Glossary: AEoI, CRS, and FATCA

Active NFE

Active Entity (typically a business that is a trading entity) is known as an Active Non-Financial Entity (NFE). You must meet any of the following criteria to be an Active NFE:

  • Less than 50% of the NFE’s 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;
  • The stock of the NFE is regularly traded on an established securities market or the NFE is a Related Entity of an Entity the stock of which is regularly traded on an established securities market;
  • The NFE is a Governmental Entity, an International Organisation, a Central Bank, or an Entity wholly owned by one or more of the foregoing;
  • Substantially all of the activities of the NFE consist of holding (in whole or in part) the outstanding stock of, or providing financing and services to, one or more subsidiaries that engage in trades or businesses other than the business of a Financial Institution (FI), except that an Entity does not qualify for this status if the Entity functions (or holds itself out) as an investment fund, such as a private equity fund, venture capital fund, leveraged buyout fund, or any investment vehicle whose purpose is to acquire or fund companies and then hold interests in those companies as capital assets for investment purposes;
  • The NFE is not yet operating a business and has no prior operating history, but is investing capital into assets with the intent to operate a business other than that of a FI, provided that the NFE does not qualify for this exception after the date that is 24 months after the date of the initial organisation of the NFE;
  • The NFE was not an FI in the past five years, and is in the process of liquidating its assets or is reorganising with the intent to continue or recommence operations in a business other than that of an FI;
  • The NFE primarily engages in financing and hedging transactions with, or for, Related Entities that are not FIs, and does not provide financing or hedging services to any Entity that is not a Related Entity, provided that the group of any such Related Entities is primarily engaged in a business other than that of an FI; or
  • The NFE meets all of the following requirements:
  • it is established and operated in its country/jurisdiction of residence exclusively for religious, charitable, scientific, artistic, cultural, athletic, or educational purposes; or it is established and operated in its country/jurisdiction of residence and it is a professional organisation, business league, chamber of commerce, labour organisation, agricultural or horticultural organisation, civic league or an organisation operated exclusively for the promotion of social welfare;
  • it is exempt from income tax in its country/jurisdiction of residence;
  • it has no shareholders or members who have a proprietary or beneficial interest in its income or assets;
  • the applicable laws of the NFE’s country/jurisdiction of residence or the NFE’s formation documents do not permit any income or assets of the NFE to be distributed to, or applied for the benefit of, a private person or non-charitable Entity other than pursuant to the conduct of the NFE’s charitable activities, or as payment of reasonable compensation for services rendered, or as payment representing the fair market value of property which the NFE has purchased; and
  • the applicable laws of the NFE’s country/jurisdiction of residence or the NFE’s formation documents require that, upon the NFE’s liquidation or dissolution, all of its assets be distributed to a Governmental Entity or other non-profit organisation, or escheat to the government of the NFE’s country/jurisdiction of residence or any political subdivision thereof.

 

 

Controlling person. How to identify a controlling person?

Where the customer (e.g. borrower) is a legal person (e.g. private limited company), we will ask for a self-certification form to be completed by a controlling person.

A controlling person is a physical person who meets one of the following conditions:

  • Directly or indirectly owns 25% or more of shares of the customer/borrower
  • Directly or indirectly owns 25% or more of the voting rights of the customer/borrower
  • Directly or indirectly holds 25% or more of interest within the customer/borrower
  • Exercises significant influence or control over the customer/borrower
  • Exercises the right to appoint and remove directors
  • Where the customer/borrower is ultimately owned by a legal arrangement (e.g. trust) that ultimately holds more than 25% of shares/voting/rights or interest within the borrower, the person who exercises significant control over the legal arrangement (e.g. trust)

A person who exercises significant control over legal arrangement (e.g. trust) would usually have at least one of the following rights:

  • Right to appoint or remove any of the trustees
  • Right to direct the distribution of funds or assets
  • Right to direct investment decisions of the trust
  • Right to amend the trust (trust deed)
  • Right to revoke the trust
  • Right to add or remove beneficiary(ies) including classes of beneficiaries

 Where there is no natural person who meets the conditions outlined above, we will ask for a self-certification form to be completed by a person who holds the position of the senior managing official of the customer/borrower.

 

 

CRS

The Common Reporting Standard (CRS) is a worldwide information-gathering and reporting requirement for financial institutions, to help fight against tax evasion and protect the integrity of tax systems.

