The Foreign Account Tax Compliance Act (FATCA) AUTOMATIC EXCHANGE OF INFORMATION. Questions and Answers WHAT IS AUTOMATIC EXCHANGE OF INFORMATION

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Wendy Riley
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1 The Foreign ccount Tax Compliance ct (FTC) and COMMON REPORTING STNDRDS (CRS) UTOMTIC EXCHNGE OF INFORMTION uestions and nswers This document provides you with an overview of the FTC and the CRS agreements and the potential impact on the relevant Old Mutual International companies, as financial institutions, and our policy/account holders. WHT IS UTOMTIC EXCHNGE OF INFORMTION put simply, it is the commitment by governments to exchange information about financial accounts held by their taxpayers with overseas financial institutions. This includes banks, building societies and insurance companies. governments around the world have become increasingly aware of large amounts of undeclared wealth held by their taxpayers in overseas accounts. Unless voluntarily disclosed, it is possible for individuals to hold overseas accounts without any of the income or profits from such accounts being visible to their domestic tax authorities. Coupled with this, in recent years there has also been a growing intolerance from governments and the general public of tax avoidance and tax evasion. s a result there has been increasing global effort by governments to provide the relevant tax authorities with information which they may use to assess whether individuals or companies are liable to any taxes which have not been paid. The Foreign ccount Tax Compliance ct (FTC) came into effect on 1 July FTC is a US law aimed at US taxpayers who have placed assets overseas with the intention of evading US tax. The law affects non-us financial institutions (also known as Foreign Financial Institutions or FFIs) in countries which have signed agreements with the US. FTC requires FFIs to introduce measures to identify and report US taxpayers who have accounts with them. This includes life assurance and capital redemption contracts. FFIs include institutions carrying out activities such as deposit taking, investment services, custody services and investment based insurance. The Organization of Economic Co-operation and Development (OECD) developed the Common Reporting Standards (CRS) based largely on the FTC model but involve a far wider range of jurisdictions. FTC and the CRS apply to financial institutions which offer insurance products with a cash value.

2 WHICH COUNTRIES HVE SIGNED TO EXCHNGE INFORMTION UNDER FTC ND THE CRS? The list of countries committed to exchange information under FTC is shown on page 4. The countries committed to exchanging information is subject to change but a number of jurisdictions have already committed to exchange information under the CRS from 2017, with a second wave of countries committed to exchange by These countries are set out on page 4. You can find a list of jurisdictions committed to CRS and the status of development of their domestic legislation on the OECD website at: WHICH FINNCIL INSTITUTIONS RE IN SCOPE UNDER FTC ND CRS? FTC and CRS have wide ranging definitions of the financial institutions which are in scope for reporting. Both define relevant financial institutions as: Depository institutions Custodial institutions Investment entities Specified insurance companies The above classifications also include where a financial institution has a branch in a participating country. WHO IS REPORTBLE PERSON UNDER FTC and CRS? reportable persons under FTC include specified U.S. persons, effectively citizens and green card holders. They will be reportable if they hold a financial account in a FTC partner jurisdiction or if they are substantial owners or controlling persons of a Passive Non- Financial Foreign Entity (NFFE). Passive NFFE is a non-us entity which has as its primary purpose the holding of financial assets. For example, where a US individual holds the shares of a British Virgin Island asset holding company, information concerning the company and the shareholder would be reported. unlike FTC, the CRS does not require financial institutions to report on citizens or nationals but focuses on tax residency. Under the CRS, an individual identified by a financial institution established in a CRS participating country, as a tax resident in another CRS country, would be reportable to that other CRS country. This includes taxpayers who are identified as controlling persons of a Passive Non-Financial Entity (NFE). It is possible for an individual to be tax-resident in more than one country and in that circumstance, if those countries are participating in CRS, then the information could be reportable to each country. WHT INFORMTION WILL BE EXCHNGED UNDER FTC and CRS? under FTC, with respect of each reportable account with an identified US reportable person as account holder, the following information will be exchanged: Name ddress Tax Payer Identification Number (TIN) or a date of birth in lieu of a TIN if available ccount number The name of the financial institution ccount balance at the end of the year or on account closure Interest, dividends or other income Gross proceeds if the account is held by a US specified person who is an individual then the above information will be reported. If the account is held by a US entity, then the information on the entity account holder will be reported. However, for certain types of non-us entity referred to as Passive Non-Financial Foreign Entities (NFFEs), information on any persons who have a substantial ownership or control of the entity will also be reported. For example, where a US individual holds the shares of a British Virgin Island asset holding company, information concerning the company and the shareholder would be reported. essentially, the same information reported under FTC is reportable under CRS with the addition of country of residence, and date and place of birth. In addition, where an account is closed, only the fact of its closure must be reported, rather than its closing balance. The above information is reportable where a financial institution in a CRS participating country identifies an account holder of a reportable account, where that account holder is resident in another CRS country. HOW IS THE INFORMTION EXCHNGED? ll information exchanged is through a financial institution s domestic tax authority. The only exception to this is where information is shared under FTC by a financial institution established in a Model 2 intergovernmental agreement (IG) country. In this situation, the information does not pass through the financial institution s domestic tax authority but is reported by the institution directly to the US Internal Revenue Service (IRS) under an agreement between the two. 2

