Automatic exchange of information (AEOI) - November 2016

Automatic Exchange of Information (AEOI)

Graham Hunt, Michael WebbJo Poole, Danielle Weiss

November 2016Wellington / Auckland

Policy and StrategyTe Wāhanga o te Rautaki me te Kaupapa

taxpolicy.ird.govt.nz

Overview1. Quick Recap2. Legislation Progress3. Timeframes 4. Key Themes from Submissions5. IR Guidance6. Questions



1. Quick Recap



Why? To detect & deter offshore tax evasion A global initiative driven by the OECD

– Strict requirements Broader context

– Other global initiatives– Wider benefits for New Zealand



Shared responsibilities

CRS

due diligence reporting

Common Reporting Standard

AEOI

exchange

Automatic Exchange of Information



CRS stepsReporting

Financial institutions

Financial Accounts

Reportable Accounts

Due Diligence Rules

Report Relevant Information

1. Review

2. To Identify

3. By Applying

4. Then



Two Jurisdiction types

Reportable Jurisdictions Participating Jurisdictions

NZ provides information to them

NZ receives information from them

largely irrelevant for those that adopt the wider approach to reporting

important for look-through of Passive NFEs*

*Non Financial Entity (NFE)



Passive NFE

Entity

Financial Institution (FI)

Non Financial Entity (NFE)

Passive NFE

Active NFE



2. Legislation Progress



Taxation Bill* Update

– Bill introduced 8 August 2016– With Select Committee – Expecting report back 21 November 2016– On track for enactment early 2017

Special dispensation for AEOI – Continued engagement with stakeholders– Constitutional constraints

Foreign trust disclosure rules

*Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill



3. Timeframes



AEOI key dates Activity DateCall for submissions (NRFIs & accounts) Mid-November 2016-End

January 2017Draft IR guidance issued Mid-December 2016Call for submissions (Reportable jurisdictions)

(TBC)

Feedback on draft IR guidance January – mid-February 2017 Legislation receives Royal Assent Early 2017 (TBC) NZ version of CRS published After enactmentLists published (NRFIs, accounts, participating jurisdictions)

After enactment

Final IR guidance issued After enactmentOrder in Council (Reportable jurisdictions) After enactmentCRS start date 1 July 2017



New Zealand timing

Legislation

Due Diligence

(FIs)

Reporting(FIs)

Exchange(IR)

Bill introduced

Referral to Select

Committee

Call for submissions

(NRFIs & excluded accounts)

Legislation enacted

IR guidance & lists issued

Aug. 2

016

Late

2016

Early

2017

1 Jul.

2017

31 M

ar. 20

18

Reviews of high value pre-existing individual accounts

Reviews of all other pre-existing accounts

30 Ju

n. 20

1830

Sept

. 201

831

Mar.

2019

30 Ju

n. 20

1930

Sept

. 201

9

1st reporting period (9 months)

2nd reporting period (12 months)

Reporting deadline

Exchange of data

1st period

Reporting deadline

Exchange of data

2nd period

Start date for new

accounts



4. Key Themes from Submissions



General Themes Inland Revenue continue engaging with the

industry to help them prepare Guidance & lists published as a matter of

urgency, and if possible CRS timeframes be extended

Concern that some reportable jurisdictions may not be trustworthy

Privacy concerns – eg. use of information gathered for one purpose for alternative purposes



Sovereignty Incorporation by reference

– Surrendering sovereignty Accessibility

– Legislation proposes incorporating the CRS* into NZ law– Copyright issues prevent the CRS being available on Inland

Revenue & NZ legislation websites Ambulatory approach

Acknowledge concerns Discussing options with Select Committee

*CRS = Common Reporting Standard (OECD)



Penalties Clarifying absolute liability vs lack of reasonable care

– Interaction – Capping

Defences need to be strengthened– Additional time for Transitional Measures defence– On-going ‘no fault’ defence for financial institutions

Public education campaign needed– Given penalties apply to customers

Other– Associated with– Person no longer connected



Optionality No compulsion to adopt options Permitted choice rule needs to be clearer Grace period Immediate reporting Distributions to beneficiaries

– Difficult for RFI* to identify– Timing issues (eg if distribution not declared until after

31 March)

*RFI = Reporting Financial Institution



Four Lists Exclusion Lists

1. NRFIs* 2. Excluded Accounts

Jurisdiction Lists 3. Reportable Jurisdictions

– Dependent on Global Forum, end of 2016?4. Participating Jurisdictions

List submissions – NRFIs, Excluded Accounts, Reportable Jurisdictions– No submissions for Participating Jurisdictions – Process

*NRFI = Non Reporting Financial Institution



Themes – technical issues

Customer on-boarding process Non responsive customers AML / FATCA procedures Determining residency Changes in circumstances Practical application of options Application to trusts Application of penalties regime



5. IR Guidance



IR Guidance Draft Guidance

– Released by Christmas 2016– Feedback by mid-February 2017

• Send practical examples to highlight concerns• Indicate key pressure points for business

– Useful & user friendly – Based on your feedback

Table of Contents of Draft IR guidance Main themes



IR Guidance – cont. Table of Contents (Draft Guidance)

1. Overview of AEOI & the CRS2. Outline who will have obligations under the CRS3. Outline what those obligations will be:

– Due diligence– Reporting– Record keeping– Providing information

4. Penalties & anti-avoidance5. Application of principles to specific types of entities



IR Guidance – industry themes Industry concerns

– Determining residency Practical due diligence

– Starting CRS due diligence– Customer forms – Meaning of ‘on account opening’– AML (Anti Money Laundering)

Practical CRS reporting – Information & optionality – Timeframe & methods



IR Guidance – themes cont. Applying CRS to trusts

– As financial institutions – As passive NFEs– Processes to apply for trust accounts

Applying CRS to managed funds– Who maintains the relevant account– Who does the reporting– How does CRS impact persons or entities using investment

managers All of these themes feed into the guidance



Technology Solution High-level design stage

– Follows CRS (Common Reporting Standard) Three approaches being considered

1. XML file upload – large Financial Institutions (FIs)2. Template spreadsheet – medium FIs3. Online form (IR site) – small FIs



6. Questions



Email AEOI questions to [email protected] Email FATCA questions to [email protected] IR Webpage http://taxpolicy.ird.govt.nz/topical-issues/implementing-aeoi AEOI Consultation paper http://taxpolicy.ird.govt.nz/publications/2016-ip-implementing-aeoi/overview OECD AEOI Portal http://www.oecd.org/tax/automatic-exchange/about-automatic-exchange/

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Automatic exchange of information (AEOI) - November 2016

Government & Nonprofit