Chapter 3 - Phasing of implementation

3.1 The G20 views implementation of AEOI by jurisdictions on consistent timelines as critical to the success of the multilateral effort. As noted, if any relevant jurisdictions fail to meet the implementation timetable, the risk is that the tax evasion problem will simply relocate to that jurisdiction. Accordingly, the G20 has set a deadline for first exchanges of information by 30 September 2018 at the latest. This deadline applies to all OECD member countries, G20 member countries, and any other jurisdiction that has, or that operates as, an international finance centre.

3.2 Some countries (referred to as “early adopters”) are implementing even earlier, with first exchanges planned for 2017. However, the majority of countries are working towards 30 September 2018 as their ultimate deadline.

3.3 In preliminary consultation in 2014, we received a number of submissions from financial institutions that indicated a strong preference for New Zealand not to implement earlier than Australia.

3.4 The Government decided on 15 February 2016 that New Zealand will implement AEOI on a timeline that would allow Inland Revenue to start exchanging information with other tax authorities by September 2018, in line with our international obligations under AEOI. Due diligence and reporting requirements for financial institutions will begin to apply from 1 July 2017, rather than from 1 January 2018 as earlier indicated.

3.5 This timeline parallels that announced by Australia at the end of last year, and included in the Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015, introduced on 3 December 2015. We also understand that it is also consistent with the approach Canada is taking to implementation timing.

3.6 Officials have considered transitional arrangements for financial institutions to help reduce the compliance costs of implementing AEOI as a 1 July timeline within the constraints imposed by the CRS and with a view to international scrutiny and peer review. Officials are seeking public views on these potential transitional measures.

3.7 To that end, we are proposing phased implementation, with the following indicative timeline showing deadlines for major milestones:

1 July 2017

• New Zealand reporting financial institutions commence applying due diligence procedures in respect of all non-exempt new accounts. (In broad terms, “new” accounts will be accounts opened on or after 1 July 2017.)

Early or mid-2018[29]

• New Zealand reporting financial institutions complete due diligence reviews of all non-exempt High Value Pre-Existing Individual Accounts.[30]

Mid-2018

• Reporting financial institutions complete their reporting to Inland Revenue in respect of reportable accounts and undocumented accounts identified in respect of the due diligence carried out in the period.

30 September 2018

• Tax administrations complete the exchange[31] of information in respect of information reported during 2018.

Early or mid-2019[32]

• New Zealand reporting financial institutions complete due diligence reviews of all non-exempt pre-existing entity accounts.
• New Zealand reporting financial institutions complete due diligence reviews of all non-exempt low value pre-existing individual accounts.

Mid-2019

• New Zealand reporting financial institutions complete reporting to Inland Revenue in respect of reportable accounts and undocumented accounts identified in respect of the due diligence carried out in the period.

30 September 2019

• Tax administrations complete the exchange of information in respect of information reported during 2019.

3.8 A key point to note is that under this approach, the initial focus is solely on completing due diligence reviews of high value pre-existing individual accounts and new accounts (opened in the first period). That is, the deadline for completing due diligence reviews of pre-existing entity accounts is the same as that for completing due diligence reviews of low-value pre-existing individual accounts. The due diligence reviews of entity accounts is expected to be more complex than due diligence of individual accounts. (Please note that these procedures and terms are elaborated on in the Appendix and Glossary to this issues paper.)

3.9 A second key point under the above approach is that the deadline for completing due diligence of high value pre-existing individual accounts is itself likely to be deferred. Under the G20 indicative timing, these reviews would need to be completed by 31 December 2017. However, given that the first deadline for reporting the information is mid-2018, officials are exploring the option of allowing until mid-2018 for the completion of the due diligence reviews. We expect that this would reduce compliance costs.

29 This is an indicative time-frame. The relevant dates for the timing of due diligence and reporting will be set out in the implementing legislation.

30 The CRS sets threshold options for determining whether an account is a high value or lower value account. The threshold options are canvassed in Chapter 5 of this issues paper and the distinction between high value and lower value accounts is elaborated on in the Appendix.

31 This is subject to the potential application of the “wider” approach which is canvassed in Chapter 2 of this issues paper.

32 This will depend on the timing for due diligence and reporting to be set out in the implementing legislation.