Preparing For The CRS Schema Version 2.0 – No Pain, No Gain

By: Guo Jian TAN, Tax Product Manager, Global, AxiomSL

Building on the U.S. Foreign Account Tax Compliance Act (FATCA), the Organisation for Economic Co-operation and Development (OECD) led an initiative to develop the Common Reporting Standard (CRS) in 2014 as part of a global effort to fight against tax evasion and protect the integrity of tax systems. The burden of complying with the regulation falls on financial institutions that have to conduct enhanced client due diligence and report to various tax authorities.

The scale and complexity of CRS is unprecedented, and its implementation has been an intensive undertaking. The required transition from CRS Schema Version 1.0 to CRS Schema Version 2.0 is the first schema change since firms began implementing four years ago across more than 100 participating jurisdictions. This change is more challenging to execute than it may seem.

The Next Step Towards Making CRS Reporting More ‘Common’ And ‘Standard’

The changes to CRS reflected in CRS Schema Version 2.0 are based on feedback from filers and are intended to achieve more granular accuracy, better reflect the business needs of filers, and mature the regulation over time. Certainly, more changes will come as regulators strive to make the exchange of information on financial accounts between tax authorities globally more efficient and the regulation more common and standard.

In the short term, changes like Schema 2.0 will likely be frequent and sometimes cumbersome. Ultimately, however, the long-term effects will be beneficial to regulators and financial institutions alike, as they will lead to granular accuracy and submitted data will better match the regulatory requirements. To prepare for this and coming revisions and related challenges, financial institutions need to future-proof their CRS-related processes and procedures.

Multiple Deadlines Loom

Although the updated XML schema was announced on June 27, 2019 for initiation on February 1, 2021, in actuality, most firms are only just beginning to tackle CRS Schema Version 2.0 preparation, having been concerned up to now with meeting 2020 reporting-year deadlines. This leaves many institutions with limited time to do the necessary preparation. Adding to the complexity of managing the timeline, jurisdictions have discretion, so actual commencement dates may vary. For example, Japan has established the earliest date allowing financial firms to adopt the schema change starting on November 1, 2020 well before the universal date and Belgium also begins early, on January 8, 2021.

The Devil Is In The Detail – Preparation May Be Painful

CRS Schema Version 2.0 - No Pain, No Gain

Some of the key changes in CRS Schema Version 2.0 are the following:

  • Alterations in the length limit of Extensible Markup Language (XML) elements and attributes. To report electronically, firms must use the XML format. (The XML schema is used to describe and validate the structure and content of XML data. It defines the element, attributes, and reporting types.)
  • Changes to two elements: The mandatory element “CrsBody” becomes optional and the previously optional element “MessageTypeIndic” becomes mandatory
  • Addition of five new country codes
  • Modifications of twenty-five country descriptions


On the face of it, these changes may not appear to be extensive. However, as with any revision, updating a solution used for CRS reporting can be daunting – whether it is home grown or supplied by a vendor. This is especially the case if the solution is not designed to be future proof. In contrast, AxiomSL’s FATCA/CRS flexible, automated, end-to-end solution enables firms to future-proof CRS compliance. Founded on years of experience working with clients and industry participants on this intensive regulatory mandate globally, the solution enables efficient, transparent reporting across all participating jurisdictions and is designed to handle change.

Financial institutions lacking a flexible, comprehensive solution like AxiomSL’s, must plan and execute a series of time-consuming and detail-oriented steps to adjust their existing CRS solution to the new schema version. Initially, firms must conduct an impact analysis to determine how to adapt to the new changes, revalidate outputs, ensure the interoperability of systems, and assess the potential impact on upstream and downstream data. Then, based on the analysis, developers make the necessary changes to their solution.

This should be followed by regression testing, which can be extremely complicated depending on the number of jurisdictions involved. For example, if a financial institution is reporting to 12 jurisdictions, regression tests for the 12 jurisdictions must be reviewed to ensure the end results are correct. To successfully adopt CRS Schema Version 2.0, a firm’s IT and compliance teams, typically siloed, must work very closely together. Each side needs to understand the implications of the schema changes across jurisdictions – regression testing will not be successful unless there is active collaboration.

