lifting of bank secrecy due to eoi

Automatic Exchange of Information

By Christiana NicolaouTax Advisor, Eurofast, Cyprus

Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information – MCAA - prepared by the OECD : Signed in Berlin,

at the 7th meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes,

on 29th October 2014.

Landmark Agreement : Introducing an International Automatic Exchange of Information (AEOI), as the signature of this MCAA adds automatic reporting to the International Exchange of Information processes.


The genesis of the automatic exchange of information:

•U.S. FATCA [Foreign Account Tax Compliance Act ]. Year 2010.

•E.U. revised DAC [Directive 2011/16/EU on administrative cooperation in the field of taxation] Year 2013.

•OECD AEOI :Year 2013: G20 Finance Ministers & Central Banks Governors endorsed the European initiative.

Year 2014: G20 approved the Global AEOI Standard : ‘Standard for Automatic Exchange of Financial Account Information - Common Reporting Standard’ [CRS] developed by OECD - to be used as the standard towards the DAC reporting purposes.

While, the above-presented signing of the MCAA is the international agreement activating the OECD AEOI.


Which countries are involved?

Currently over 90 jurisdictions have committed to implement the CRS, with some for first exchanges in 2017 and others in 2018


Latest update releasedAs at 30 October 2015:

AEOI: STATUS OF COMMITMENTS

96 Jurisdictions have committed


JURISDICTIONS UNDERTAKING FIRST EXCHANGES BY 2017

[ 56 in total ]

Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Dominica, Estonia,

Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania,

Luxembourg, Malta, Mauritius, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain,

Sweden, Trinidad and Tobago, Turks and Caicos Islands, United Kingdom


JURISDICTIONS UNDERTAKING FIRST EXCHANGES BY 2018

[ 40 in total ]

Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Ghana, Grenada,

Hong Kong (China), Indonesia, Israel, Japan, Marshall Islands, Macao (China), Malaysia, Monaco, New Zealand, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Saint Maarten, Switzerland,

Turkey, United Arab Emirates, Uruguay


JURISDICTIONS THAT HAVE NOT INDICATED A TIMELINE

OR THAT HAVE NOT YET COMMITTED

[ 3 in total]

Bahrain, Nauru, Vanuatu


Special reference to the USA via the 30th October 2015 AEOI Status of Commitments update:

‘The United States has indicated that it will be undertaking automatic information exchanges pursuant to FATCA from 2015 and has entered into intergovernmental agreements (IGAs) with other jurisdictions to do so. The Model 1A IGAs entered into by the United States acknowledge the need for the United States to achieve equivalent levels of reciprocal automatic information exchange with partner jurisdictions. They also include a political commitment to pursue the adoption of regulations and to advocate and support relevant legislation to achieve such equivalent levels of reciprocal automatic exchange.’


The OECD Common Reporting Standard [CRS] : Specifics

In order to meet the new single global Standard for the Automatic Exchange of financial account Information between Tax Authorities around the world, the participating countries will need to gather the relevant information from financial institutions and exchange it automatically with partner countries annually.



Further, to make sure all relevant taxpayers are covered, the CRS has been drafted with a very broad scope on four pillars, similar with FATCA’s intergovernmental nature:

Reportable IncomeFinancial InstitutionsReportable AccountsDue diligence procedures



I ) Reportable Income:

All kinds of investment income [ interest, dividends, income from certain insurance contracts, annuities and such] as well as account balances, and sales proceeds from financial assets that give rise to this type of income.



II ) Financial Institutions:

Who needs report under the CRS?

Not only banks, but also:custodians, brokers, various collectiveinvestment vehicles, andspecified insurance companies.

Further, the exact terminology of a ‘Participating Jurisdiction Financial Institution’ extends to the following: (i)any Financial Institution that is resident in a Participating Jurisdiction, but excluding any branch of that Financial Institution that is located outside such Participating Jurisdiction, and (ii)any branch of a Financial Institution that is not resident in a Participating Jurisdiction, if that branch is located in such Participating Jurisdiction.


The OECD Common Reporting Standard [CRS]: Specifics

III ) Reportable Accounts:

include:

Accounts held by individuals and entities ( trusts and foundations inclusive),

While also there also exists the necessity to examine passive entities as well, in order to gather and provide information on reportable controlling persons if applicable.



