CRS Flashcards
What is a NZFI under FATCA?
Reporting New Zealand Financial Institution
What does the first ‘C’ in the acronym CCR stand for with respect to NZFI reporting obligations?
Conduct due diligence
What does the 2nd ‘C’ stand for in the acronym ‘CCR’ concerning NZFI obligations?
Collect prescribed information
What does the ‘R’ stand for in the acronym ‘CCR’ with respect to NZFI obligations under CRS?
Report this information
What does the ‘look-through rule’ refer to with respect to NZFI obligations?
Identifying accounts held by passive non-financial entities that are controlled by foreign non residents.
What is the aim of CRS other than to improve cross-border tax compliance?
Promote the global automatic exchange of information (“AEOI”).
What is the aim of CRS other than to promote the global automatic exchange of information (“AEOI”)?
Improve cross-border tax compliance
What does CRS build on?
US FATCA (Foreign Account Tax Compliance Act)
What was FATCA enacted to combat?
Offshore tax evasion by US persons.
Is CRS built on similar principles to FATCA?
Yes
Other than not being US Centric, how else is CRS different from FATCA?
It is based on universal OECD principles
Other than being based on universal OECD principles, how else is CRS different from FATCA?
It is not US Centric
Who is CRS intended to apply to?
Financial Institutions that would otherwise fall within the ambit of FATCA.
How many types of financial institution does CRS apply to?
Four
Does are the types of financial institution that CRS applies to, similar to FATCA?
Yes
Other than Depository institutions, Custodial Institutions and Specified insurance companies, who else does CRS apply to?
Investment Entities
Other than Depository institutions, Custodial Institutions and Investment Entities, who else does CRS apply to?
Specified Insurance companies
Other than Depository institutions, specified insurance companies and Investment Entities, who else does CRS apply to?
Custodial Institutions
Other than Custodial Institutions, specified insurance companies and Investment Entities, who else does CRS apply to?
Depository Institutions
How many jurisdictions have committed to exchange information under CRS?
101
When has New Zealand committed to have completed its first exchange of information under CRS by?
30 September 2018
When are New Zealand institutions expected to have commenced due diligence procedures for CRS from?
1 July 2017
How long will the first reporting period under CRS be?
9 months.
When will the first reporting period for CRS finish?
31 March 2018.
Going forward after 31 March 2018, what will the annual reporting period under CRS be till?
31 March each year.
Is having an annual reporting period till 31 March each year under CRS, consistent with FATCA?
Yes
What grace period will be in effect under CRS for the first 2 reporting periods?
3 months
For how many reporting periods will the 3-month grace period be offered under CRS?
2
What is the purpose of the grace period under CRS?
To allow Financial Institutions additional time to conduct due diligence procedures.
Where will any reportable information gathered during the grace period under CRS need to be reported?
In the current year’s AEOI report.
What is currently being developed by the OECD for encrypting and transmitting data between jurisdictions under CRS?
A common IT information exchange system
What is hoped concerning the system compared for CRS with the FATCA reporting system?
That it is more user friendly.
What does Inland Revenue intend to publish periodically with respect to CRS?
A list of participating jurisdictions.
Why does Inland Revenue intend to periodically publish a list of participating jurisdictions under CRS?
To help Financial Institutions identify reporteable accounts.
How could the evolving list of participating jurisdictions under CRS result in increased compliance costs?
Because ongoing monitoring and subsequent updates to due diligence and reporting may be required each time a new jurisdiction signs up for AEOI.
What is proposed to minimize compliance costs under CRS?
A wider approach to due diligence and reporting that allows Financial Institutions to identify all non-resident account holders irrespective of whether the account is from a reportable jurisdiction.
If a wider approach to due diligence and reporting that allows Financial Institutions to identify all non-resident account holders irrespective of whether the account is from a reportable jurisdiction is agreed to under CRS, is it expected to be mandatory?
Yes
What has Inland Revenue proposed to do with the filtering of information if IR mandates that information be required on all non-resident account holders irrespective of whether the account is from a reportable jurisdiction?
To filter the information reported to limit the exchange of information to relevant reportable jurisdictions.
In the event that IR mandates that information be required on all non-resident account holders irrespective of whether the account is from a reportable jurisdiction and agrees to filter the information reported to limit the exchange of information to relevant reportable jurisdictions what likely option will be available to financial institutions?
Financial Institutions will be able to filter the information themselves if they wish.
What issues are IR currently working through with respect to CRS?
What issues are IR currently working through with respect to CRS?
Privacy issues and also whether this information can be used for other purposes such as reviewing non-resident withholding tax rates and compliance.
