Chapter 4 Status Vs CRS Status Vs CDOT Status

The “Chapter 4 Status”/”FATCA Status” of a Legal Entity Customer is not always the same as their CRS Status or CDOT Status.

Here is a simplified chart that illustrates some of the Status variables and differences of treatment between the IGA FATCA, CRS and CDOT regimes.

pdf of the table below

GATCA Classificationsv9

Notes:

  1. US accounts are not exempted from CDOT or CRS.
  2. Non-Reporting FIs are Identified in each jurisdiction’s FATCA IGA – Annex II.
  3. Investment Entities in jurisdictions that are not participating to the CRS are always treated as Passive NFEs under the CRS. (The USA has not currently signed up to participate under CRS. Until the USA gives a firm commitment to a date when it will start automatically exchanging financial account information it is, for the purposes of the CRS and DAC2, a Non-Participating Jurisdiction.)
  4. In IGA Countries, FIs can be non participating only after a period of significant non-compliance that has elapsed with continuing non-compliance.
  5. Non-Profit Organisations are ‘carved out’ under FATCA. Under CDOT and CRS, Not for Profit Organisations are subject to the same tests as other NFEs.
  6. Any entity claiming US Treaty Relief will need to complete a W-8.
  7. Direct Reporting NFFE is a status that applies only to FATCA. For CDOT and CRS purposes the DR-NFFE would be required to identify its CDOT and CRS Status.
  8. An ODFI is not a Non-Reporting FI under either the CRS, nor CDOT.
  9. This pool will include those Legal Entities that have provided a FATCA Status that does not exist under CDOT or the CRS, for example, “Excepted Territory NFFE”. This will not include LEs that have separately provided an acceptable CRS Status and CDOT Status.
  10. Under both CDOT and DAC such non-profit organisations are required to carry out due diligence processes to identify and report on any Reportable Persons. Where the non-profit organisation is not a financial institution, it will be an NFE. Under all three regimes, the effect is to treat the NFE as active. They are specifically defined as active under FATCA and DAC, and the Controlling Persons are exempted from being reported on under CDOT. (See Note 12.)
  11. Under CDOT, FIs that would for US FATCA, be either Non-Profit Organisations or Local Client Base FIs or Non-Registering Local Banks are not considered “Deemed-Compliant” and will instead be Reporting Financial Institutions for CD and Gibraltar due diligence and reporting purposes.
  12. Not for profit Financial Institutions: The majority of not for profit organisations are expected to qualify as NFFEs as very few will be carrying on a business as Financial Institutions. If a not for profit organisation does qualify as a financial institution, then it will need to subject any financial accounts that it maintains to due diligence.
  13. Whilst a W-9 establishes US Citizenship, under the CRS it is also necessary to establish all jurisdictions that consider the entity resident for tax purposes.
  14. A difference between the DAC/CRS and the other regimes is that for both FATCA and CDOT the definition of Financial Account excludes equity and debt interests in an Investment Entity where those interests are regularly traded on an established securities market. That means that equity and debt interests in certain listed Investment Entities, for example, Investment Trust Companies (ITC), are in scope under the DAC/CRS. Source: HMRC Guidance on AEoFI, September 2015, §103225. https://haydonperryman.com/gb/guidance/dac/aeim103225/
  15. Reporting obligations are only removed for an Entity meeting the definition in Section VIII A(6)(a) {Investment Entity] if it also meets the conditions in Section VIII D(9)(d) to (g) (a holding company or treasury centre in a non-financial group, a start-up entity or an entity liquidating or emerging from bankruptcy) whereby it will be treated as an Active NFE.
  16. See: https://www.gov.uk/hmrc-internal-manuals/international-exchange-of-information/ieim403360
  17. “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 (i) managed by a Financial Institution and (ii) not a [CRS] Participating Jurisdiction Financial Institution. “Investment Entity managed by another Financial Institution” An Entity is “managed by” another Entity if the managing Entity performs, either directly or through another service provider on behalf of the managed Entity, any of the activities or operations described in clause (i) above in the definition of ‘Investment Entity’. An Entity only manages another Entity if it has discretionary authority to manage the other Entity’s assets (either in whole or part). Where an Entity is managed by a mix of Financial Institutions, NFEs or individuals, the Entity is considered to be managed by another Entity that is a Depository Institution, a Custodial Institution, a Specified Insurance Company, or the first type of Investment Entity, if any of the managing Entities is such another Entity.