IV) Due Diligence Procedures:

Strong due diligence procedureswill need to be in place to facilitate the recognition of reportable accounts and gather theAccountholder Identifying information that needs to be reported for such accounts.


What’s next and When will the systems of these participating countries need be ready?

Status and timing of regime:

Implementation is expected by early adopting countries very soon, as the first exchanges which are expected to occur between tax authorities in year 2017 will be covering 2016 information of residents of participating countries. Thus Financial institutions will need to adapt their systems in order to be able by 2017 to extract from their database all the information relating to the year 2016, that will need to be transmitted. Further, in the case of entities accounts, their 31 December 2015 balances will also be determining their eligibility to being reportable.


The OECD Common Reporting Standard [CRS] : Reportable Accounts and Reportable Persons:

Reportable accounts are: Accounts held by individuals and entities. For Individual Accounts:

Reportable Persons:An account held by an individual / individuals is a reportable account if the account holder[s] is a tax resident of a reportable jurisdiction.

The account holder in this case is called a :reportable person.

Pre-existing financial accounts held by individuals [i.e. accounts that were in place before the jurisdiction signed the convention] will be reportable as well as any new financial accounts.

And also, each holder of a jointly held financial account will be attributed the entire balanceor value of the jointly held account when it comes to these reporting purposes.


https://thebanks.eu/articles/automatic-exchange-of-information-on-financial-accounts

https://thebanks.eu/articles/automatic-exchange-of-information-on-financial-accounts

The OECD Common Reporting Standard [CRS] : Rationale:

oCRS has tax residency as its basis, and unlike FATCA it does not withstand on citizenship.

Conclusively: Reportable accounts are financial accounts held by tax residents of CRS committed countries. A person will be deemed to have a tax residence in a particular country if , under the laws of that country, is liable to tax due to domicile, residence, place of management, or any other similar parametre. Also for an account holder that is a reportable person in respect to a multiple of participating countries, the entire account balance / value, and the total amount of income or gross proceeds etc, will be reportable to each CRS participating country.


The OECD Common Reporting Standard [CRS] : Reportable Accounts & Reportable Persons

Entity Accounts:Pre-existing financial accounts held by entities are not considered reportable if their aggregate account balance is not above USD 250.000 as of December 31 of a reportable year. Yet, the account[s] can become reportable if the account balance exceeds USD 250.000 as of December 31 of any subsequent calendar year.

Any new financial accounts to be held by entities, will all be considered reportable irrespective of the account balance.

Passive Non Financial Entities: An entity account will be reportable if it is held by one or more reportable persons, or it is held by a passive non-financial entity [NFE] that has one or more controlling persons who are reportable persons. A Passive NFE is a non-financial entity that has more than 50% of its gross income for the previous calendar year being passive income, or if more than 50% of its assets generate, or are held towards production of, passive income.


The OECD Common Reporting Standard [CRS] :

Information to Be Reported:

For each of reportable accounts the following information will be reported:

1. Account holders details:Name / Address / Jurisdiction[s] of Residence / Taxpayer Identification Number [TIN]

If a reportable account holder is an individual, date and place of birth.

If a reportable account holder is an entity, for each of the controlling persons the account holder details listed above are reported.

2. Account details: Account Number or its equivalent if there is not one.

3. Financial Institution details: Name & Identifying Number.

4. Financial information:Account balance Sales proceeds from financial assetsInvestment income [ interest, dividends, income from certain insurance contracts etc]Currency in which each amount is denominated.



Automatic & Other Information Exchange in Practice:

Main principles:

The information will be exchanged on a yearly basis in accordance to the reporting standard.

The information will be exchanged only between the jurisdictions which the Information Exchange convention is in force and in effect.

The information will not be automatically exchanged with jurisdictions which have not signed up the convention.




Apart from the automatic exchange, the information may be exchanged in other ways:

On Request : Exchange of information on request : a situation when: a competent authority of one jurisdiction asks for info from a competent authority of another jurisdiction. The request relates to a specific tax investigation, [criminal or civil ]. And this type of exchange is conducted in accordance to Tax Information Exchange Agreements (TIEAs).

