Common Reporting Standard imageIn recent years globalisation has had a profound impact on the tax revenue collection of many economies around the world as it has eroded their tax bases. In order to combat the tax evasion opportunities created by globalisation, the Organisation for Economic Co-operation and Development (OECD) has developed the single global standard called Common Reporting Standard (CRS). New Zealand is one of the many jurisdictions which committed to be part of this global initiative from 1st July 2017.

Common Reporting Standard

CRS is a global framework for the collection, reporting and exchange of financial account information about people and entities investing outside of their tax residence jurisdiction, i.e. foreign tax residents. IRD will collect and exchange this identity and financial account information with the participating foreign tax authorities of those foreign tax residents. In return, IRD will receive identity and financial information on New Zealand residents from other tax jurisdictions (for example ATO and HM Revenue and Customs). The CRS will be governed and enforced in New Zealand by IRD under the Tax Administration Act 1994.

How Does CRS Affect You?

It is important to note that only Reporting New Zealand Financial Institutions (Reporting NZFIs) will have CRS due diligence and reporting obligations to IRD. Some family trusts will be caught by these CRS rules.


Trusts have been particularly targeted at the very outset in the CRS guidelines published by IRD as they are most commonly used by foreign tax residents to shield their assets and income. If the trust is identified as a Reporting NZFI, the trust/trustees will be responsible for:

  • Carrying out due diligence on the account holders such as trustees, beneficiaries, settlors or any other controlling persons.
  • If foreign tax residents are identified during the due diligence process then the Reporting NZFI (i.e. the trust) will have to report the information to IRD.
Is The Trust A Reporting NZFI? A Three-Step Approach

The due diligence and reporting obligations are only applicable if the trust qualifies as a Reporting NZFI and there are three steps in determining this. These steps need to be worked through carefully. It is important to note that a trust with a corporate trustee can come under these rules.

Step 1: Is The Trust A Financial Institution?
The trust is a financial institution if:

  1. It is carrying on a business as one or more of a custodial institution, depository institution, investment entity or specified insurance company; or
  2. It is a “managed investment entity”, i.e. the trust derives 50% or more of its income from financial assets over a specified period of time (three years) and is managed by a financial institution, for example the trust’s investment portfolio is managed by an investment management company.

Step 2: Is The Trust A New Zealand Financial Institution (NZFI)?
A financial institution trust will generally be resident in New Zealand for CRS purposes, and therefore a NZFI, if it has one or more trustees who are tax-resident in New Zealand.

Step 3: Is The Trust A Reporting NZFI?
A NZFI trust will be a Reporting NZFI (by default), unless it is a Non-Reporting NZFI. If the trust is not a Reporting NZFI it will either be a Passive Non-Financial Entity or an Active Non-Financial Entity which means it does not have reporting obligations under CRS.

Companies/Unit Trusts

Generally, a company/unit trust is likely to be an active non-financial entity as it would be operating as a business which derives 50% or more of its total gross income from active sources (providing goods and services). However, the company/unit trust can also be a Reporting NZFI if it meets the same criteria as specified above for trusts.


Partnerships include general partnerships, limited partnerships and similar legal arrangements like joint ventures. If identified as a Reporting NZFI, the partnership will have to carry out the due diligence and reporting to IRD. The criteria for identifying a Reporting NZFI partnership is the same as specified above for trusts.

Individuals/Sole Traders

For the purpose of CRS rules, an individual or sole trader is not an entity and therefore cannot be a financial institution. This means they are not required to carry out the due diligence on themselves and report the information to IRD. However, in almost all cases, an individual/sole trader will have a bank account with a bank that has CRS reporting obligations. If you opened a new bank account on or after 1 July 2017 your bank should have sent you a self-certification form which must be completed and submitted to the bank. Failure to do so could result in your account being frozen by the relevant bank.

The above list is not exhaustive. The definition of “entity” is very broad under the CRS rules to cover both legal persons like incorporated companies and legal arrangements like trusts and partnerships.

As discussed above, if the entity is identified as a Reporting NZFI it will be required to carry out the due diligence on its account holders but the reporting obligation would only arise if the entity’s account holders are foreign tax residents. For example, a Reporting NZFI trust with only New Zealand tax residents as account holders would not be required to report any information to IRD. The only requirement will be to keep the record of due diligence process carried out by the trust for seven years from the end of the relevant reporting period.

Reporting Deadlines

A. Pre-existing accounts maintained as at 30 June 2017:

  • High value individual account with a balance which exceeds NZD$1,000,000 as of 30 June 2017 needs to be reported by 30 June 2018.
  • Low value individual accounts (balance/value of less than NZD$1,000,000) and entity accounts as of 30 June 2017 need to be reported by 30 June 2019.

B. New accounts opened on or after 1 July 2017:

  • New individual and entity accounts as at or after 1 July 2017 need to be reported by the following 30 June. For example, new accounts opened between 1 July 2017 and 31 March 2018 must be reported by 30 June 2018.

The Common Reporting Standard rules are very complex and detailed, and this information is a brief overview of how they can affect various entities. It is important to seek professional tax advice on the implications of CRS rules.

UHY will be working very closely with clients who are identified as Reporting NZFIs under the CRS to help ensure full compliance with the CRS rules and reporting obligations.