Compliance Reporting Standard terms
|Account holder||The “person” (individual or entity) listed or identified as the holder of a financial account by the reporting financial institution that maintains the account. There is also a look-through rule that applies where a person (other than a financial institution) holds a financial account for another person as agent or nominee (or similar), where that other person is treated as the account holder.|
|AEOI||“Automatic Exchange of Information”: refers to the automatic exchange of information between tax authorities.|
|Aggregation rules||For purposes of determining the aggregate balance or value of financial accounts held an individual or entity, a reporting financial institution is required to aggregate all financial accounts that it (or a related entity) maintains on that individual or entity, but only to the extent that its computerised systems link the financial accounts by reference to a common data element such as client number or TIN, that allows account balances or values to be aggregated.
Special aggregation rules also apply to jointly held financial accounts, and to pre-existing individual high value accounts with relationship managers.
|AML/KYC||“Anti-Money Laundering / Know Your Client” procedures means the customer due diligence procedures of a reporting financial institution per the anti-money laundering or similar requirements. Information exchanged in the CRS often leverages off information obtained under such procedures.|
|Controlling person||Usually refers to controlling persons of passive NFEs, being a natural person who exercises control over an entity that is a legal person (for example, company) or a legal arrangement (for example, trust). Where no natural person(s) is identified as exercising control, the controlling person(s) of the entity are the natural person(s) who hold the position of senior managing official.
For a trust, this means: any settlor(s), trustee(s), protector(s), beneficiary(ies) or class(es) of beneficiaries, and any other natural person(s) exercising ultimate effective control over the trust. Such persons must always be treated as controlling persons of a trust, regardless of who exercises actual control over the trust.
|Commissioner||The Commissioner of Inland Revenue.|
|Competent authority||In the context of international tax treaties and AEOI, the Competent Authority is usually the head (or delegate) of the tax authority of the relevant contracting state. The Competent Authority in New Zealand is the Commissioner of Inland Revenue (or his or her delegate).|
|CRS||The Common Standard on Reporting, Due Diligence and Exchange of Information on Financial Account Information (in short, the Common Reporting Standard) that forms part of the global standard for Automatic Exchange of Financial Account Information in Tax Matters.|
|CRS Commentaries||OECD’s Commentaries on the CRS.|
|CRS schema||OECD’s approved XML schema for CRS electronic exchange of information.|
|Custodial institution||Any entity that holds, as a substantial portion of its business (generally 20% or more of its annual gross income), financial assets of others.|
|Depository institution||Any entity that accepts deposits in the ordinary course of a banking or similar business.|
|Documentary evidence||Documentary evidence for CRS includes:
|Due diligence||Processes and procedures required for reporting financial institutions to identify reportable accounts and undocumented accounts. This involves determining tax residence (generally based on indicia, account information, or self-certifications, depending on the type of account) of account holders and controlling persons (in the context of passive NFEs) and collecting reportable account information about reportable accounts.|
|Entity||Includes a “legal person” (for example, company,) or a “legal arrangement” (for example, trust). Does not include an individual.|
|Excluded accounts||Financial accounts that are not subject to due diligence or reporting under the CRS. Usually this is because the type of financial account presents a low risk of being used to evade tax and comes within a defined category of excluded account.|
|FATCA||Foreign Account Tax Compliance Act: United States law for global automatic exchange of information with the United States.|
|Financial account||An account maintained by a reporting financial institution and includes certain: depository accounts; custodial accounts; equity and debt interests; cash value insurance contracts; and annuity contracts.|
|Financial asset||Includes financial securities (for example, shares and other equity interests; notes, bonds, debentures, and other debt interests; partnership interests, commodities, swaps, insurance contracts, annuity contracts, or any other interest (including a futures or forward contract or option) in a security, partnership interest, commodity, swap, insurance contract, or annuity contract. The term does not include a non-debt, direct interest in real property.|
|Financial institution (FI)||The definition includes: a “Depository Institution”; a “Custodial Institution”; an “Investment Entity”; or a “Specified Insurance Company”. Apart from the more obvious entities, such as banks, this definition includes other financial institutions such as certain brokers, custodians, collective investment vehicles, managed entities, and insurance companies.|
|GIIN||The Global Intermediary Identification Number is the US FATCA registration and reporting number issued by the United States’ Internal Revenue Service to foreign financial institutions.|
|IGA||An Inter-Governmental Agreement between a jurisdiction and the United States for US FATCA reporting purposes.|
|Implementation Handbook||OECD Implementation Handbook.|
|Indicia||Defined indications that an individual or entity may be tax resident in another jurisdiction (for example, physical or mailing address, phone numbers, standing instructions, etc relating to that jurisdiction).|
|Individual||A natural person.|