Spontaneously. Spontaneous exchange of information is a situation when: there is an actual provision of information to a competent Authority of one jurisdiction that is forseeably relevant to a competent Authority of another jurisdiction although it has not been previously requested of !




If a jurisdiction did not sign the convention, this jurisdiction will neither automatically report nor automatically receive account information from the jurisdictions which signed the convention.

Nevertheless, the absence of the automatic information exchange between a pair of jurisdictions cannot be interpreted as to that there cannot or will not be any information exchange at all, as the information may instead be exchanged either on request or spontaneously as described previously.


Some countries which are currently not committed to Automatically Exchanging Financial Accounts Information :

Although many European countries proceeded to the commitment to start the Automatic Exchange of Information, there also are several jurisdictions of the general European region and other near-to Europe countries, currently not committed to the exchanging the information automatically, with these being :

- Armenia, - Azerbaijan,- Belarus, - Bosnia and Herzegovina,- Former Yugoslavian Republic of Macedonia,- Georgia, - Holy See (Vatican City State), - Kazakhstan,- Lebanon,- Moldova, - Montenegro,- Serbia, - Ukraine


Concluding remarks:

As the global map on bank secrecy is altering in such speedy manner, Eurofast is alert in assisting clients with any requests they may be presenting reference to the upcoming introduction of the AEOI.


HOW TO OPEN A BANK ACCOUNT IN MONTENEGRO, SERBIA, BOSNIA AND

HERZEGOVINA• By physical non-resident• By legal non-resident

By Ivan Petrovic, Director

Eurofast Montenegro

By a physical foreign person

Needed only a valid PASSPORT.All documents for the purpose are provided by the Bank- Request for the opening of the bank account- Agreement with the Bank for the opening of the Bank account- Internal banking papers, which are different from bank to bank.

Foreign person has to be physically present in the Bank at the moment of opening the bank account.

MONTENEGRO

NON RESIDENT /LEGAL ENTITY

Opening a non-resident account for a company - documents needed are: The authenticated Decision on registration of the company in your country which

cannot be dated older than three months

A formal request for opening a non-resident account explaining the activities of the company in Montenegro (company letter head document must be used)

A list of persons authorized to deal with the account, together with their signatures

Passport copies of the authorized persons

Written confirmation certifying that a private person holds more than 20 percent of shares of the company, stating also their exact percentage, the name(s) of the mentioned holders and their passport numbers (must be on letterhead document)

MONTENEGRO

According to the Law on preventing money laundering and terrorist financing, the bank is obliged to obtain data on beneficial owners of the legal entities.

The beneficial owner of an economic corporation, ie. the legal entity, in the sense of this law, is considered to be:

• a natural person who is, directly or indirectly, the owner of at least 25% of business participation of the shares, suffrage or other rights, on the basis of which it participates in management, that is in the capital with more than 25% of participation or has a prevailing influence in the management of the assets of the economy corporation;

• a natural person who provides or is providing directly the assets to the economic corporation and on that basis has the right to significantly affect decision making of the organs of the management of the company during deciding on financing and business.


MONTENEGRO

The beneficial owner of the institution or other entity of the foreign right ( trust, fond etc.) which takes, manages or divides property assets for certain purposes, in the sense of this law is considered to be:

• a natural person who, directly or indirectly, manages at least 25% of the property of the legal entity or similar subject of foreign law;

• a natural person defined or definable as the user of at least 25% of the incomes from the property that is managed with.


MONTENEGRO

Information on beneficial owners • If ownership is divided in parts less than 25% no additional information is needed.• If ownership is divided in parts at least 25%, authorized person has to sign

questionary about beneficial owners including: his name, date and place of birth, address, personal identification number and ownership percent.

Information on the legal entity the statement is related to: • Name • Identification No. • Place of founding/registration (country, address) • Legal representative: name and last name (identification is done

with the ID/passport)


MONTENEGRO

The below rules are common for all Serbian banks. Depending on the bank chosen, the list of documents might be longer due to internal rules of the bank.