3 WHT DUE DILIGENCE MUST FINNCIL INSTITUTIONS UNDERTKE? FTC and the CRS prescribe due diligence procedures to be adhered to by financial institutions to identify reportable accounts. These procedures distinguish between individual accounts and entity accounts and between pre-existing and new accounts. Pre-existing Individual ccounts pre-existing account is a financial account maintained on 31 December financial institution must review its pre-existing accounts to identify if an account and its account holder are reportable. The required review has different procedures for Lower Value ccounts, those worth $1m or less and High Value ccounts which are accounts worth more than $1m. The institution must look for certain data, or indicia, which suggest the account holder is a tax resident of a country. On finding relevant data, a financial institution must treat the account as reportable to the country linked to that data unless a self-certification is obtained which places the country of tax residence in another country beyond doubt. New Individual ccounts For new accounts held by individuals, the financial institution must obtain a self-certification regarding tax status and certain information regarding any new account opened. It must also conduct a reasonableness test against the self-certification to ensure that no information provided conflicts with the declared tax status of the applicant. Pre-existing Entity ccounts For entities, which include such legal arrangements as trusts and foundations, a financial institution must determine where the entity itself is tax resident. This can be done through information collected about the entity under anti-money laundering (ML) due diligence or information available publically. The financial institution must also determine if the entity is a Passive NFE and if so, determine the tax residence of its controlling persons. gain, this may be achieved by reviewing existing records held or obtaining a self-certification about the entity and its controlling persons. New Entity ccounts Financial institutions must follow the same process to determine the applicant s status as with pre-existing accounts. However, part of that process involves the collection of a self-certification from the account holder regarding the tax status of the entity as well as its controlling persons. Monitoring for Changes of Circumstance There is a continuous requirement under FTC and CRS for financial institutions to monitor any change of circumstance on an account to ensure that the original assessment of tax status is not brought into question. This could occur as a result of, a change of or addition to, key information about the account or the account holder which could suggest a change of tax residence. For example, a change of address to a new country would be a relevant change of circumstance whereas a new address in the same country would not. in the case of a change of circumstance, the financial institution must treat the account as reportable in the country linked to the new information unless it receives a self-certification containing information allowing it to discount the new information. WHT RE THE KEY FTC/CRS DTES? The majority of requirements under FTC came into force on 1 July This is the date that defined a New ccount from a pre-existing account. ll accounts held on 30 June 2014 were treated as pre-existing and any account opened after that date was treated as a new account. For the countries entering into CRS with a commitment to exchange information in 2017, the CRS requirements came into effect on 1 January Therefore, a pre-existing account is a financial account maintained on 31 December 2015 with a New ccount being defined as an account opened on or after 1 January under FTC, the review of pre-existing individually held high value accounts had to be completed by 30 June 2015 with the review of pre-existing individually held lower value accounts and entity accounts being completed by 30 June For a country committed under CRS to exchange information from 2017, the review of pre-existing individually held high value accounts has to be completed by 31 December 2016 with the review of pre-existing individually held lower value and entity accounts being completed by 31 December The first reporting under FTC was carried out prior to the end of June 2015 with participating countries exchanging information with the IRS no later than the end of September The first CRS reporting by financial institutions in the first wave of committed countries will be carried out by the end of June The first exchange of information between competent authorities under the first wave of CRS will be carried out before the end of September