Under the CRS, we are required to determine where you are “tax resident” (this will usually be where you are liable to pay income or corporate taxes) and give national tax authorities information on those customers that are tax resident/paying taxes outside the country/jurisdiction where they bank. They may then share this information with the tax authority of the country/jurisdiction (or countries/jurisdictions) where you are tax resident.

 

 

Custodial Institution

The term “Custodial Institution” means any Entity that holds, as a substantial portion of its business, Financial Assets for the account of others.

Please refer to the relevant domestic legislation or guidance, IRS FATCA Regulations and the CRS and associated Commentary, as applicable, for further clarification.

 

 

Depository Institution

The term “Depository Institution” means any Entity that accepts deposits in the ordinary course of a banking or similar business.

Please refer to the relevant domestic legislation or guidance, IRS FATCA Regulations and the CRS and associated Commentary, as applicable, for further clarification.

 

 

FATCA

The Foreign Account Tax Compliance Act (FATCA) is the name of the legislation introduced by the United States government, to help counter US tax evasion by encouraging better reporting of information.

 

 

GIN

A “Global Intermediary Identification Number” (GIIN) is a number assigned by the IRS FATCA Registration System to Financial Institutions and direct reporting non-financial foreign entities.

 

 

Entity

This is defined under the CRS as a legal person or a legal arrangement, such as a corporation, organisation, partnership, trust or foundation. An entity will therefore include any customer that holds a business account, product or service with OakNorth Bank Plc.

 

 

Financial Institution

The term “Financial Institution” means a “Custodial Institution”, a “Depository Institution”, an “Investment Entity” or a “Specified Insurance Company”.

Please refer to the relevant domestic legislation or guidance, IRS FATCA Regulations and the CRS and associated Commentary, as applicable, for further clarification.

 

 

Investment Entity:

Investment Entity means any entity that primarily conducts as a business one or more of the following activities or operations for or on behalf of a customer:

  • trading in money market instruments (cheques, bills, certificates of deposit, derivatives, etc.); foreign exchange; exchange, interest rate and index instruments; transferable securities; or commodity futures trading;
  • individual and collective portfolio management; or
  • otherwise investing, administering, or managing Financial Assets or money on behalf of other persons; or

Or the entity managed by a Depository Institution, a Custodial Institution, or a Specified Insurance Company the gross income of which is primarily attributable to investing, reinvesting, or trading in Financial Assets.

Investment Entity located in a Non- Participating Jurisdiction and managed by another Financial Institution

The term “Investment Entity located in a Non-Participating Jurisdiction and managed by another Financial Institution” means any Entity the gross income of which is primarily attributable to investing, reinvesting, or trading in Financial Assets if the Entity is:

  • managed by a Financial Institution; and
  • not a Participating Jurisdiction Financial Institution

Please refer to the relevant domestic legislation or guidance, IRS FATCA Regulations and the CRS and associated Commentary, as applicable, for further classification.

 

 

Legal persons

A legal person is an entity or body which has an existence separate and distinct from the persons (legal or natural) comprising that entity or body.

The following are examples of legal persons

  • Corporate bodies
  • Corporations sole
  • Scottish partnerships
  • European Economic Interest Groupings
  • Limited Liability Companies
  • Limited Liability Partnerships

 

NFE is any Entity that is not a Financial Institution.

 

 

Non-Financial (Foreign) Entity

A “Non-Financial (Foreign) Entity” is any Entity that is not a Financial Institution.

 

 

Non-Participating Financial Institution (FATCA specific)

A Non-Participating Financial Institution (NPFI) is a Financial Institution that is not FATCA compliant.

 

 

Non-Reporting Financial Institution

The term “Non-Reporting Financial Institution” means any Financial Institution that is:

  • a Governmental Entity, International Organisation or Central Bank, other than with respect to a payment that is derived from an obligation held in connection with a commercial financial activity of a type engaged in by a Specified Insurance Company, Custodial Institution, or Depository Institution.
  • a Broad Participation Retirement Fund; a Narrow Participation Retirement Fund; a Pension Fund of a Governmental Entity, International Organisation or Central Bank; or a Qualified Credit Card Issuer;
  • any other Entity that presents a low risk of being used to evade tax, has substantially similar characteristics to any of the Entities described in subparagraphs (1) and (2), and is defined in domestic law as a Non-Reporting Financial Institution, provided that the status of such Entity as a Non-Reporting Financial Institution does not frustrate the purposes of the Common Reporting Standard.
  • an Exempt Collective Investment Vehicle; or
  • a trust to the extent that the trustee of the trust is a Reporting Financial Institution and reports all information required to be reported pursuant to Section I with respect to all Reportable Accounts of the trust.

