FATCA/CRS Glossary

This information is a general summary of key terms only, given to help you understand different classification types in the self-certification form. The information is not tax or other professional advice; if you’re unsure how to classify your entity, please talk to your tax adviser, lawyer, or other tax specialist.

 

General terms to know

Common Reporting Standard (CRS): A set of rules developed by the OECD on how countries taking part in the automatic exchange of financial account information (AEOI) collect, report, and share financial account information. Under Australian law, financial institutions must collect tax residency information about any people or entities that are tax resident of countries other than Australia and report it and account information to the Australian Tax Office.

Foreign Account Tax Compliance Act (FATCA): Under an agreement between Australia and the United States, and under Australian law, financial institutions collect tax residency information about United States citizens and tax residents. Financial institutions report the information to the Australian Tax Office, who may share it and account information with the United States Internal Revenue Service (IRS).

Global Intermediary Identification Number (GIIN): The Global Intermediary Identification Number is a 19-character number, issued by the US Internal Revenue Service to uniquely identify an entity registered with the IRS for FATCA.

Intergovernmental Agreement (IGA): An intergovernmental agreement or agreement between two or more countries. 

Tax Identification Number (TIN): A tax identification number or equivalent given to individuals or entities by a tax authority.

Country of Tax Residence: The country or jurisdiction in which an individual or entity must pay tax under the laws of that country or jurisdiction.  You can find out information relating to the rules around tax residency for OECD countries here: http://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/

 

About Financial Institutions

Financial Institution (FI): Holds or invests cash and Financial Assets for others, and sometimes for themselves.

  • Includes Depository Institutions, Custodial Institutions, Specified Insurance Companies, Managed Investment Entities (which include trusts in certain circumstances) and other Investment Entities.
  • Under FATCA, non-US FIs are called ‘Foreign Financial Institutions’ (FFIs).
  • Entities may also be FIs if they’re managed or controlled by another FI that has responsibility and power to make and carry out investment decisions for them e.g. a trust may be a FI, if a trustee is a FI and that trustee invests or manages the trust’s property without needing prior approval from other trustees.

Depository Institution: Accepts monetary deposits in the ordinary course of banking or similar business.

Custodial Institution: Holds customers’ securities, physically or electronically, for safekeeping and isn’t engaged in traditional banking.

Specified Insurance Company: An insurance company, or its holding company, that issues or must pay under a cash value insurance contract or an annuity contract.

Managed Investment Entity (MIE): An entity that: (i) in the past three financial years or if shorter, the period since the entity has been trading, earned more than 50% of its gross income from investing or trading in Financial Assets and (ii) is managed or controlled by another FI that has responsibility and power to make and carry out investment decisions for them. For example, a trust may be a managed Investment Entity, if a trustee is a FI and that trustee invests or manages the trust’s property without needing prior approval from other trustees.

Investment Entity: Primarily trades, invests, administers or manages Financial Assets (including individual and collective portfolios of Financial Assets) on behalf of its customers.

Financial Assets: Includes shares, debt securities, commodities, and derivative financial instruments, e.g. interest rate swap or foreign currency forward contracts. Does not include a non-debt direct interest in real property.

 

About FATCA status types - With GIIN available

Reporting Model 1 FFI: FFIs who report information on account holders to their local tax authority, which in turn provides the information to the US IRS.

Reporting Model 2 FFI: FFIs who report information on account holders to the US IRS directly, rather than through their local tax authority.

Registered Deemed Compliant FFI: An FFI that has registered with the IRS under FATCA.

Participating FFI: An FFI that has entered an agreement direct with the IRS to report information on account holders who are US tax residents. 

Trustee Documented Trust: A trust set up under foreign laws (not US) that reports all information needed to be reported under an IGA to the local tax authority directly.

Sponsored FFI: An FFI which has a sponsoring entity that will act on its behalf and complete any necessary due diligence and reporting.

 

About FATCA status types - Without GIIN available

Pension / Retirement / Super Fund: Funds that meet FATCA exemptions and is set up to provide pension, retirement, disability, or death benefits to investors.

Non-Reporting IGA FFI: An FFI located or set up in a Model 1 or Model 2 IGA jurisdiction, which is treated as a non-reporting FI under Annex II of the Model 1 IGA or Model 2 IGA.

Non-Participating FFI: An FFI that hasn’t entered an agreement with the IRS, isn’t deemed compliant, or isn’t exempt.

United States FI: An FI incorporated or organised under the laws of the US.

Territory FI: An FI incorporated or organised under the laws of any US territory.

Owner Documented FFI: An FFI that provides documents to a specific withholding agent who reports to the US IRS or national tax authority on its behalf. You must qualify to be an owner-documented FFI, and if you choose this status, you’ll need to complete and return a W-8 form obtainable from the US IRS website at www.irs.gov/forms.

Other FI / Certified Deemed Compliant FFI: An FFI that doesn’t have to register with the US IRS. If you choose this status, you’ll need to complete and return a W-8 form obtainable from the US IRS website at www.irs.gov/forms.

 

About Exempt Entities

Exempt Entities: An exempt, or excepted entity is not required to provide tax residency and foreign tax information under the FATCA or CRS regimes.  These include:

(Wholly owned entities include branches and wholly owned subsidiaries of the specified exempt entity type.)

  • Central bank: Provides financial and banking services to a country’s government.
  • Government entity: Part of or owned or controlled by a country’s government.
  • International organisation: A governmental (IGO) or non-governmental (NGO) entity, set up and governed under international law.
  • Publicly-traded NFE: A non-financial entity (NFE) that has securities freely traded on a stock exchange or other securities market. 
  • Related Entity of Publicly-traded NFE: An entity is related to another entity if either entity controls the other, or the two entities are under common control. Control means more than 50% of the vote and value in an entity.

 

About types of NFEs

Non-Financial Entity (NFE): An entity that doesn’t fall into one of the types of financial institutions (FIs). Under FATCA, non-US NFEs are called non-financial foreign entities (NFFE). A NFE will be either an Active NFE or a Passive NFE.

Active NFE: A NFE that, in the last financial year, had less than 50% of assets held to produce passive income, and less than 50% of its gross income came from Passive Income. 

Passive NFE: A NFE that is not an Active NFE. A NFE that, in the last financial year, had 50% or more of assets held to produce Passive Income, or 50% or more of its gross income came from Passive Income.

Passive Income: Income that includes interest, dividends, coupons, rent, or royalties that does not come from active participation in a business.

Holding Company / Treasury Centre: A NFE whose primary business is to own shares in another company. Or the NFE enters investment, hedging, and financial transactions for members of its expanded affiliated group to manage price, currency, or interest rate risks for that group.

Start Up Company: An NFE that:

  • has existed for less than 24 months;
  • isn’t operating a business yet and has no prior operating history; and
  • intends to operate a business other than that of FI or Passive NFE.

Entity in Liquidation or Bankruptcy: A NFE in liquidation or bankruptcy or a similar arrangement that hasn’t engaged in business as a FI or Passive NFE in the past five years.

Tax Exempt Non-Profit Organisations: A NFE exempt from income tax and run only for religious, charitable, scientific, artistic, cultural, athletic, or educational purposes. The entity must not have any shareholders with a proprietary or beneficial interest.

 

 

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