How does Česká spořitelna check the tax obligations of its clients?
Below is a basic overview of how Česká spořitelna ascertains the tax obligations of its clients. Please note it is undertaken in compliance with international law, specifically FATCA (the Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard).
FACTA (Foreign Account Tax Compliance Act)
Legal framework
The obligations of the Czech Republic in connection with FACTA are based mainly on the Agreement between the Czech Republic and the United States of America to Improve International Tax Compliance, which entered into force on 18 December 2014. This is a “presidential international agreement”, which takes precedence over national legislation. This agreement has been enshrined in Czech Act No. 164/2013 Coll., on International Cooperation in Tax Administration and on Amendments to Other Related Acts.
What will be reported?
According to the above legislation, a bank is obliged to identify an individual with a potential tax obligation in the USA and report them through the Specialised Tax Office to America’s Internal Revenue Service (IRS).
How will this affect clients?
In practice, this means that if we believe a new or existing client has a relationship to the USA, we verify their tax obligations to the United States of America through the American W-9 tax forms (if the client demonstrates that they are an American citizen) or the W-8BEN or W-8BEN-E forms (if the client proves otherwise).
Useful links regarding FACTA:
CRS (Common Reporting Standard)
Legal framework
As part of the global fight against tax evasion, the Czech Republic enshrined Directive 2014/107/EU in Act No. 164/2013 Coll., on International Cooperation in Tax Administration and on Amendments to Other Related Acts, on 6 April 2016. Based on the mentioned legislative framework, Czech banks and other financial institutions have been obliged since 2016 to ascertain and verify their clients’ tax residencies and other tax obligations, including all allocated tax identification numbers. Financial institutions will then report foreign tax residents to the Specialised Tax Office, which will then forward the information to the respective foreign tax administrations as part of the automatic exchanges of tax information.
What will be reported?
These reporting obligations pertain to clients – legal entities and individuals – who are tax residents of countries participating in the automatic exchange of information (over 100 countries are participants at this time). Selected information about these clients will be reported once a year (on 30 June) for the previous calendar year, with the first automatic exchange of information for 2016 taking place in 2017. Information that is reported is clients’ identification information, including tax identification numbers, information about the total balance on their financial accounts (especially deposit accounts, investment products and insurance policies with capital value) and information about the structure of their earnings (i.e., interest, dividends and proceeds from the sale of securities).
How will this affect clients?
Česká spořitelna determines its clients’ tax obligations using the Client Tax Obligation Declaration form, which clients fill out at any Česká spořitelna branch or via internet banking. The declaration only needs to be filled in once, and is valid until there is a change that could affect a client’s tax obligations.
Useful link regarding CRS: