AEOI - Q&A and Definitions
Information for clients
Backed Assets (JE) Limited (Backed) is a reporting Jersey financial institution in accordance with the FATCA and Common Reporting Standard regimes adopted by Jersey (AEOI).
Under AEOI, Jersey exchanges data with jurisdictions with which a reciprocal agreement is in place (Reportable Jurisdictions).
As a reporting Jersey financial institution, Backed must determine the tax residence(s) and AEOI classification of all its clients.
Every year Backed must report to the Jersey Tax Authorities (TA) certain information regarding certain account holders (and in certain cases, "Controlling Persons" of certain account holders) who are tax resident in a Reportable Jurisdiction.
The TA then sends the information reported to the tax authorities in the jurisdiction(s) of tax residence of these account holders (and, where applicable, their Controlling Persons).
How might AEOI affect you?
During the account opening process, you will be asked to confirm your jurisdiction(s) of tax residence and your Taxpayer Identification Number(s) (TIN).
What will Backed report to the TA?
The reportable information includes:
the account holder’s personal data (name, address, jurisdiction of tax residence, date of birth, TIN); and
account information (account number, aggregate balance or value of the account by 31st December, investment income including total gross amount of interest, dividends or other income and total gross proceeds from sales or redemptions).
In certain cases, Backed must also report on the Controlling Persons of an entity account holder, where that entity is classified as a Passive NFFE/ NFE.
If an entity classifies as Financial Institution, the entity itself may be responsible to report its relevant account holders to its local tax authority.
For what purpose will this information be used?
The TA will send the information received from Backed to the tax authority in the relevant Reportable Jurisdiction(s). In principle, the information exchanged may only be shared with the tax authorities of the relevant jurisdiction(s) of tax residence and may only be used for tax purposes. The information must be treated as confidential.
DEFINITIONS
Account Holder
The term Account Holder means the person listed or identified as the holder of an account. A person, other than a Financial Institution, holding an account for the benefit or account of another person as agent, custodian, nominee, signatory, investment advisor, or intermediary, is not treated as holding the account, and such other person is treated as the Account Holder for AEOI purposes. Please note that for AEOI purposes in the case of trusts it is not the trustee that is treated as holding the account, but the trust itself.
FATCA
FATCA is an abbreviation of Foreign Account Tax Compliance Act. This US tax legislation is aimed at identifying US Persons that have an account or financial assets outside of the United States.
Intergovernmental Agreement (IGA)
The term Intergovernmental Agreement, or short IGA, means an agreement or arrangement between the US and a foreign government governing the implementation of FATCA in such non-US jurisdiction.
CRS
“CRS” stands for Common Reporting Standard. It is an internationally agreed standard for Automatic Exchange of Information on financial account information, endorsed by the OECD and the Global Forum for Transparency and Exchange of Information for Tax Purposes. The CRS sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as the customer due diligence procedures to be followed by financial institutions.
Controlling Person
A natural person who exercises direct or indirect control over an entity. In the case of a trust, such term means the settlor(s), the trustees(s), the protector(s) (if any), the beneficiary(ies) or class(es) of beneficiaries, and any other natural person(s) exercising ultimate effective control over the trust, and in the case of a legal arrangement other than a trust, such term means persons in equivalent or similar positions. The term ‘Controlling Person’ shall be interpreted in a manner consistent with the Financial Action Task Force Recommendations.
Participating Jurisdiction
In relation to the CRS, the term Participating Jurisdiction means a jurisdiction (i) with which Jersey has an agreement in place pursuant to which it will provide certain information specified in the CRS, and (ii) which is identified in a published list.
Reportable Jurisdiction
In relation to the CRS, the term Reportable Jurisdiction means a Participating Jurisdiction with which Jersey is obliged to provide the information about the residents of that jurisdiction and their accounts (Reportable Accounts).
Reportable Account
In relation to the CRS, the term Reportable Account means an account held by one or more Reportable Persons or by a Passive NFE (or a Professionally Managed Investment Entity in a Non-Participating Jurisdiction) with one or more Controlling Persons that is a Reportable Person, provided it has been identified as such pursuant to the applicable CRS due diligence procedures.
Reportable Person
In relation to the CRS, the term Reportable Person means a person that is resident for tax purposes in a Reportable Jurisdiction under the tax laws of such jurisdiction other than: (i) a corporation the stock of which is regularly traded on one or more established securities markets; (ii) any corporation that is a Related Entity of a corporation described in clause (i); (iii) a Governmental Entity; (iv) an International Organisation; (v) a Central Bank; or (vi) a Financial Institution.
(Foreign) Financial Institution (FFI/ FI)
An entity that qualifies as a Custodial Institution, a Depository Institution, an Investment Entity or a Specified Insurance Company.
Non-Financial (Foreign) Entity (NFFE/ NFE)
An entity that is not an FFI/ FI.
Active NFFE/ NFE
Active NFFE/NFE by reason of income and assets:
less than 50% of the gross income for the preceding calendar year or other appropriate reporting period is passive income, and
less than 50% of the assets held by the NFE during the preceding calendar year or other appropriate reporting period are assets that produce or are held for the production of passive income.
