OECD Common Reporting Standard Seminar - …

1 OECD Common Reporting StandardSeminarDeloitte: Chris Tragheim, Tom Shave, Martin Killer & Owen GibbsSeptember 2015 2015 Deloitte LLP. All rights are we now? 2015 Deloitte LLP. All rights regulatory landscapeCRS is the culmination of recent growth in tax information exchange regulations globally The world is becoming a much smaller place for those who want to hide themselves and their assets behind anonymous corporate structures Richard Summersgill, HMRC s director of criminal investigation Co-operation between tax administrations is critical in the fight against tax evasion and in protecting the integrity of tax systems.

2 A key aspect of that co-operation is exchange of information The OECD 2015 Deloitte LLP. All rights regulatory landscapeOver 90 jurisdictions have committed to CRSE U R O P E , M I D D L E E A S TAND A F R I C AA M E R I C A SA S I A P A C I F I CAustraliaBrunei DarussalamChinaHong KongIndiaIndonesiaJapanSouth Korea*MacauMalaysiaMarshall IslandsNew ZealandNiueSamoaSingaporeAnguilla*Antigu a and BarbudaArgentina*ArubaBahamasBarbadosBel izeBermuda*BrazilBritish Virgin Islands*CanadaCayman Islands*ChileColombia*Costa RicaCura ao*DominicaGrenadaMexico*Montserrat*Sain t Kitts and NevisSaint LuciaSaint Vincent and the GrenadinesSaint MartinTrinidad and TobagoTurks and Caicos Islands*UruguayAlbaniaAndorraAustriaBelg ium*BulgariaCroatia*Cyprus*Czech

3 Republic*Denmark*Estonia*Faroe Islands*Finland*France*Germany*GhanaGibr altar*Greece*GreenlandGuernsey*Hungary*I celand*Ireland*Isle of Man*IsraelItaly*Jersey*Latvia*Liechtenst ein*Lithuania*Luxembourg*Malta*Mauritius *MonacoNetherlands*Norway*Poland*Portuga l*QatarRomania*RussiaSan Marino*Saudi ArabiaSeychellesSlovak Republic*Slovenia*South Africa*Spain *Sweden*SwitzerlandTurkeyUnited Kingdom*United Arab Emirates*Signatories of multilateral CAA signed in Berlin; source: 2015 Deloitte LLP. All rights regulatory landscapeCRSwill require increased Reporting on a greater number of customers compared to FATCA5UK Financial InstitutionHMRCUS & UK FATCA ReportingUSJEUS customerJE customerDE customerIT customerJE PersonUS PersonUS FATCA and UK CDOTUK Financial InstitutionHMRCUS & UK FATCA ReportingUSJEUS customerJE customerDE customerIT customerJE PersonUS PersonUS FATCA and OECD CRSCRS ReportingITDEIT PersonDE Person 2015 Deloitte LLP.

4 All rights regulatory timelineCRS is being implemented on a very short timeframe and is expected to replace UK FATCA6 CRSUS FATCAGo live: 01/07/14UK FATCA2014201520162017 May (in UK)Annual ReportingTaken over by CRS on 01/01/16?Go live: 01/01/16 CRSC ompetent Authority AgreementCommon Reporting StandardCAA/CRS ManualOECD SchemaEU DACCRS regulatory mechanismsCRS encompasses several key elements which form the legal basis for exchange and outline the requirements for FIs 2015 Deloitte LLP. All rights guidanceLocal schemasLegislation setting out annual audit requirementsInformation yet to be released 2015 Deloitte LLP.

5 All rights HMRC AEI ManualThe HMRC Automatic Exchange of Information ( AEI ) Manual was released on 17 September 20158 HMRC AEI MANUALAll regimes have significant Common requirements so the HMRC Manual concentrates on the requirements of DAC and CRS and highlights differences that apply under the other two regimesUK CDOT Annual Reporting by UK FIs on CD and GibPersons Annual Reporting by CDOT FIs on UK Persons. US FATCA Annual Reporting on US PersonsDAC EU Directive that provides a legal basis for EU Member States to exchange information under the CRSCRS OECD global Standard for exchange of information Annual Reporting by FIs on Persons resident in 90+ counterparty jurisdictions 2015 Deloitte LLP.