|Investment entity||Any entity that primarily conducts a business of specified investment activities for customers or is managed by a certain type of financial institution and derives income primarily from investing, reinvesting, or trading in financial assets (and is not a type of active NFE that is specifically excluded from the definition of investment entity).|
|MCAA||Multilateral Competent Authority Agreement.|
|Multilateral Convention||Multilateral Convention on Mutual Administrative Assistance in Tax Matters.|
|Natural person||A natural person (that is, an individual, as opposed to an entity).|
|New accounts||Includes new financial accounts opened on or after the date of implementation of the CRS.|
|NFE||A non-financial entity: generally covers any entity other than a financial institution. NFEs are classified as “active” or “passive”. Passive NFEs (and any of their controlling persons who are reportable persons) are the only NFEs that are subject to CRS reporting.|
|Non-reporting financial institution||A financial institution that is not required to carry out due diligence on its financial accounts nor report for CRS purposes. This is usually because the type of financial institution presents a low risk of being used to evade tax and comes within a category of non-reporting financial institution.|
|OECD||Organisation for Economic Co-operation and Development.|
|Participating jurisdiction||A jurisdiction with which an agreement is in place with another jurisdiction by which they will exchange CRS information and which is identified in a published list.|
|Passive income||Passive income generally includes non-trading investment income in the form of: interest or equivalents, dividends, annuities, other financial arrangements’ income, and rents and royalties. This term may be modified by domestic law.|
|Passive NFE||A NFE is generally treated as “passive” if, in the preceding reporting period, 50% or more of its gross income is passive income, or 50% or more of its financial assets held produce passive income. A passive NFE also includes certain investment entities that are not participating jurisdiction financial institutions.
Note, certain entities (for example, registered charities) are treated as active NFEs irrespective of whether they derive predominantly passive income from passive assets.
|Related entity||An entity is a “related entity” of another entity if either controls the other, or the entities are under common control. “Control” includes direct or indirect ownership of more than 50% of the voting and value in an entity. There is scope for participating jurisdictions to adopt an expanded definition of “related entity”.|
|Reportable account||Certain financial accounts held or controlled by non-resident persons that are resident in a reportable jurisdiction, including those held by a reportable person (individual or entity); and those held by a passive NFE with one or more controlling persons that is a reportable person.|
|Reportable account information||Information which reporting financial institutions are generally required to report with respect to each reportable account which comprises of personal data (for example, name, address, residence, TIN, etc) and financial data (for example, interest or dividend income and balances, values of certain insurance products, sales proceeds from financial assets, etc).|
|Reporting financial institution||Generally any Financial Institution that is not a non-reporting financial institution, and is therefore required to carry out due diligence on its non-exempt financial accounts and report under the CRS if it has any reportable accounts or undocumented accounts.|
|Reportable jurisdiction||An overseas jurisdiction that has an agreement with New Zealand to exchange CRS information and is identified in a published list.
There is also scope for a participating jurisdiction to treat any non-resident jurisdiction as being a “reportable jurisdiction”. This is known as the “wider approach” to CRS, which is one of the issues consulted upon in this issues paper.
|Reportable person||Is a reportable jurisdiction person other than: a company the shares of which are regularly traded on an established securities market (including any related company); a governmental entity; an international organisation; a central bank; or a financial institution.
There is also scope for a participating jurisdiction to treat a controlling person of a passive NFE account holder that is resident in that Jurisdiction as also being a “reportable person”, which is also one of the issues consulted upon in this issues paper.
|Reportable jurisdiction person||Generally an individual or entity that is resident in a reportable jurisdiction under the tax laws of such Jurisdiction, or an estate of a decedent that was resident of a reportable jurisdiction. An exception is an entity such as a partnership, limited liability partnership or similar legal arrangement that has no residence for tax purposes which shall be treated as resident in the jurisdiction in which its place of effective management is situated.|
|Self-certification||A reporting financial institution requesting an account holder (and in certain circumstances a controlling person) to certify their identity and tax residency and obtaining such a certification.|
|Specified insurance company||Any entity that is an insurance company (or the holding company of one) that issues, or is obligated to make payments with respect to, a cash value insurance contract or an annuity contract.|
|TAA||Tax Administration Act 1994.|
|Tax residency||This is based on where an individual or entity is tax resident under the law of a jurisdiction.|
|TIN||“Taxpayer Identification Number” (or functional equivalent in the absence of a TIN). A TIN is assigned and used by a jurisdiction to identify an individual or an entity.|
|Undocumented account||Undocumented accounts generally arise when a reporting financial institution is unable to obtain information from an account holder regarding pre-existing accounts. This can result from inadequate procedures implemented by a reporting Financial Institution to obtain the necessary information, or from non-compliance by the account holder.|