Automatic Exchange of Information (AEOI) Graham Hunt, Michael Webb Jo Poole, Danielle Weiss November 2016 Wellington / Auckland

Overview Quick Recap Legislation Progress Timeframes Key Themes from Submissions IR Guidance Questions

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 steps Reporting Financial institutions 1. Review Financial Accounts 1. Review 2. To Identify Reportable Accounts 3. By Applying Due Diligence Rules 4. Then Report Relevant Information

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 Special dispensation for AEOI 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 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) Final IR guidance issued Order in Council (Reportable jurisdictions) CRS start date 1 July 2017

Start date for new accounts 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. 2016 Late 2016 Early 2017 1 Jul. 2017 31 Mar. 2018 Reviews of high value pre-existing individual accounts Reviews of all other pre-existing accounts 30 Jun. 2018 30 Sept. 2018 31 Mar. 2019 30 Jun. 2019 30 Sept. 2019 1st reporting period (9 months) 2nd reporting period (12 months) Reporting deadline Exchange of data 1st period 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 Accessibility 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 Jurisdiction Lists List submissions NRFIs* Excluded Accounts Jurisdiction Lists Reportable Jurisdictions Dependent on Global Forum, end of 2016? 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 Table of Contents of Draft IR 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) Overview of AEOI & the CRS Outline who will have obligations under the CRS Outline what those obligations will be: Due diligence Reporting Record keeping Providing information Penalties & anti-avoidance 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 XML file upload – large Financial Institutions (FIs) Template spreadsheet – medium FIs Online form (IR site) – small FIs

6. Questions

Contact us 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/

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