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Global FATCA - Common Reporting Standard

Date published: 1 May 2018

BACKGROUND

From the year ended 31 December 2014 onwards a large number of financial institutions and non-financial foreign entities have been under the obligation to collect, verify and report information on its customers to the Guernsey Tax Authorities. This requirement for reporting has been imposed by the Foreign Account Tax Compliance Act (FATCA) and other equivalent legislation.

Following the US FATCA model, the Organization for Economic Cooperation and Development (OECD) issued a new global version of FATCA called the “Global Standard for Automatic Exchange of Information”, but better known as the Common Reporting Standard (CRS) which facilitates the exchange of detailed account information between governments.

Guernsey, like Norway, Sweden, Denmark, the United Kingdom and a number of other countries, signed an agreement in July 2015 to automatically exchange information based on Article 6 of the Convention on Mutual Administrative Assistance in Tax Matters. This agreement specifies the details of what information will be exchanged and when, as set out in the CRS.

RECENT ACTIVITY

The Income Tax (Approved International Agreements) (Implementation) (Common Reporting Standard) Regulations, 2015 (the Regulations) implementing the CRS were made on 23 November 2015, and took effect from 1 December 2015. The Regulations had the effect of requiring Guernsey Financial Institutions (including Nordben Life and Pension Insurance Co. Limited (Nordben)) to apply the CRS due diligence procedures to all financial accounts they maintain from 1 January 2016.

Under CRS, Guernsey Financial Institutions report to the Guernsey Tax Authorities who will then share the information with the appropriate foreign tax authorities.

PRODUCTS

All products provided by Nordben with the exception of group life, disability and accident products fall within scope of CRS. Reporting on the products within scope commenced as early as 30 June 2017 (depending on the CRS participating countries at that time).

The main requirements arising from the CRS has been the identification and declaration of legal persons (i.e. companies and natural persons) meeting the criteria as defined in the CRS as well as the reporting of balances and payments in respect of those persons that are reportable.

REQUIREMENTS CONTAINED IN THE CRS

The requirements contained in the CRS are as follows:

  • Nordben applies the CRS due diligence procedures to all financial accounts they maintain from 1 January 2016.
  • Nordben assesses which of the identified client account balances relate to “reportable persons” (i.e. deemed to be caught under the CRS).
  • If there is any uncertainty Nordben contacts the policyholder/account holder for self-certification of their tax status.

N.B. If Nordben contacts a policyholder/account holder for self-certification of their tax status and the request is not fulfilled, Nordben will be required to declare the surname, first name and date of birth of these policyholders/account holders to the Guernsey Tax Authorities as we will not hold information to confirm they are not “reportable persons”.

  • Nordben reports client account balances and payments in respect of those “reportable persons” that are identified to the Guernsey Tax Authorities. This reporting is based on calendar years and occurs approximately 6 months after the calendar year end.
  • Individual Member Accounts held under a Group Plan (i.e. Members of an International Pension Plan) are not “Reportable Accounts” until the date on which an amount is payable to the employee or beneficiary unless the Group Plan has fewer than 25 employees OR the aggregate amount payable to any employee or beneficiary exceeds USD 1,000,000.
  • Unlike the requirements of FATCA, the CRS requires no thresholds to be applied to individual client (i.e. where the policyholder/account holder is a natural person) account balances.
  • Any individual client account balances deemed to be reportable to the Tax Authorities will continue to be reported in subsequent years until the individual account is closed or the individual account no longer becomes reportable (e.g. if the Account Holder’s tax jurisdiction is not party to the CRS).

Please note that we are not in a position to provide any tax advice and recommend that you contact your tax advisor for further information on the CRS and its possible implications for you.