6 All rights complianceReporting FIs must review Financial Accounts to identify Reportable Accounts by applying due diligence rules and then report relevant information91. Are group entities in scope? they have Financial Accounts? pre-existing account due diligence obligations5. Establishreporting processGovernance/internal controlsGovernance/internal controlsKey Development and Challenges 2015 Deloitte LLP. All rights Financial Institutions FIs will need to identify whether their overseas subsidiaries/branches introduce business to them that results in them maintaining financial accounts Ambiguity remains around some specific categories which will need case-by-case consideration holding companies in PE structures Possibility for different classification between the CRS and FATCA Regulations FI definitions broadly the same under CRS Still no equivalent to the GIIN registration under US FATCA Professionally Managed Investment Entities resident in non-participating jurisdictions

7 Treated as Passive NFE Fewer Deemed Compliant / Non- Reporting Financial Institution categories The guidance remains largely unchanged and the impact is expected to be low for most groupsKey observationsPractical considerations 2015 Deloitte LLP. All rights Financial InstitutionsReporting Financial Institution ( FI ) Depository Institutions Custodial Institutions Investment Entities Specified Insurance Reporting FIs Government entities, international organisations and central banks; Broad and narrow participation retirement funds Qualified credit card issuers; Entities that prevent a low risk of tax evasion, (defined in domestic law); Exempt Collective Investment Vehicles.

8 Trustee Documented ( NFE ) Any entity that is not an FI, NFEs are classified as either: ActiveNFE: NFEs that meet certain criteria specified under CRS, including less than 50% of gross income/assets for preceding calendar year attributable to passive income, or Passive NFE:NFEs that are not active , or an Professionally Managed Investment Entity that is not a Participating Jurisdiction FI Passive NFEs will need to provide information on Controlling Persons 2015 Deloitte LLP. All rights Financial InstitutionsThe table below gives some practical examples of differences between FATCA and CRS Non-CRS Jurisdiction CRS Jurisdiction FATCA ClassificationsCRS ClassificationsFI Investment EntityPMIE (treated as Passive NFE)FI Investment EntityReporting FICertified Deemed Compliant EBO Govt, PensionsActive/Passive NFFEP rofessionally Managed IEReporting FIReporting FI/NFE Non- Reporting FIActive/Passive NFEO ther EBOsNon- Reporting FI / Reporting FI 2015 Deloitte LLP.

9 All rights Financial Accounts Further reviews required to ensure FIs have made use of all relevant exemptions Implement processes required for capturing and remediating listed debt and equity Consider whether any group entities, previously with limited obligations due to exemptions, now fall substantively within scope of the regulations The exemption for Listed Regularly traded Financial Accounts has not been included under the CRS. Change to the definition of Custodial Account from person that holds one or more financial assets to any financial instrument or contract held for investment.

10 New exemptions for approved holdings in venture capital trusts Narrower definition of exempt products De-minimisfor dormant account under USD 1,000 There are some significant changes to the products and services that are potentially in scope for CRS Key observationsPractical considerations 2015 Deloitte LLP. All rights investors2. Financial Accounts The absence of a regularly traded exemption will result in dramatically increased compliance due diligence burdensReporting FI Investment EntityLarge investors (eg. pension funds)Large investors(eg. pension funds) High-volume trading Potential for multiple opened and closed accounts per investor each year Requirement to report each account Requirement to perform periodic review of secondary trading High due diligence and assurance burden Low-volume trading Unlikely that large investors will sell entire holding Lower due diligence impactLarge institutional investors 2015 Deloitte LLP.