country of residence. If a bank cannot identify the client’s tax residence in another country, it does not transmit the data.

Questions and Answers:

-What happens if an individual is not a tax resident of any country?
If a person is not a tax resident of any country, their data will not be shared under CRS, as the standard obligates banks to report information only about tax residents of participating countries. However, when changing their tax status, the client is required to inform the bank.

-Will information about an individual be shared if they own property in Georgia but have no bank accounts?
If a person owns property in Georgia but does not have accounts in Georgian banks or other financial institutions, information about their ownership will not be shared under the CRS standard. CRS regulates the exchange of information exclusively concerning financial accounts, not property ownership.

-Automatic Exchange of Information with Russia:

There is no automatic exchange of data under CRS between Russia and Georgia, as Russia is not included in the list of countries with which Georgia participates in automatic exchange. However, Russia may submit individual requests regarding specific individuals or companies through the OECD Convention on Mutual Administrative Assistance in Tax Matters or through the agreement on cooperation and exchange of information on tax legislation between the governments of Georgia and Russia.

It is important to note, however, that due to the current geopolitical situation and sanctions after 2022, many EU countries have suspended the exchange of tax information with Russia, which may also affect cooperation with Russia in areas such as the exchange of tax information.

-Termination of Tax Residency in Russia:

In Russia, tax residency is terminated if a person has not been present in the country for 183 days during a calendar year (except in cases where their absence is short-term and does not interrupt the tax residency period in accordance with the provisions of the Russian Tax Code). Thus, if a Russian citizen is not a tax resident of Russia, Georgia, even upon request, is not obligated to transfer information about their accounts to Russian tax authorities under CRS rules.

-How to deal with dual tax residency?

In cases of dual tax residency (for example, when a person is a tax resident of Georgia and another CRS participant country), taxation is regulated by bilateral double taxation avoidance agreements. These agreements typically contain rules that determine primary tax residency based on factors such as the place of permanent residence, the center of vital interests, and other parameters. If a person has tax obligations in both countries, they must report in both jurisdictions, and in the absence of an agreement, pay taxes in both countries. Violation of the tax laws of either country may result in penalties.