What options does CRS provide with respect to currency?
Financial Institutions will have choices around the currency used to determine account balance thresholds, to reduce compliance costs.
What has been a focus for many taxpayers concerning FATCA?
Applying the scope of FATCA to various New Zealand trusts.
What is it likely IR will do concerning its FATCA guidance notes concerning trusts?
Update them to clarify any differences to CRS.
What additional guidance does IR plan to publish concerning CRS?
Due diligence procedures, reporting requirements and the application of CRS to particular business structures (e.g. partnerships and collective investment vehicles).
How will the OECD ensure CRS effectively achieves its objective of improving cross-border tax compliance?
Conduct regular peer reviews and other forms of monitoring to ensure that jurisdictions correctly implement the standard and that global consistency is maintained.
What is happening concerning the monitoring of audit activity for FATCA?
This has yet to take effect, although his is expected to change now that the best endeavours period has come to an end.
What is proposed concerning civil penalties under CRS?
They will be civil in nature other than penalties for knowledge based offences.
With respect to civil penalties under CRS what is proposed to promote compliance?
Penalties will be extended beyond reporting Financial Institutions and include account holders and controlling persons.
If to promote compliance penalties are extended beyond reporting Financial Institutions and include account holders and controlling persons, what will this mean for trusts?
Penalties will likely apply to the settlor, trustees and beneficiaries?
If penalties are applied under CRS, will they also likely apply to FATCA?
Yes
A graduate who leaves New Zealand to go on an OE and subsequently becomes a non-resident. In what circumstances might penalties under CRS and FATCA apply here?
If they do not disclose their change in circumstance to each Financial Institution they have an account with
What is the proposed penalty for non-compliance by account holders and controlling persons?
$1,000
In the Acronym ‘AAU’ with respect to the New Zealand Financial Institution obligations, the first ‘A’ stands for iden___ acco____ hel_ by rel_______ for_____ ta_ res_______.
identifying accounts held by relevant foreign tax residents
In the Acronym ‘AAU’ with respect to the New Zealand Financial Institution obligations, the first ‘A’ stands for identify____ account__ held by relev____ forei___ tax resid_____.
identifying accounts held by relevant foreign tax residents
In the Acronym ‘AAU’ with respect to the New Zealand Financial Institution obligations, the first ‘A’ stands for identifying accounts held by _________________.
identifying accounts held by relevant foreign tax residents
In the Acronym ‘AAU’ with respect to the New Zealand Financial Institution obligations, the first ‘A’ stands for ________________ relevant foreign tax residents
identifying accounts held by relevant foreign tax residents
Peter Loerscher
‘I don’t have foreign or non resident clients CRS does not apply“ … is a misconception as the above conclusion can only be a result of your ___________ in which the client need to obtain self certification (E.g. from all trustees, beneficiaries and settlors or other account holders). Remember not documented accounts need to be frozen and reported to IRD by 30 June’
due diligence
Peter Loerscher
‘I don’t have foreign or non resident clients CRS does not apply“ … is a misconception as the above conclusion can only be a result of your due diligence in which the client need to obtain _____________ (E.g. from all trustees, beneficiaries and settlors or other account holders). Remember not documented accounts need to be frozen and reported to IRD by 30 June’
self certification
Peter Loerscher
‘I don’t have foreign or non resident clients CRS does not apply“ … is a misconception as the above conclusion can only be a result of your due diligence in which the client need to obtain self certification (E.g. from all __________________________ or other account holders). Remember not documented accounts need to be frozen and reported to IRD by 30 June’
trustees, beneficiaries and settlors
Peter Loerscher
‘I don’t have foreign or non resident clients CRS does not apply“ … is a misconception as the above conclusion can only be a result of your due diligence in which the client need to obtain self certification (E.g. from all trustees, beneficiaries and settlors or ________________). Remember not documented accounts need to be frozen and reported to IRD by 30 June’
other account holders
Peter Loerscher
‘I don’t have foreign or non resident clients CRS does not apply“ … is a misconception as the above conclusion can only be a result of your due diligence in which the client need to obtain self certification (E.g. from all trustees, beneficiaries and settlors or other account holders). Remember not documented accounts need to be _________ and reported to IRD by 30 June’
frozen
Peter Loerscher
‘I don’t have foreign or non resident clients CRS does not apply“ … is a misconception as the above conclusion can only be a result of your due diligence in which the client need to obtain self certification (E.g. from all trustees, beneficiaries and settlors or other account holders). Remember not documented accounts need to be frozen and ____________ by 30 June’
reported to IRD
Peter Loerscher
‘I don’t have foreign or non resident clients CRS does not apply“ … is a misconception as the above conclusion can only be a result of your due diligence in which the client need to obtain self certification (E.g. from all trustees, beneficiaries and settlors or other account holders). Remember not documented accounts need to be _____________________________ by 30 June’
frozen and reported to IRD
These types of financial institutions are broadly similar to FATCA. Apart from more obvious entities such as banks, this can also include non-bank deposit takers, collective investment entities, mutual funds, private equity funds, hedge funds, investment managers and advisors, and certain brokers and trusts (including some ________________). You can find more information in the Inland Revenue guidance Section 11 “Application of CRS to particular types of entities and structures”.
