China Publishes Rules for Tax Information Due Diligence on Non-Resident Accounts

China's State Taxation Administration, Ministry of Finance, and People's Bank of China have jointly issued new regulations for tax information due diligence on non-resident financial accounts. Announcement No. 14, as it is known, became effective on July 1, 2017, with the first reporting deadline for financial institutions set for May 31, 2018.

This legislative action signifies China's domestication of the "Common Reporting Standard" (CRS). Following an agreement with the OECD in December 2015, China committed to exchanging the first batch of non-resident financial account information with other countries starting in September 2018.

The CRS standard, released by the OECD in July 2014, mandates tax authorities to collect information on non-resident financial accounts and exchange it annually with tax authorities in other jurisdictions. The regulations clearly define the scope of information to be exchanged, the types of financial institutions responsible for data collection, and the due diligence procedures they must undertake.

Financial institutions operating in China are obligated to comply with these Chinese CRS regulations. This includes entities such as banks, securities firms, fund management companies, insurance companies, and trust companies. Branches of foreign banks located in China must also adhere to these rules. Consequently, financial institutions need to prepare diligently for the new regulatory landscape and its requirements.