As more than 100 legal systems have committed to exchanging information under the CRS, exchange relationships between legal systems are generally based on the Multilateral Convention on Mutual Assistance in Tax Matters (Convention), in which more than 100 legal systems participate, and the Multilateral Agreement on the Multilateral Authority for DCS (CRS MCAA), based on Article 6. Jurisdictions may rely on a bilateral treaty such as a double taxation treaty or a tax information exchange agreement. In addition, a specific exchange of CRS will be organised on the basis of the relevant EU directive, EU-third country agreements and bilateral agreements such as the UK-CDOT agreements. In order to fulfil its obligations under the Multilateral Convention and the MCAA, South Africa needs comprehensive information from the country`s financial institutions on accounts linked to persons residing in other countries. The MCAA implements the OECD Standard for the Automatic Exchange of Financial Information. It is based on Article 6 of the OECD Multilateral Convention on Mutual Assistance in Tax Matters (Multilateral Convention), which provides that two or more parties may mutually agree on an automatic exchange of information. Even if the MCAA is signed on a multilateral basis, the actual exchange of information will take place on a bilateral basis. The MCAA requires the competent authorities of the participating countries to automatically collect and exchange tax information prescribed by the OECD CRS. In order to combat the loss of taxable revenue due to these tax evasion regimes, the Organisation for Economic Co-operation and Development (OECD) has announced the Multilateral Agreement on Multilateral Public Authorities (MCAA), which is the signatory state of South Africa. The objective of the MCAA is to create a framework for the systematic and periodic transmission of information on mass taxpayers from the country of origin to the country of residence of the taxable person.
The MCAA should be read in conjunction with the Common Reporting Standard (CRS), which contains the procedural, reporting and diligence standards underlying the automatic exchange of information, as well as broad technical guidelines for the interpretation of the MCAA. For example, the implementation of an agreement between the Government of the Republic of South Africa and the Government of the United States of America for the implementation of the US Foreign Account Tax Compliance Act (FATCA) is an important springboard for South Africa to the automatic exchange of information within the meaning of the CRS. With respect to FATCA, South African financial institutions are required to report material financial information to SARS for transfer to the United States of America. As of August 2020, there are more than 2500 bilateral exchanges that have been activated with respect to jurisdictions that have committed to exchanging CbC reports, and the first automatic exchange of CbC reports took place in June 2018. These include exchanges between the 88 signatories to the CbC Multilateral Competent Authority Agreement, between Eu Member States in accordance with Council Directive 2016/881/EU and between signatories to bilateral agreements of competent authorities on trade under double taxation conventions or tax information agreements, including 41 bilateral agreements with the United States. Lawyers continue to negotiate CbC report exchange agreements and the OECD will publish regular updates to clarify things for multinationals and tax administrations. The CRS MCAA determines the details of the exchange of information and when. . . .