Financial institutions established in China are now required to perform due diligence procedures on non-Chinese residents who hold financial accounts with the institutions, as well as to collect and submit requested financial account information to the Chinese authorities
The enforcement of Announcement 14 signals the localization of the Common Reporting Standard (CRS) in China, following the SAT’s signing of the “Multilateral Competent Authority Agreement on Automatic Exchange of Financial Information in Tax Matters” with the Organisation for Economic Co-operation and Development (OECD) in December 2015, committing to mutually exchange the financial account information of foreign tax residents with other countries/jurisdictions starting September 2018.
Due diligence checks will be conducted on financial accounts that are held by non-Chinese tax residents (i.e., organizations and individuals) and/or passive non-financial institutions controlled by non-residents. Financial accounts mainly include three types:
- Deposit accounts;
- Escrow accounts: brokerage accounts, wealth management products, funds, trust plans and other financial products that are managed by financial institutions;
- Other accounts: partnership interest and trust beneficiary rights of private equity funds, as well as insurance contracts with cash value.
The above-mentioned financial accounts include both existing and newly opened accounts.