Qualified listed stock corporations and their related entities
Governmental entities, international organizations, central banks and entities under the sole ownership of such NFFE/NFEs.
Holding NFFE/NFEs that are member of a non-financial group
substantially all (i.e. 80% or more measured against an entity’s gross income) the activities of the NFE consist of holding (in whole or in part) the issued stock of one or more subsidiaries that engage in businesses other than the business of a FI, or
providing financing and services to such subsidiaries.
Start-up NFFE/NFEs
is not yet operation
has not had any operations in the past
invests equity in assets with the intention of operating a business other than a FFI/FI, and
has been established for no more than 24 months.
NFFE/NFEs that are liquidating or under reorganization
Treasury centers that are part of a non-financial group
Non-profit NFFE/NFEs
Passive NFFE/ NFE
A NFFE/NFE which is not an Active NFFE/NFE; or
In the case of the CRS (and not in the case of FATCA), a professionally-managed investment entity resident in a non-Participating Jurisdiction.
Passive Income
Dividends,
interest,
income equivalent to interest,
rents and royalties, other than rents and royalties derived in the active conduct of a business conducted, at least in part by the employees of the NFE
annuities
etc.
TIN
The term TIN means Taxpayer Identification Number or a functional equivalent in the absence of a TIN. A TIN is a unique combination of letters or numbers assigned by a jurisdiction to an individual or an entity and used to identify the individual or entity for the purposes of administering the tax laws of such jurisdiction. Further details of acceptable TINs can be found on the OECD AEOI Portal (http://www.oecd.org/tax/automatic-exchange/).
Custodial Institution
An entity that holds, as a substantial portion of its business, Financial Assets for the account of others. This is the case if the gross income of the entity attributable to the holding of Financial Assets and related financial services equals or exceeds 20 percent of the entity’s gross income during the shorter of the three-year period ending as of 31 December (or the final day of a non-calendar year accounting period) prior to the year in which the determination is being made, or the period during which the entity has been in existence.
Depository Institution
An entity that accepts deposits in the ordinary course of a banking or similar business. An entity conducts banking or similar activities if it accepts deposits or similar investments of funds (on the liabilities side of the balance sheet) while regularly engaging in at least one of the following activities (on the assets side of the balance sheet):
makes personal, mortgage, industrial, or other loans or provides other extensions of credit;
purchases, sells, discounts or negotiates accounts receivable, installment obligations, notes, bills of exchange, drafts, checks, acceptances or other evidence of indebtedness;
issues letters of credit and negotiates drafts drawn thereunder;
provides trust or fiduciary services;
finances foreign exchange transactions; or
enters into, purchases, or disposes of finance leases or leased assets.
Under the CRS, an entity is not considered engaged in a banking or similar business if the entity solely accepts deposits from persons as a collateral or security payment pursuant to a sale or lease of property or pursuant to a similar financing arrangement between such entity and not the person from whom the entity received the deposit.
Entity
Legal entities and legal structures (e.g. stock corporations, partnerships, collective capital investment schemes, trusts or foundations)
Financial Assets
Includes securities (e.g. shares in the share capital of a corporation, interests or beneficial ownership of the interests in a free float or listed partnership or trust, as well as bonds, notes, debentures, other debt instruments or interests in collective investment schemes), partnership interests, commodity transactions, swaps, insurance or annuity contracts or interests in securities (including exchange traded and non-exchange traded futures and options).
The term Financial Assets does not include non-trading assets.
Investment Entity
An entity that meets at least one of the conditions a) or b) below:
a. an entity that primarily conducts one or more of the following business activities for a customer:
i. trading in money market instruments; foreign exchange; exchange, interest rate and index instruments; transferable securities; or commodities futures trading;
ii. individual and collective portfolio management; or
iii. otherwise investing, administering, or managing Financial Assets or money on behalf of other persons;
b. an entity the gross income of which is primarily attributable to investing, reinvesting, or trading in Financial Assets, if the entity is managed by another entity that is a Depository Institution, a Custodial Institution, a Specified Insurance Company or an Investment Entity.
An entity is treated as primarily conducting as a business one or more of the activities described in a) above or an entities gross income is primarily attributable to investing, reinvesting or trading in Financial Assets for the purpose of b) above, if the entity’s gross income attributable to the relevant activities equals or exceeds 50 percent of the entity’s gross income during the shorter of (i) the three-year period ending as of 31 December of the year preceding the year in which the determination is made, or (ii) the period during which the entity has been in existence. The term “Investment Entity” does not include an entity that is an Active NFE.
Professionally managed
This is relevant to the CRS only. Another FI (e.g. bank, asset manager) performs with discretionary decision-making authority services on the entity’s behalf, such as:
Trading in financial instruments
Portfolio management
Otherwise investing, administering or managing funds, money or financial assets
It is sufficient if only parts of the entities’ assets are professionally managed as per above.
Specified Insurance Company
An entity that is an insurance company (or the holding company of an insurance company) that issues, or is obliged to make payments with respect to, a Cash Value Insurance Contract or an Annuity Contract.
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