What is the Common Reporting Standard (CRS)?

The Common Reporting Standard (CRS) was developed by the Organisation for Economic Co-operation and Development (OECD) to promote global tax transparency.

The approach for CRS requires Reporting Financial Institutions, such as PayPal, to identify and report on certain account holders who are tax residents of a Participating Jurisdiction.

PayPal will collect, review, and classify customer information to determine which accounts are held directly or indirectly by CRS Reportable Persons* that could be subject to reporting. If PayPal determines that an account is reportable under CRS (based on its analysis of account holder and/or business entity information), PayPal is required to report information to Luxembourg Inland Revenue (Administration des Contributions Directes, ACD), which may then share that information with other relevant tax authorities.

The reportable information generally consists of customer information (e.g., name, address, and Tax Identification Number (TIN) or similar) and account balance information. CRS requires reporting on an annual basis in most Participating Jurisdictions.

* Reportable Person means an individual or entity that is resident in a CRS Reportable Jurisdiction other than:

i. an entity the stock of which is regularly traded on one or more established securities markets;
ii. an entity that is a Related Entity of an entity described in clause i;
iii. a Governmental Entity;
iv. an International Organization;
v. a Central Bank; or
vi. a Financial Institution (other than certain managed Investment Entities).

Who is impacted by the Common Reporting Standard (CRS)?

The Common Reporting Standard (CRS) impacts both newly created and existing PayPal accounts.

PayPal will document, review, and classify the customer to determine which accounts are held directly or indirectly by CRS Reportable Persons. We’ll then report identified accounts and certain noncompliant customer accounts and related financial data to Luxembourg Inland Revenue (Administration des Contributions Directes, ACD), which may then share that information with other relevant tax authorities.

Note, there are varied classifications under CRS, which include:

• Financial Institutions

  • Depository Institutions - entities that accept deposits in the ordinary course of banking or a similar business, such as issuing credit and foreign exchange, credit facilitation, or that hold certain e-money products for customers.
  • Custodial Institution - entities that hold financial assets for the account of others as a substantial portion of their business. For example, securities and bonds.
  • Investment Entity - entities that conduct business investment activities or operations on behalf of a customer. For example, portfolio management, investing or managing financial assets, and commodity futures trading.
  • Specified Insurance Companies - insurance companies that issue or make payments with respect to cash value insurance contracts or annuity contracts.
  • Non-Reporting Financial Institutions - financial institutions that fall under certain exempted categories. For example, governmental entities, international organisations, central banks, certain retirement funds, exempt collective investment vehicles, and other low-risk financial institutions defined by local law.

• Nonfinancial Entities

  • Active and Excepted - nonfinancial entities that fall into a variety of categories. For example:
       - Entities for which less than 50 percent of their gross income for the preceding taxable year is passive income, and less than 50% of the weighted average percentage of assets held by them are assets that produce or are held for the production of passive income;
       - Entities that are publicly traded on an established securities market (or a related entity thereof);
       - Nonfinancial entities that are governmental entities, or international organisations, central banks (or wholly owned by any of these); and
       - Tax-exempt non-profit entities that meet certain eligibility criteria.
  • Passive entities - nonfinancial, non-publicly traded entities whose passive income is more than 50% of their gross income and that do not qualify under any of the Active or Excepted Nonfinancial Entity categories.

• Consumers and Individuals

• PayPal is required to document new consumer and individual accounts to determine if they’re reportable under CRS. CRS was enacted into local law by Luxembourg Inland Revenue (Administration des Contributions Directes, ACD) to establish whether a person holding the account is tax resident in any foreign jurisdiction. PayPal won’t allow the account holder to progress through the existing CRS onboarding application until all mandatory data elements have been filled out. During onboarding, consumer and individual account holders are required to indicate all countries where they are tax residents.

What information do I need to provide for the Common Reporting Standard (CRS)?

If you are a new customer, you will be required to complete a Common Reporting Standard (CRS) questionnaire and provide certification when opening your account.

If you are an existing account holder, you may be requested to provide additional documentation to ensure your status is properly documented for CRS purposes. All information can be submitted through your PayPal account by following alert notification prompts.

The CRS information that must be collected may include, but is not limited to:

• the account holder’s address;
• Tax Identification Number (TIN), where required; and/or
• other information relevant to establishing tax residency.

A business entity will also be required to provide:

• business type or classification;
• tax Identification Number (TIN), where required.
• A certification stating whether:
  o the account holder(s) is or is not considered a reportable person(s);
  o the entity is a sole trader or a business entity;
  o the entity has or does not have substantial owners or controlling persons.

If it does have controlling persons:

• the names, addresses, and tax residency information of those owners or persons.

Situations where additional documentation may be required include:

• if data previously collected about an account holder does not match the information already provided, and/or
• if an account holder claims they are a non-reportable person, but PayPal finds that certain tax residency identifiers exist in the customer’s information.

If you are determined to be reportable under CRS, PayPal is required to report information to Luxembourg Inland Revenue (Administration des Contributions Directes, ACD), which may then share that information with other relevant tax authorities.