On 1 July 2017, the "Administrative Measures on Due Diligence of Non-resident Financial Account Information in Tax Matters” (the Measures) came into effect. The Measures were jointly promulgated in May 2017 by the State Administration of Taxation (SAT), the Ministry of Finance, the People‘s Bank of China, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission. The Measures are seen as China’s domestic legislation enacted for implementation of the Common Reporting Standard (CRS) in the PRC, which requires financial institutions in the PRC to put in place due diligence procedures to identify and keep information of accounts held by any non-PRC tax residents.
Pursuant to the Measures, PRC fund managers including private securities fund managers and private equity fund managers fall under the definition of "financial institutions" and thus are subject to the due diligence and reporting obligations. The SAT has provided sample self-certification forms for reference. Fund managers in the PRC should assess their internal policies to ensure compliance with the Measures, and should register with the SAT by 31 December 2017.
Over 100 countries and regions have committed to implementation of CRS, about 50 of which (including the BVI and the Cayman Islands) have agreed to automatic exchange of tax related information from September 2017 while the others (including Mainland China, Hong Kong and Singapore) will do so from September 2018.
This also means (i) both a PRC tax resident’s investments in a Cayman fund, and a non-PRC tax resident’s investments in a PRC domestic fund, will be subject to CRS, and (ii) information relating to any of these investments will be shared between the Cayman government and the PRC government from September 2018 onward.