CRS and FATCA — will a foreign broker report your account?

A stubborn myth circulates among retail traders: "I will open an account with a broker in Cyprus or Australia, and my home tax office will never find out about it." A decade ago that belief held a grain of truth. Today it is a mistake that can cost interest and a penalty. Since the CRS standard and the American FATCA law came into force, a foreign financial account is no longer a private island — information about it travels between tax authorities automatically, every year, without any request on your part. In this article I explain what exactly is reported, by whom and when, and why you still declare your forex profit yourself.

What CRS is and where it came from

CRS, the Common Reporting Standard, is a framework for the automatic exchange of financial account information developed by the OECD. It was created at the request of the G20 and adopted by the OECD Council on 15 July 2014, as a response to the era of banking secrecy in which capital was tucked away in jurisdictions that did not cooperate with the tax office of the holder's country of residence. The idea is simple: since every bank and every broker knows who its client is, let that knowledge reach the tax authority, and let the authorities exchange it among themselves.

In the European Union, CRS is not a soft recommendation but hard law. The standard was introduced by Council Directive 2014/107/EU, known as DAC2, which Poland implemented through the act of 9 March 2017 on the exchange of tax information with other countries. More than one hundred jurisdictions joined the system, including every significant financial centre in Europe and Asia. For an investor resident in Poland this means a broker licensed in Cyprus, Germany, Ireland or Australia operates in a country that exchanges data with Poland.

"We can say that today bank secrecy is over." — Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, interview for *Marketplace*, American Public Media, 2017.

What, by whom and when it is reported

In the CRS chain the role of the reporting party falls to the financial institution — and a broker holding your investment account is such an institution within the meaning of the standard. It identifies your tax residency, gathers the data and passes it to the tax authority of its own country. The authorities of the participating states then exchange the collected information among themselves, directing it to the account holder's country of residence. For a Polish resident the final recipient is the National Revenue Administration, known as KAS.

The scope of the report is tightly defined and — worth stressing — narrower than many people imagine. The institution transmits identification data (name, address, country of tax residence, taxpayer identification number, date of birth) and financial data: the account number, its balance or value at the end of the year, and the total income credited to it — interest, dividends, other income and gross proceeds from the sale of assets. The report contains no list of individual trades and no position history. The tax office therefore does not see every one of your orders, but it does know that you hold an account with a specific broker, what it is worth and the scale of the flows through it.

The rhythm is annual. The institution collects the data for the calendar year, passes it to its authority within a statutory deadline after the year ends, and the international exchange typically follows by September of the next year. From this comes a natural delay: information about an account for a given year reaches the country of residence around the middle of the following one. In that time you have already filed your annual return by the 30 April deadline, so your declaration comes first, and the exchanged data arrives later — as material for comparison.

FATCA — when the American regime comes into play

FATCA, the Foreign Account Tax Compliance Act, is a United States regime, older than CRS and effectively its blueprint. Its logic differs from CRS: instead of reciprocal exchange by country of residence, FATCA places an obligation on foreign financial institutions to report the accounts of so-called US persons to the American tax authority, the IRS, under the threat of a withholding sanction on certain US-source payments.

For a typical investor resident in Poland, FATCA usually does not matter. The regime touches you in two situations: when you are a US person — a US citizen, a green-card holder or someone meeting the substantial-presence test in the States — or when the broker is itself a US entity or operates through US infrastructure. If you hold dual Polish-American citizenship, your account may fall under FATCA in parallel. That is why a broker, when you open an account, asks directly about your tax residency and any US-person status — it wants to assign you to the correct reporting channel, which is its obligation, not yours.

The limits of the system — and why it is not a loophole

The system has real gaps, which must be stated honestly, but without suggesting they are an escape route. Not every country in the world takes part in CRS, and more surprisingly, the United States itself has not joined CRS — it relies on its own FATCA, which does not provide full reciprocity. In practice, then, there are jurisdictions from which an automatic report about your account will not flow to Poland.

The thing is, the absence of an automatic report and the absence of a tax obligation are two entirely different matters. As a Polish tax resident you settle your worldwide income in Poland — the residency principle does not depend on where the broker sits. I wrote about this at length in the article on a trader's tax residency. An account in a non-CRS country merely means one verification channel is missing — it does not remove the duty to declare the profit. What is more, the list of participants in the exchange grows year by year, and funds rarely sit in one place without moving: a transfer from a non-CRS broker to your Polish bank account leaves a trace in its own right. Betting that the data "will not surface" is betting against a trend that has moved in only one direction for a decade.

What this means for filing forex and CFD profit

The practical conclusion is unambiguous: you declare profit from forex trading and from CFD contracts yourself on the PIT-38 return, at a flat rate of 19 percent, regardless of where the broker is located. A Polish broker will issue you a PIT-8C with ready figures; a foreign broker leaves the filing to you — in which case you download the transaction history, convert each closed position at the NBP average rate from the preceding day, and complete the form yourself. I described the full step-by-step procedure in the guide on how to file forex on PIT-38.

It is worth separating two distinct obligations that are easy to confuse. The first is settling income tax on the gains — you do this on PIT-38 every time. The second is the possible duty to declare the mere holding of a foreign account, which applies mainly to bank accounts and has its own thresholds; an investment account with a broker does not always fall under it, but it is covered by CRS reporting on the broker's side regardless. CFD contracts offered by a broker in the European Union are, moreover, fully covered both by the market regulation I describe in the article on MiFID II regulation and by CRS reporting — the broker remains a financial institution whether you trade derivatives or hold cash.

A separate case is settling payouts from prop firms — there the regime can differ from the classic PIT-38 on capital gains, which I break down in the article on prop trading tax in Poland. If, in turn, you are wondering which currency to hold your account in with a foreign broker and how it affects the conversions, the article on whether a currency account or a base-currency account is better will help. For the broader framing of taxes and record-keeping across borders, the taxes and records section on forexmechanics.com gives a useful overview.

What to do tomorrow

1. Establish your tax residency on paper. Check whether you meet the Polish residency test — a centre of vital interests in Poland or a stay of more than 183 days in the year. If you live and work in Poland, you are a Polish resident, and it is in Poland that you settle your entire worldwide capital income, including the profit from a foreign broker.
2. Go to your broker's site and find the tax-residency form. Every regulated broker collects a CRS self-certification when you open an account. Make sure the residency and the identification number recorded there are correct — an error at this point means your data could be routed to the wrong country and trigger needless questions from two sides at once.
3. Download the annual transaction statement for the last closed year. Open the broker panel, generate the yearly report or a CSV export, and save it in one folder together with the history from the MT4 or MT5 platform. This is the same set of data whose scale reaches the tax office in the CRS report, so your return and the report should agree with each other.
4. Calculate the tax and enter it on PIT-38 by 30 April. Convert each closed position at the NBP average rate from the business day preceding the close, sum the result, subtract documented costs and apply the 19 percent rate. File the return through the Twoj e-PIT service before the data from the international exchange even reaches the office.
5. If you have omitted profit from a foreign broker in the past, consider a voluntary disclosure. Correct the outstanding return and file a written notice of late compliance — the Polish czynny zal — before the office learns of the matter from a CRS report itself. An effective voluntary disclosure protects you from the fine, though it does not waive the interest on the overdue tax.