4 HOW RE THE COUNTRY OF TX RESIDENCE ND TIN DETERMINED? Country of tax residence each jurisdiction has its own rules for defining tax residence. Normally an individual is tax resident in the country where they live and spend the majority of their time each year. However, some countries (e.g. the United States) may also treat an individual as resident for taxation based on their nationality or citizenship. Because tax residence is determined by the country or countries in which tax is paid, it is possible to be tax resident in more than one country at the same time. Tax IDENTIFICTION Number (TIN) TIN will be the unique code or an equivalent number assigned by a jurisdiction to identify an individual for the purpose of administering tax laws. This is normally the number used when corresponding with a tax authority. This could be a specific tax identification number, a national insurance number or a national identity card number. Please refer to the OECD s website for further details. DO EXISTING CLIENTS HVE TO DO NYTHING? FTC and CRS are requirements that are binding on financial institutions not clients. However, as a result of those requirements, financial institutions may need to obtain new or updated information about clients, including obtaining self-certifications of their tax status. WHICH COUNTRIES HVE SIGNED TO EXCHNGE INFORMTION UNDER FTC ND THE CRS? List of Countries Participating in FTC lgeria, ngola, nguilla, ntigua and Barbuda, rmenia, ustralia, ustria, zerbaijan, Bahamas, Bahrain, Barbados, Belarus, Belgium, Bermuda, Brazil, British Virgin Islands, Bulgaria, Cabo Verde, Cambodia, Canada, Cayman Islands, Chile, China, Colombia, Costa Rica, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Dominica, Dominican Republic, Estonia, Finland, France, Georgia, Germany, Gibraltar, Greece, Greenland, Grenada, Guernsey, Guyana, Haiti, Holy See, Honduras, Hong Kong, Hungary, Iceland, India, Indonesia, Iraq, Ireland, Isle of Man, Israel, Italy, Jamaica, Japan, Jersey, Kazakhstan, Kosovo, Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Macao, Malaysia, Malta, Mauritius, Mexico, Moldova, Montenegro, Montserrat, Netherlands, New Zealand, Nicaragua, Norway, Panama, Paraguay, Peru, Philippines, Poland, Portugal, atar, Romania, San Marino, Saudi rabia, Serbia, Seychelles, Singapore, Slovak Republic, Slovenia, South frica, South Korea, Spain, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sweden, Switzerland, Taiwan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Turks and Caicos Islands, Ukraine, United rab Emirates, United Kingdom, Uzbekistan. List of CRS Jurisdictions 2017 Exchange nguilla, rgentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South frica, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, United Kingdom List of CRS Jurisdictions 2018 Exchange lbania, ndorra, ntigua and Barbuda, ruba, ustralia, ustria, The Bahamas, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Ghana, Grenada, Hong Kong, Indonesia, Israel, Japan, Marshall Islands, Macao, Malaysia, Mauritius, Monaco, New Zealand, atar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi rabia, Singapore, Sint Maarten, Switzerland, Turkey, United rab Emirates, Uruguay. 4