Please refer to the relevant domestic legislation or guidance and the CRS and associated Commentary, as applicable, for further clarification.

 

 

Non-Reporting Financial Institutions (FATCA specific)

The term “Non-Reporting Financial Institution” means any Partner Jurisdiction Financial Institution, or other entity resident in a Partner Jurisdiction that is identified in Annex II as a Non-Reporting Financial Institution or that otherwise qualifies as a deemed-compliant FFI, an exempt beneficial owner, or an excepted FFI under relevant U.S. Treasury Regulations.

Please refer to the relevant domestic legislation or guidance and the IRS FATCA Regulations as applicable, for further clarification.

 

 

Participating Jurisdiction – A Participating Jurisdiction is a jurisdiction with which an agreement is in place pursuant to which it will provide the information set out in the Common Reporting Standard.

 

 

Passive Non-Financial Entity

Under the CRS, a Passive NFE means any NFE that is not an Active NFE.

A NFE will be deemed a Passive NFE if more than 50% of the NFE’s gross income for the preceding calendar year or appropriate reporting period is passive income or the assets held by the NFE during the same period are assets that produce or are held for the production of passive income.

For the purpose of the CRS, passive income* would generally be considered to include the portion of gross income that consists of:

  • 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 employees of the NFE;
  • annuities;
  • the excess of gains over losses from the sale or exchange of Financial Assets that gives rise to passive income described above;
  • the excess of gains over losses from transactions (including futures, forwards, options, and similar transactions) in any Financial Assets;
  • the excess of foreign currency gains over foreign currency losses;
  • net income from swaps;
  • amounts received under Cash Value Insurance Contracts.

* Passive income will not include, in the case of an NFE that regularly acts as a dealer in Financial Assets, any income from any transaction entered into in the ordinary course of such dealer’s business as such a dealer.

 

 

Senior Managing Official

In the absence of a natural person(s) that exercises control of the Entity through ownership interests, the Senior Managing Official can be identified as the Controlling Person(s) of the Entity.

The Senior Managing Official of a company is the person who exercises control over the management of the entity.

 

Specified United States (US) Person

The term specified United States person means any United States person other than:

  • A corporation the stock of which is regularly traded on one or more established securities markets for a calendar year;
  • Any corporation which is a member of the same expanded affiliated group as a corporation the stock of which is regularly traded on one or more established securities markets for the calendar year;

 

 

Tax residency

Your tax residency is the country/jurisdiction where you are resident/registered for tax purposes. Each country/jurisdiction has its own rules for defining tax residence. For more information on tax residence, please consult your tax advisor or the OECD AEOI portal.

 

 

TIN

The term “TIN” means Taxpayer Identification Number or a functional equivalent in the absence of a TIN. A Taxpayer Identification Number (TIN) is a unique combination of letters and/or numbers assigned to you/your entity. Some countries/jurisdictions do not issue a TIN, but may rely on other issued numbers such as social security/insurance numbers or company registration numbers for entities. You may need to provide these if requested. The OECD has published a list of the acceptable Taxpayer Identification Number (TIN) formats and their alternatives.

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-identification-numbers/ 

 

 

US Citizen

The term “United States Citizen” means:

  • An individual born in the United States,
  • An individual whose parent is a U.S. citizen,
  • A former alien who has been naturalized as a U.S. citizen,
  • An individual born in Puerto Rico,
  • An individual born in Guam, or
  • An individual born in the U.S. Virgin Islands.

 

 

US entity

A corporation incorporated in the U.S., or a trust or partnership that is organised in the U.S. or established under the laws of the U.S., or the entity is a U.S. taxpayer.

 

 

US Person (USP)

The term “United States person” means:

  • A citizen or resident of the United States,
  • A partnership created or organized in the United States or under the law of the United States or of any State, or the District of Columbia,
  • A corporation created or organized in the United States or under the law of the United States or of any State, or the District of Columbia,
  • Any estate or trust other than a foreign estate or foreign trust. (See Internal Revenue Code section 7701(a)(31) for the definition of a foreign estate and a foreign trust.),
  • A person that meets the substantial presence test, or
  • Any other person that is not a foreign person.