And Another Important Pain Point: Refiling!

An additional challenge is that refiling can be very cumbersome with the introduction of Schema 2.0. Whether it is a tax-authority initiated refiling or a voluntary refiling, starting in 2021 a file originally generated under CRS Schema Version 1.0 may only be refiled under CRS Schema Version 2.0. It is important for firms to recognize that this requirement impacts not only 2019 reports (reports submitted in 2020 are on 2019 data), but also previous years’ filings, if refiling is required.

A Collision Is Inevitable – Running V1 and V2 Simultaneously

The fact that some jurisdictions have different inception dates to the universal February 1, 2021 start date, adds complexity to the CRS Schema Version 2.0 preparation timeline. In general, firms need to recognize that most internal or vendor-provided solutions will not be able to handle both versions of the schema before the 2019 reporting is completed.

This creates a huge impediment to preparation in general and in particular for firms that have to start reporting to jurisdictions with different inception dates for Schema 2.0. A firm may have to report using Schema 1.0 for jurisdiction X and simultaneously report using CRS Schema Version 2.0 for jurisdiction Y, et cetera. Overlay the challenge of managing refiling requirements over the course of 2021 and the problem intensifies exponentially.

Clearly, any solution for CRS reporting must be flexible if firms are to traverse the challenges of this schema change effectively and efficiently.

AxiomSL Clients Gain Flexibility And A Time Advantage

AxiomSL’s existing clients have the luxury of working with a future-proof solution that has already been updated to CRS Schema Version 2.0, leaving them with ample time to do the necessary regression testing. Crucially, the latest update to AxiomSL’s FATCA/CRS solution already enables users to toggle between Schemas 1.0 and 2.0 for each jurisdiction, based on the date of their submission if the reporting period has not ended. And the solution elegantly solves the refiling pain point through a carefully crafted module. Should the need to refile arise, users can simply void the original files and rerun and resubmit the data in Schema 2.0.

Alleviate Pain – Be Better Prepared For Change With AxiomSL’s FATCA/CRS Solution

AxiomSL’s data-driven, automated, scalable FATCA/CRS Solution on ControllerView® is future-proof and empowers financial institutions to meet their CRS compliance requirements seamlessly on a single data integrity and control platform. Powered by TaxView, an extensible data dictionary methodology, the solution’s eligibility engine enables users to map volumes of diverse source data from across silos to CRS filtration and classification specifications. The platform adapts to infrastructure changes without the need for systems re-engineering while the dynamic solution design enables financial institutions to stay up to date with evolving CRS regulatory changes across all jurisdictions allowing them to mitigate the uncertainty of change.

Deployable on AxiomSL’s secure, fully managed RegCloud® (or on premises), the solution’s inherent data and process transparency and dashboard accessibility enable users to monitor, analyze, and sign-off on submissions suited to each jurisdiction’s requirements. In addition, with a RegCloud deployment, clients derive operational benefits including:

  • Eliminating infrastructure ownership: AxiomSL manages hardware and scales capacity dynamically (both horizontally and vertically) as the business grows.
  • Managing processes: AxiomSL oversees workflows from complex data ingestion and mapping, updating regulatory rules (publishing and interpreting), to report generation.
  • Managing changes: AxiomSL distributes regulatory and software updates and validates changes via user acceptance testing (UAT).
  • Meeting regulatory standards: AxiomSL ensures that data is retained appropriately.
  • Providing security: AxiomSL meets stringent regulator-aligned best-practice security requirements (ISO and SOC).

Gaining Confidence

Though edging closer, CRS remains far from being as ‘common’ or ‘standard’ as envisioned at its inception. Consequently, changes are not only inevitable, but desirable. That situation of constant change makes it mission critical for financial institutions to be prepared to adapt to new reporting requirements efficiently and timely by implementing a flexible data-driven solution that is designed to accommodate changes such as the transition to CRS Schema Version 2.0. AxiomSL’s solution provides firms with a single platform ecosystem for both FATCA and CRS reporting, enabling them to comply with consistency, while reducing cost and operational burdens, and strengthening auditability.

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