5 Calls may be monitored and recorded for training purposes and to avoid misunderstandings. Old Mutual International Isle of Man Limited is registered in the Isle of Man under number 24916C. Registered and Head Office: King Edward Bay House, King Edward Road, Onchan, Isle of Man, IM99 1NU, British Isles. Phone: +44 (0) Fax: +44 (0) Licensed by the Isle of Man Financial Services uthority. Old Mutual International Isle of Man Limited is a member of the ssociation of International Life Offices. Old Mutual International is registered in the Isle of Man as a business name of Old Mutual International Isle of Man Limited. Old Mutual International Trust Company Limited is registered in the Isle of Man under number C. Registered and Head Office: PO Box 142, King Edward Bay House, King Edward Road, Onchan, Isle of Man, IM99 3DJ, British Isles. Phone: +44 (0) Fax: +44 (0) Licensed by the Isle of Man Financial Services uthority. Old Mutual International s Hong Kong office: 24th Floor, Henley Building, 5 ueen s Road Central, Hong Kong. Phone: Fax: hongkong@ominternational.com uthorised by the Insurance uthority of Hong Kong to carry on long term business. Old Mutual International Middle East Limited, registered in the Dubai International Financial Centre under number 0962 Office 7 and 8, Level 2 Gate Village 7, Dubai International Financial Centre (DIFC), PO Box , Dubai, UE. Old Mutual International Middle East Limited is authorised and regulated by the Dubai Financial Services uthority. Old Mutual International Ireland dac is regulated by the Central Bank of Ireland. Registered No dministration Centre for correspondence: King Edward Bay House, King Edward Road, Onchan, Isle of Man, IM99 1NU. Tel: +353(0) Fax: +353(0) Head Office ddress: Hambleden House,19-26 Lower Pembroke Street, Dublin 2, Ireland. VT number for Old Mutual International Ireland dac is S. Registered Office: rthur Cox Building, Earlsfort Terrace, Dublin 2, Ireland. Old Mutual International is registered in Ireland as a business name of Old Mutual International Ireland dac. Old Mutual Guernsey is the trading name of Old Mutual Life ssurance Company (South frica) Limited, Guernsey Branch. Old Mutual Guernsey, whose principal place of business is lbert House, South Esplanade, St Peter Port, Guernsey, GY1 1W, is a branch of Old Mutual Life ssurance Company (South frica) Limited, which is incorporated in South frica (reg no. 1999/04643/06). Registered Office: Mutualpark, Jan Smuts Drive, Pinelands, Cape Town, South frica. Old Mutual Guernsey is licensed by the Guernsey Financial Services Commission under The Insurance Business (Bailiwick of Guernsey) Law, 2002 to carry on long term insurance business. Old Mutual Life ssurance Company (South frica) Limited is a registered long-term insurer and a licensed financial services provider. Old Mutual International (Guernsey) Limited, registered office: lbert House, South Esplanade, St Peter Port, Guernsey, GY1 1W (reg. no. 2424) and is licensed to write long term insurance business under the Insurance Business (Bailiwick of Guernsey) Law 2002 by the Guernsey Financial Services Commission. Old Mutual Isle of Man, Branch of Old Mutual Life ssurance Company (South frica) Limited, is registered in the Isle of Man under number F and whose principal place of business is King Edward Bay House, King Edward Road, Onchan, Isle of Man, IM99 1NU, British Isles. Phone: +44 (0) Fax: +44 (0) Licensed by the Isle of Man Financial Services uthority. Old Mutual Life ssurance Company (South frica) Limited is incorporated in South frica (reg. number: 1999/04643/06). Registered office: Mutualpark, Jan Smuts Drive, Pinelands, Cape Town, South frica. Old Mutual Life ssurance Company (South frica) Limited is a registered long-term insurer and a licensed financial services provider. Old Mutual Hong Kong, Branch of Old Mutual Life ssurance Company (South frica) Limited, is authorised by the Insurance uthority of Hong Kong to carry on long term business. Old Mutual Hong Kong s principle place of business is 24th Floor, Henley Building, 5 ueen s Road Central, Hong Kong. Phone: Fax: Old Mutual Life ssurance Company (South frica) Limited is incorporated in South frica (reg. number: 1999/04643/06). Registered office: Mutualpark, Jan Smuts Drive, Pinelands, Cape Town, South frica. PDF9873/INT FT/November

When will CbC reports need to be filled?

Who will be subject to CbCR? Country by Country Reporting (CbCR) applies to multinational companies (MNCs) with a combined revenue of euros 750 million or more When will CbC reports need to be filled?