Appendix

Summary of CRS Due Diligence Procedures that New Zealand reporting financial institutions will need to carry out on non-exempt financial accounts that they maintain (based on the indicative implementation time-line)

New Zealand reporting financial institutions need to carry out CRS due diligence on their non-exempt accounts to identify whether the accounts are either reportable accounts or undocumented accounts.

These procedures vary depending on whether the account is a pre-existing account or a new account and whether the account is held by an individual or an entity. In broad terms, a pre-existing account will be an account opened immediately before the date of implementation of the CRS (30 June 2017) and a new account will be an account opened on or after the date of implementation of the CRS (1 July 2017). These procedures are summarised briefly below. (These procedures are subject to the resolution of a number of the consultation points set out in this paper – for example, the optional threshold exemption from due diligence for pre-existing entity accounts with a balance or value of US $250,000 or less and should be read in this context).

Individual accounts

Pre-existing individual accounts (accounts maintained as of 30 June 2017)

A New Zealand reporting financial institution will need to carry out CRS due diligence on non-exempt pre-existing individual accounts that they maintain to determine whether those accounts are held by reportable persons, and, therefore, are reportable accounts (or whether the accounts are undocumented accounts).

There are two types of pre-existing individual accounts (lower value accounts and high value accounts) that are subject to different due diligence procedures. Lower value accounts are pre-existing individual accounts with an aggregate balance or value that does not exceed US $1,000,000 at a date to be set out in implementing legislation. High value accounts are pre-existing individual accounts with an aggregate balance or value that exceeds US $1,000,000 at dates to be set in implementing legislation.

In broad terms, these due diligence procedures will involve the New Zealand reporting financial institution applying various procedures to its financial accounts to search for defined indicia (for example, one such indicia is a current mailing or residence address in a reportable jurisdiction) that the account holder is tax resident in a reportable jurisdiction and is a reportable person. This indicia if found (including if there is a subsequent change of circumstances that results in any indicia being associated with the account) will lead to a presumption that the Individual is tax resident in each reportable jurisdiction for which an indicium is identified and is a reportable person with the account being a reportable account with respect to each reportable jurisdiction (unless this presumption is “cured” through a combination of self-certifications and documentary evidence, which applies in certain defined circumstances). These due diligence procedures are generally more extensive for high value accounts (as set out below) and such accounts are also subject to a special provision which applies to accounts that are assigned to a relationship manager.

Lower value accounts

For lower value accounts there is scope for a participating jurisdiction to allow reporting financial institutions to apply a residence address test (in certain defined circumstances) as one such type of indicia to determine whether an account holder is tax resident in a reportable jurisdiction and is a reportable person. For example, if this approach is permitted, the New Zealand reporting financial institution would be able to review its records for a current residence address for the individual account holder based on documentary evidence and treat the individual account holder as being a resident for tax purposes of the jurisdiction in which the address is located for the purposes of determining whether they are a reportable person.

If the reporting financial institution does not rely on a current residence address in this way, they will need to review electronically searchable data that they maintain for various indicia that the account holder is tax resident in a reportable jurisdiction and is a reportable person (for example, one such indicia is a current mailing or residence address in a reportable jurisdiction).

This indicia (if found) will lead to a presumption that the individual is tax resident in each reportable jurisdiction for which an indicium is identified and is a reportable person with the account being a reportable account with respect to each reportable jurisdiction (unless this presumption is “cured” through a combination of self-certifications and documentary evidence to the contrary, which applies in certain defined circumstances). The New Zealand reporting financial institution will need to report such reportable accounts.

If a “hold mail” instruction or “care of” address is discovered in the electronic search and no other defined indicia are identified for the account holder, the New Zealand reporting financial institution will need to apply various defined procedures to establish the account holder’s residence for tax purposes. If the New Zealand reporting financial institution is unable to do this they will need to report the account as an undocumented account.

High value accounts

For high value accounts the New Zealand reporting financial institution will need to review electronically searchable data that they maintain for various indicia that the account holder is tax resident in a reportable jurisdiction and is a reportable person (for example, one such indicia is a current mailing or residence address in a reportable jurisdiction). A paper-based search of further defined documents associated with the account is also required in certain circumstances.

This indicia (if found) will lead to a presumption that the individual is tax resident in each reportable jurisdiction for which an indicium is identified and is a reportable person with the account being a reportable account with respect to each reportable jurisdiction (unless this presumption is “cured” through a combination of self-certifications and documentary evidence to the contrary). The New Zealand reporting financial institution will need to report such reportable accounts.

If a “hold mail” instruction or “in care of” address is discovered in the electronic search and no other defined indicia are identified for the account holder, the New Zealand reporting financial institution will need to apply various defined procedures to establish the account holder’s residence for tax purposes. If the New Zealand reporting financial institution is unable to do this they will need to report the account as an undocumented account.

In addition to the electronic and paper record searches described above, the New Zealand reporting financial institution will also need to treat as a reportable account any high value account assigned to a relationship manager (including any financial accounts aggregated with that high value account) if the relationship manager has actual knowledge that the account holder is a reportable person.

New individual accounts (accounts opened on or after 1 July 2017)

A New Zealand reporting financial institution will also need to carry out CRS due diligence on non-exempt new individual accounts that they maintain to determine whether those accounts are held by reportable persons.

New individual accounts will require self-certification upon account being opened in the account holder’s jurisdiction of residence for tax purposes and confirmation by the New Zealand reporting financial institution of the reasonableness of this self-certification based on the information that they have obtained in connection with the opening of the account, including any documentation collected pursuant to AML/KYC Procedures. (A New Zealand reporting financial institution will also be required to obtain a further self-certification if there is a change in circumstances that causes them to know or have reason to know that the original self-certification is incorrect or unreliable.)

If the self-certification establishes that the account holder is resident for tax purposes in a reportable jurisdiction, the reporting financial institution will need to treat the account as a reportable account and report the account.

Entity accounts

Pre-existing entity accounts (accounts maintained as of 30 June 2017)

A New Zealand reporting financial institution will also need to carry out CRS due diligence on non-exempt pre-existing entity accounts that they maintain to determine whether those accounts are held by reportable persons and/or are held by passive NFEs that have one or more controlling persons that are reportable persons. If an account is identified as being held and/or having one or more controlling persons that are reportable persons (in this way) the account will be a reportable account and will need to be reported. (There is scope for a participating jurisdiction to exempt from this review/reporting pre-existing accounts that have a balance or value that does not exceed US $250,000 at defined dates set out in legislation).

These procedures will generally involve the New Zealand reporting financial institution reviewing information that they already have (and sometimes obtaining self-certifications) to determine whether the account is a reportable account.

New entity accounts (accounts maintained as of 1 July 2017)

A New Zealand reporting financial institution will also need to carry out CRS due diligence on non-exempt new entity accounts that they maintain to determine whether those accounts are held by reportable persons and/or are held by passive NFEs that have one or more controlling persons that are reportable persons. If an account is identified as being held and/or having one or more controlling persons that are reportable persons (in this way) the account will be a reportable account.

These procedures will generally involve the New Zealand reporting financial institution obtaining a self-certification from the account holder (or controlling person, in the case of a passive NFE) of their tax residence, albeit that there is scope for the reporting financial institution to sometimes reasonably determine the status of the account based on information in their possession or that is publicly available in defined circumstances.