NON RESIDENT /PHYSICAL PERSON

1) By a physical foreign person/non-resident in person

Needed only a valid ID DocumentAll documents for the purpose are provided by the Bank-Request for the opening of the bank account-Agreement with the Bank for the opening of the Bank account-Additional documentation for the KYC procedure and internal banking papers, which are different from bank to bank.Or

SERBIA

2) By an authorised person, with POA: with a notarised and possibly apostilled POA. POA’s in foreign language must be translated into Serbian.

Documents needed:

1.Excerpt from the Trade Register for the Company, issued by the competent authority according to the applicable legislation, from which to be evident also – the trade name of the Company , the seat and registered address, identification number, the person/s with legal representative rights. Notarised, apostilled and translated into Serbian.

2. The PoA/s, if such, with which the person/s that represent the Company authorizes another person/s to open and to deal with the amounts in the Bank account on behalf and to the expense of the Client must be signed as follows – the competent person must sign the POA before the Bank employee, or it has to be duly notarised, apostilled and translated into Serbian.

SERBIA


Continues….

3. Specimen of the person/s that have the right to operate with the bank account/s on behalf of the Client. The signatures of this / these person/s must be on the specimen of signatures and must be notarised, appostiled and translated into Serbian on the so called OP form.

4. Documents (original excerpts from the company registries and passport copies) proving the ultimate beneficiary.

5. Know your customer Questionnaire – also obligatory – provided by the Bank


SERBIA

Non resident/physical person

- One must fill out the bank’s application for the account opening- Provide a verified passport copy

Non resident person has to be physically present in the Bank at the moment of the account opening.

BOSNIA & HERZEGOVINA

- By a founder or a POA authorized person.- Certificate of registration – proving registration with the commercial

register or equivalent (original or certified copy).- Activity code, business classification data.- Articles of the association.- Authorized signatures list - specimen signatures file designating the

persons who are to be granted signatory power over the account.- Certified copies of the ID’s (passports) of the persons having the

signing authority on the account.

Additional documents may be demanded by the bank, depending on the type of account being opened, ownership structure etc.

Non resident/physical person


- Verified copy of a ID card.- Proof of residence (issued by the CIPS) with

home address.

The process usually takes few minutes when the documentation from above is provided. Some banks may ask a small payment is made to the account (up to 3 EUR) in order to activate it.

Resident/ physical person


- Court registration (original or certified copy)- Articles of association or bylaws for account holders who are not legally required to be

court-registered (original copy with the legal entity's seal).- Founding resolution passed by the competent body, in case the legal entity was not

established by operation of law (original or certified copy).- Notice of business classification issued by the RS Statistics Bureau, (original or certified

copy)- Certificate of registration issued by the Tax Authority (original or certified copy).- Certificate of registration as indirect tax payer, with VAT number, issued by the

Indirect Taxation Office (original or certified copy) or VAT exemption declaration by an authorised person, as appropriate.

- Specimen signatures file designating the persons who are to be granted signatory power over the account

- Certified copies of CIPS-issued ID cards (passports) of the persons having signing authority on the account and copies of their CIPS-issued proof of residence.

- Certified copies of CIPS-issued ID cards (passports) of the authorised company representatives and copies of their CIPS-issued proof of residence.

Resident/ legal entity


- Certified copy of CIPS-issued ID cards (passports) of the person producing the account opening documents and a copy of his CIPS-issued proof of residence.

- Latest financial report (for the most recent accounting period, in the final version for regulatory reporting), not required for start-up companies.

- Declaration by the beneficial owner. For each resident private individual named in the declaration, kindly deliver a certified copy of their CIPS-issued identity card and proof of residence, and for non-resident private individuals please deliver a certified copy of their passport with a certified translation into one of the official local languages (no translation is required for documents issued in Croatia, Serbia or Montenegro).


By Anna Pushkaryova, Director

Eurofast Georgia

Procedure and issues of current bank accounts opening in Georgia

• Georgia is not a part of agreement on automatic exchange of information;

• Georgian banking system is one of the most progressive in Europe, providing a wide range of modern and convenient banking products. Consumer digital banking of the Georgian TBC Bank has been recognized by Global Finance Magazine for the Best SMS/Text Banking 2015 in the Central & Eastern European (CEE) region. Best Integrated Corporate Banking Site in CEE 2015;

• Opening account to legal entities is subject to successful DD and KYC procedure and approval of the application for account opening by the bank`s legal department. Account opening fees for legal entities are very low.

