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Automatic exchange of information (AEOI) - November 2016

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Presentation delivered in November 2016 (Wellington - 4th November, Auckland - 9th November, webinar - 18th November) aimed at financial institutions and covered the practical implementation and technical issues for the Common Reporting Standard.

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Automatic exchange of information (AEOI) - November 2016

  1. 1. Automatic Exchange of Information (AEOI) Graham Hunt, Michael Webb Jo Poole, Danielle Weiss November 2016 Wellington / Auckland
  2. 2. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz Overview 1. Quick Recap 2. Legislation Progress 3. Timeframes 4. Key Themes from Submissions 5. IR Guidance 6. Questions
  3. 3. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 1. Quick Recap
  4. 4. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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
  5. 5. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz Shared responsibilities CRS  due diligence  reporting Common Reporting Standard AEOI  exchange Automatic Exchange of Information
  6. 6. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz CRS steps Reporting Financial institutions Financial Accounts Reportable Accounts Due Diligence Rules Report Relevant Information 1. Review 2. To Identify 3. By Applying 4. Then
  7. 7. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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)
  8. 8. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz Passive NFE Entity Financial Institution (FI) Non Financial Entity (NFE) Passive NFE Active NFE
  9. 9. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 2. Legislation Progress
  10. 10. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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
  11. 11. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 3. Timeframes
  12. 12. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz AEOI key dates Activity Date Call for submissions (NRFIs & accounts) Mid-November 2016-End January 2017 Draft IR guidance issued Mid-December 2016 Call 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 enactment Lists published (NRFIs, accounts, participating jurisdictions) After enactment Final IR guidance issued After enactment Order in Council (Reportable jurisdictions) After enactment CRS start date 1 July 2017
  13. 13. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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 Reviews of high value pre-existing individual accounts Reviews of all other pre-existing accounts 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
  14. 14. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 4. Key Themes from Submissions
  15. 15. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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
  16. 16. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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)
  17. 17. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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
  18. 18. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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
  19. 19. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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
  20. 20. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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
  21. 21. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 5. IR Guidance
  22. 22. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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
  23. 23. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz IR Guidance – cont.  Table of Contents (Draft Guidance) 1. Overview of AEOI & the CRS 2. Outline who will have obligations under the CRS 3. Outline what those obligations will be: – Due diligence – Reporting – Record keeping – Providing information 4. Penalties & anti-avoidance 5. Application of principles to specific types of entities
  24. 24. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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
  25. 25. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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
  26. 26. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 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 FIs 3. Online form (IR site) – small FIs
  27. 27. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz 6. Questions
  28. 28. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz  Email AEOI questions to global.aeoi@ird.govt.nz  Email FATCA questions to fatca@ird.govt.nz  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/ Contact us
  29. 29. Policy and Strategy Te Wāhanga o te Rautaki me te Kaupapa taxpolicy.ird.govt.nz Thank you!  For your time today  Please continue to give us your feedback

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