Guidance on the Common Reporting Standard for …

1 Guidance on the Common Reporting Standard For Automatic Exchange of Information June 2017 IN CONFIDENCE Page 1 of 165 Contents Disclaimer .. 6 Background .. 7 Overview of the Common Reporting Standard for the Automatic Exchange of Information .. 7 Use of information by Inland Revenue .. 9 Purpose of this Guidance .. 9 High level summary of CRS due diligence and Reporting obligations .. 11 CRS due diligence incorporating the wider approach .. 12 CRS Reporting reportable accounts and undocumented accounts.

2 12 Meaning of account holder and controlling person for CRS purposes .. 14 Meaning of account holder for the purposes of CRS due diligence .. 14 Identifying controlling persons for the purposes of CRS due diligence .. 16 Options that a Reporting NZFI can adopt for CRS purposes .. 18 Ability for a Reporting NZFI to use Anti-Money Laundering/Know Your Customer procedures and FATCA procedures for Common Reporting Standard purposes .. 18 Penalties and anti-avoidance .. 19 Roadmap for the following Guidance .

3 20 2 Reporting NZFIs for CRS purposes .. 20 Types of financial institutions .. 20 Custodial institution .. 21 Depository institution .. 22 Investment entity .. 23 Specified insurance company .. 28 Circumstances when a financial institution will be a New Zealand Financial Institution .. 32 Circumstances when a NZFI will be a Reporting New Zealand Financial Institution .. 33 Circumstances when a NZFI will be a Non- Reporting New Zealand Financial Institution .. 33 Financial institutions that the CRS defines as being Non- Reporting Financial Institutions.

4 34 Financial institutions that implementing jurisdictions can treat as Non- Reporting Financial Institutions (excluded entities) .. 35 The financial institution presents a low risk of being used to evade tax .. 35 The financial institution has substantially similar characteristics to any of types of institutions described in section VIII(B)(1)(a) or (b) of the Common Reporting Standard .. 36 IN CONFIDENCE Page 2 of 165 What financial accounts are subject to CRS due diligence? .. 37 Depository account .. 38 Annuity contract.

5 39 Cash value insurance contract .. 39 Custodial account .. 40 Equity or debt interest .. 40 Equity or debt interest in an investment entity .. 40 Equity or debt interest in another type of financial institution .. 41 What accounts are excluded from being financial accounts ? .. 42 Accounts that the CRS explicitly defines as excluded accounts .. 42 Accounts that can be treated as Excluded Accounts .. 42 What does the CRS due diligence process involve? .. 45 High level overview of the CRS due diligence process.

6 45 Detailed outline of due diligence procedures .. 50 Pre-existing individual accounts .. 50 Overview .. 50 CRS due diligence procedures for lower-value pre-existing individual accounts .. 52 CRS due diligence procedures for high-value pre-existing individual accounts balance or value that exceeds USD 1,000,000 as of 30 June 2017 or any subsequent 31 March .. 57 New individual accounts .. 60 Form of self-certification .. 61 Obtaining a valid self-certification on account opening .. 62 Changes in circumstances.

7 69 Pre-existing entity accounts .. 69 Whether the entity is a relevant foreign tax resident .. 70 Whether the entity account holder is a passive non-financial entity .. 73 When an entity account holder is a passive non-financial entity identifying controlling persons .. 75 Timeframe for completion of initial due diligence and Reporting .. 80 Record-keeping requirements .. 80 Change in circumstances .. 80 New entity accounts .. 81 Whether the entity is a relevant foreign tax resident .. 81 Whether the entity is a passive non-financial entity.

8 83 When an entity account holder is a passive non-financial entity identifying controlling persons .. 84 Record-keeping requirements .. 89 Change in circumstances .. 89 IN CONFIDENCE Page 3 of 165 Outline of the CRS information that needs to be reported .. 89 Identity information that Reporting NZFIs will need to report for a reportable account 90 Financial account information that Reporting NZFIs will need to report for a reportable account .. 92 Format that a Reporting NZFI can use for Reporting CRS information.

9 95 7 Information regarding how to report your CRS information will be made available from the Inland Revenue website from March 2018 in time for the first CRS Reporting period.. 95 CRS record-keeping obligations .. 95 Obligation to keep and retain records .. 95 Records to be in English and retained in New Zealand .. 96 Period of retention of records .. 97 Publicly available information .. 97 Due diligence documentary evidence .. 98 Self-certifications .. 98 Reasonable efforts to obtain a TIN .. 100 Penalties regime.

10 101 Penalties regime financial institutions .. 101 Civil absolute liability penalties .. 101 Criminal knowledge-based penalties .. 105 Penalties regime information providers .. 106 Civil penalties .. 108 Criminal knowledge-based penalties .. 109 CRS requirement to have an avoidance provision .. 110 New Zealand s anti-avoidance provision .. 111 What constitutes an arrangement under section 185R(1) .. 111 What is meant by a main purpose of a person in entering into such an arrangement being to avoid a requirement under Part 11B.