Georgia

GENERAL OVERVIEW

• For opening accounts to individuals, either residents or non – residents, only passport shall be submitted (and the PoA issued to the authorized representative, if the latter opens account on behalf of a non-resident). As a matter of practice, the bank opens multicurrency account to individuals. Opening account takes half an hour and is free of charge.

• Accounts opened to legal entities allow clients to make unlimited transfers in various currencies worldwide; make currency exchanges; pay bills; access funds anytime. No initial deposit and no minimum ballance is required for company account. Active accounts have no term limitations;

GENERAL OVERVIEW

Georgia

RESIDENT LEGAL ENTITY

1. Charter binded and notarized, or the charter printed from the web-page of the public register (https:// enreg.reestri.gov.ge), or a registration statement

2. Extract from the register of entrepreneurs and nonindustrial (noncommercial) legal bodies.

3. Application of a person having representative authority on the personality of founders with 25% or more of a share together with the copies of their IDs.

4. Signature samples of all persons having representative authority on behalf of a legal person and of proxy holders on disposing of an account.

Signature samples should be certified by a notary or a bank employee with appropriate rights.

5. Identification cards of all persons having representative authority on behalf of a legal person and of all persons having the right to dispose an account.

6. In case of Joint Stock Company excerpts of the stock registry from independent registrar or from its own registry regarding Joint Stock company founders. And some other documents as regards JSCs.

Georgia

http://enreg.reestri.gov.ge/

NON-RESIDENT LEGAL ENTITY (EITHER BY FOUNDER(S) or BY AUTHORISED PERSON BASED ON POA) shall submit the following documents for current account opening:

1. Annual report (if available) of the organization. This document is required only from legal entities registered in offshore countries.

2. Original charter or its notarized copy.

3. Extract (original) from the trade register of the country of incorporation of the legal entity. In the absence thereof, any official document issues by the respective state authorities certifying the entrepreneurial status of the company, e.g. good standing, information about shareholders, directors, authorized representatives, initial registration date, registration number and authority.

4. Application of a person having representative authority on the personality of founders with 25% or more of a share with the copies of their identification cards (such application to be provided in accordance with the established pro forma based on the Georgian law).

NOTE: If among the founders of the company (with 25% or more of a share) there is another company (companies), it is necessary to submit additionally an application of the director (directors) of this company (companies) concerning the personality of the founders together with copies of their identification cards. It is enough to carry out identification of the founders at two stages.

Georgia

5. Signature samples of all persons having representative authority on behalf of a legal entity and of proxy holders on disposing of an account. Signature samples should be certified by a notary or a bank employee with appropriate rights. There is no established form of such document.

6. Copies of identification cards or passports of all persons having representative authority on behalf of a legal entity and of all persons with the right to dispose of an account (it is possible to furnish notarized copy of an identification card);

7. KYC questionnaire. Such form may be signed by the authorized representative. The questionnaire, in particular, requests to additionally provide a biographical or other sketch showing how the beneficial owner created his/her wealth (source of wealth);

8. PoA, in case an authorized representative opens an account.

All foreign documents should be apostilled abroad and contain the notarized All foreign documents should be apostilled abroad and contain the notarized translation into the Georgian language. translation into the Georgian language.

NON RESIDENT /LEGAL ENTITY (…continued from previous slide)

Georgia

ISSUES TO BE CONSIDERED BY LEGAL NON-RESIDENTS

• Georgian banks have very small experience of opening accounts to foreign companies and in practice they may require information and documents which are not envisaged either by the legislation or by its internal rules;

• There can be problems with opening bank accounts to companies having bearer shares, based on internal bank regulations of each particular bank, because there is no possibility to identify company owners. Certain banks may refuse to open accounts to such companies;

• in order to confirm the owner of the company, the bank may require the authorized representative to submit the Affidavit letter of beneficiary owners which may be signed by the authorized representative. The letter indicates the owners/controlling parties of the company and the amount of their direct and indirect share in the company

Georgia

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