The Organisation for Economic Co-operation and Development (OECD) recently released a revised version of its CRS-related frequently asked questions (FAQs) (June 2016) which includes a number of new questions and answers. One of the FAQs (Section I, #9) addresses the situation where an investment entity is treated as a Passive nonfinancial entity (NFE) because it is not in a CRS participating jurisdiction and it is managed by a financial institution. Passive NFEs under CRS must generally report the full name of each controlling person along with certain identifying information of the controlling persons.

The FAQ clarifies that, at least for a managed investment entity in a non-CRS jurisdiction, the managed Investment Entity is not required to provide a TIN for a controlling person who is not tax resident in a CRS Participating Jurisdiction, unless otherwise required by local law.

Effect on validation procedures

Following the new FAQ, we expect many CRS self-certifications provided by managed US investment entities will omit TINs for their controlling persons who are not tax residents in a CRS participating jurisdiction (e.g. the United States). Financial institutions that had been invalidating such forms because of the missing TINs should re-visit the validation of such forms in light of the FAQ's clarification.

Effect on managed investment entities in non-CRS jurisdictions (e.g., US investment entities)

Prior to the issuance of the FAQ, there was a question about whether the identifying information for each controlling person had to include the taxpayer identification number (TIN) of a controlling person who was not a tax resident of a participating jurisdiction. The clarification provided in the FAQ is welcome relief for managed US investment entities and other non-participating jurisdiction investment entities that had difficulty collecting TINs from their controlling persons.

CRS-related FAQs, June 2016, Section I, #9

Q: Pursuant to Section VIII(D)(8), an Investment Entity described in Section VIII(A)(6)(b) that is not a Participating Jurisdiction Financial Institution is a Passive NFE, and the due diligence procedures in either Section V or Section VI must be applied to the account of the Investment Entity to determine whether its account is a Reportable Account. The account is a Reportable Account if the Passive NFE has one or more Controlling Persons who are Reportable Persons. In the case where a Controlling Person is not a Reportable Jurisdiction Person, is there a requirement to collect the TIN of such Controlling Person?

A: Subject to provisions in domestic law, in particular with respect to the so-called "wider approach," as reflected in Annex 5 to the Standard, if a Controlling Person is not a Reportable Jurisdiction Person, the TIN is not required to be collected from such Controlling Person.

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