On December 21, 2016 the New Zealand Inland Revenue issued Advance Draft Guidance on the Automatic Exchange of Information (AEOI). The New Zealand Inland Revenue states that it welcomes feedback on this draft guidance. Feedback and any queries can be sent to This email address is being protected from spambots. You need JavaScript enabled to view it. until February 28, 2017.

From July 2017 financial institutions will need to begin meeting obligations under the OECD’s Common Reporting Standard for the Automatic Exchange of Financial Account Information in Tax Matters.

According to the New Zealand Inland Revenue, legislation enabling the implementation of this international initiative in New Zealand is expected to be passed by March 2017. In anticipation of this, Inland Revenue has developed the advanced draft guidance it released on December 21, 2016 to help financial institutions prepare for their obligations as early as possible. The draft guidance outlines how these various entities are affected and their responsibilities under the Common Reporting Standard.

 

The draft guidance also sets out the obligations that account holders (and other persons connected with accounts) will have to provide information to such financial institutions to assist those institutions comply with their responsibilities under the Common Reporting Standard.

 

The New Zealand Inland Revenue states that a finalized guidance document will be prepared which will take into account submissions on this draft.

 

The very extensive Draft Guidance (184 pages) discusses a.o. the following topics:

·   Background

o  Overview of the Common Reporting Standard for the Automatic Exchange of Information

o  Use of information by Inland Revenue

o  Purpose of this guidance

o  High level summary of CRS due diligence and reporting obligations

o  CRS due diligence – incorporating the “wider approach”

o  CRS reporting 

o  Meaning of “account holder” and “controlling person” for CRS purposes

o  Meaning of “account holder” for the purposes of CRS due diligence

o  Identifying “controlling persons” for the purposes of CRS due diligence

o  Options that a Reporting NZFI can adopt for CRS purposes

o  Ability for a Reporting NZFI to use Anti-Money Laundering/Know Your Customer procedures and FATCA procedures for Common Reporting Standard purposes

o  Penalties and anti-avoidance

·   Roadmap for the following guidance

·   Reporting NZFIs for CRS purposes

o  Types of financial institutions

o  Circumstances when a financial institution will be a “New Zealand Financial Institution”

o  Circumstances when a NZFI will be a “Reporting New Zealand Financial Institution”

o  Circumstances when a NZFI will be a “Non-Reporting New Zealand Financial Institution”

o  Financial institutions that the CRS defines as being “Non-Reporting Financial Institutions”

o  Financial institutions that can be treated by implementing jurisdictions as “Non-Reporting Financial Institutions”

·   What “financial accounts” are subject to CRS due diligence?

o  Depository account

o  Annuity contract

o  Cash value insurance contract

o  Custodial account

o  Equity or debt interest

o  What accounts are excluded from being “financial accounts”?

·   What does the CRS “due diligence” process involve?

o  High level overview of the CRS due diligence process

o  Detailed outline of due diligence procedures

o  Pre-existing individual accounts

o  New individual accounts

o  Pre-existing entity accounts

o  New entity accounts

·   Outline of the CRS information that needs to be reported

o  Identity information that Reporting NZFIs will need to report for a reportable account

o  Financial account information that Reporting NZFIs will need to report for a reportable account

·   Format that a Reporting NZFI can use for reporting CRS information

·   CRS record-keeping obligations

o  Obligation to keep and retain records

·   Penalties regime

o  Penalties regime – financial institutions

o  Penalties regime – information providers

·   CRS requirement to have an avoidance provision

o  New Zealand’s anti-avoidance provision

o  What constitutes an “arrangement” under section 185R(1)

o  What is meant by “a main purpose of a person” in entering into such an arrangement being to “avoid a requirement under” Part 11B

o  Reconstruction

·   Application of CRS to particular types of entities and structures

o  Trusts

o  Application of CRS to specific types of trusts

o  Application of CRS to partnerships

o  Application of CRS to collective investment vehicles

o  Deceased estate

 

Furthermore the following Appendices are attached to the Draft Guidance:

·   Appendix 1: A Comparison between the CRS and FATCA

o  1 FATCA Inter-Governmental Agreement

o  2 Common Reporting Standard

o  3 Residence

o  4 Non-Reporting Financial Institutions

o  5 Excluded accounts

o  6 Due diligence and reporting

o  7 Definitions

·   Appendix 2: Options permitted by the Common Reporting Standard

·   Appendix 3: Documentary evidence under the CRS

·   Appendix 4: Definitions of “Non-Financial Entity”, “active Non-Financial Entity”, “Passive income”, and “Passive Non-Financial Entity”

·   Appendix 5: Definition of “Excluded Account”

·   Appendix 6: Definition of “Non-Reporting Financial Institution”

·   Appendix 7: Requirements to be satisfied to be a “Non-Reporting Financial Entity” under the Common Reporting Standard

 

Click here to be forwarded to the Advance Draft Guidance on the Automatic Exchange of Information (AEOI) as issued by the New Zealand Inland Revenue on December 21, 2016.

 

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