https://www.ird.govt.nz/international/exchange/crs/financial-institutions/#02
managed family trusts
Example 1: A family trust has the following assets: • shares; • bonds; • a rental property; and • units in various Reporting NZFI unit trusts (that are managed investment schemes). The family trust derives 80% of its income from the shares, bonds and units over the specified period. The family trust derives the other 20% of its income from its rental property.
Is the family trust a financial institution?
____: The family trust is not in business. Therefore, the only way that it could be a financial institution is if it is a managed investment entity. The trust derives its income primarily (50% or more) from financial assets (the shares, bonds and units) over the specified period. However, the trust is not managed by a financial institution. It is important to note, in this regard, that the fact that the trust holds units in various Reporting NZFI unit trusts does not mean that those unit trusts manage the trust. Therefore, the trust is not a managed investment entity. This means that it is not a financial institution.
https://www.ird.govt.nz/resources/c/e/ce0dd7f2-3e73-4103-833a-1d6dea19b37d/crs-guidance-final.pdf
No
Example 2: The facts are the same as example 1. However, the trustee of the trust is concerned that the trust is not getting a good return from its investments in shares and bonds. Therefore, the trustee decides to engage a Reporting NZFI discretionary investment service provider (DIMS provider) to manage the trust’s investments in shares and bonds. The trustee provides the Reporting NZFI with discretionary authority to buy and sell shares and bonds within the parameters of an agreed mandate.
Is the family trust a financial institution?
______: The family trust derived its income primarily from financial assets (the shares, bonds and units) over the specified period. The trust’s assets are also managed (in part) by the Reporting NZFI (the DIMS provider). Therefore, the trust is a managed investment entity financial institution.
https://www.ird.govt.nz/resources/c/e/ce0dd7f2-3e73-4103-833a-1d6dea19b37d/crs-guidance-final.pdf
Yes
- 2.1.2 Family trusts that are _____ account holders If a family trust is not a financial institution it will be a ____ (by default). If a ____ family trust holds an account with a Reporting NZFI they will be subject to due diligence by that NZFI. This means that they (along with other persons connected to the trust) may be asked to provide a self-certification and other information about whether they are a relevant foreign tax resident (or whether any of the controlling persons are relevant foreign tax residents) to assist the Reporting NZFI with its own due diligence, and may be subject to penalties if they fail to provide the information within a reasonable period of time. This is outlined in detail in section
https: //www.ird.govt.nz/resources/c/e/ce0dd7f2-3e73-4103-833a-1d6dea19b37d/crs-guidance-final.pdf
NFE
- 2.1.2 Family trusts that are NFE account holders If a family trust is not a financial institution it will be a NFE (by default). If a NFE family trust holds an account with a Reporting NZFI they will be subject to due diligence by that NZFI. This means that they (along with other persons connected to the trust) may be asked to provide a ________________ and other information about whether they are a relevant foreign tax resident (or whether any of the controlling persons are relevant foreign tax residents) to assist the Reporting NZFI with its own due diligence, and may be subject to penalties if they fail to provide the information within a reasonable period of time. This is outlined in detail in section
https: //www.ird.govt.nz/resources/c/e/ce0dd7f2-3e73-4103-833a-1d6dea19b37d/crs-guidance-final.pdf
self-certification
- 2.1.2 Family trusts that are NFE account holders If a family trust is not a financial institution it will be a NFE (by default). If a NFE family trust holds an account with a Reporting NZFI they will be subject to due diligence by that NZFI. This means that they (along with other persons connected to the trust) may be asked to provide a self-certification and other information about whether they are a relevant _________________ (or whether any of the controlling persons are _________________) to assist the Reporting NZFI with its own due diligence, and may be subject to penalties if they fail to provide the information within a reasonable period of time. This is outlined in detail in section 9.1.1.
https: //www.ird.govt.nz/resources/c/e/ce0dd7f2-3e73-4103-833a-1d6dea19b37d/crs-guidance-final.pdf
relevant foreign tax resident
