An Account Holder is the person listed or identified as the holder of a Financial Account. Where a Financial Account is held jointly, each joint holder is treated as an Account Holder.
If a trust or an estate is listed as the owner of a Financial Account, it is the trust or estate that is the Account Holder and not the beneficiaries of the trust or estate.
If an entity, that is not a Financial Institution, holds a Financial Account for the benefit of another entity, as agent, custodian, nominee or signatory, the Account Holder is the entity for which the Financial Account is held.
Generally beneficiaries are individuals and entities that have a right to receive a distribution from a fixed trust or the right to be considered for a distribution from a discretionary trust. Under the CRS, an individual or entity may only be considered to be a beneficiary of a discretionary trust in the year(s) that they receive a distribution. In relation to charitable trusts, the beneficiaries will generally be individuals and entities that receive grants (or other distributions).
Controlling Person
A Controlling Person is a natural person that exercises control over an entity. Some persons connected to an entity are deemed to be Controlling Persons even if they do not have actual control.
For instance in the case of a trust, a Controlling Person will be the settlor, the trustees, the protector (if any), the beneficiaries and any other natural person that exercises ultimate effective control. In the case of another entity it could be any person in an equivalent position, for instance a director who exercises ultimate effective control.
Due diligence
Due diligence is the procedure a Financial Institution has to go through to determine if its Financial Accounts are Reportable Accounts. The due diligence procedure will require a Financial Institution to review all existing accounts (and where necessary obtain a self-certification), and obtain a self-certification for each new account, to determine if a Financial Account is reportable.
A Financial Account is an account maintained by a Financial Institution. For a Financial Institution that is an Investment Entity, a Financial Account is any equity or debt interests in the Financial Institution.
Financial Account also includes a depository account, a custodial account, a cash value insurance contract, and an annuity contract.
It does not include an excluded account.
Financial Assets
For the purposes of the CRS, Financial Assets include:
- securities, which includes
- a share of stock in a corporation
- partnership of beneficial ownership interest in a widely held or publicly traded partnership or trust
- note, bond, debenture, or similar
- partnership interests
- commodities
- swaps
- insurance contract or annuity contract
- interests (including futures contracts and options) in any of the above.
A Financial Institution means:
- a Custodial Institution; an entity that holds, as a substantial part of its business, financial assets for the account of others
- a Depository Institution; an entity that accepts deposits in the ordinary course of a banking or similar business
- an Investment Entity; an entity that receives 50% or more of its gross income from the following activities and they either undertake these activities as a business or engage another professional entity to manage these activities for them
- trading in money market instruments
- foreign exchange, exchange, interest rate and index instruments
- transferrable securities
- commodities futures trading
- individual and collective portfolio management
- otherwise investing, administering or managing financial As assets or money
- a Specified Insurance Company; an entity that is an insurance company that issues, or makes payments with respect to, a cash value insurance contract or an annuity contract.
Passive income
Income in respect of which the recipient does not participate in a business activity giving rise to the income. It includes, but is not limited to, dividends, interest, annuities, rental income and royalties.
Passive non-financial entity (NFE)
A Passive NFE is either:
- an entity that is not an Active NFE
- a professionally managed investment entity.
An entity is an Active NFE if less than 50% of its income is passive income and less than 50% of its assets are held for the production of passive income.
Reportable Account
A Reportable Account refers to a Financial Account that is held by a Reportable Person or a Passive NFE with a Controlling Person who is a Reportable Person, which has been identified through the due diligence procedures.
Reportable Person
A Reportable Person is an individual or entity that is a tax resident in a foreign country, or an estate of a decedent that was a resident of a foreign country. A Reportable Person does not include:
- a corporation the stock of which is regularly traded on one or more established security markets
- a related entity of a corporation described in the above point
- a government entity
- an international organisation
- a central bank
- a Financial Institution.
Self-certification involves a Financial Institution requesting information from an Account Holder (or in certain circumstances, the Controlling Person of a Passive NFE) for any of the following purposes:
- to determine if the Account Holder is a Reportable Person
- to determine if the entity is a Passive NFE
- to determine if the Controlling Person(s) of a Passive NFE is a Reportable Person
- to collect information for reporting purposes where required.
An aspect of Self-certification requires an Account Holder to answer questions about its residency status.
A settlor of a trust will have an equity interest in the trust. Further, a donor to the trust may also be considered a settlor. This will only occur when the donor gives a conditional donation, for example, they specify what the donation must be used for.
Under the Common Reporting Standard, NFP financial institutions must report information on foreign tax residents.