Disclosures for the initial Common Reporting Standard (CRS) reporting period are due to Inland Revenue by 30 June 2018, the government's taxation agency says.
CRS obligations have applied in New Zealand from 1 July 2017 and are mainly contained in Part 11B of the Tax Administration Act 1994.
The CRS is an OECD-led global initiative to combat offshore tax evasion. This involves jurisdictions exchanging financial account information about relevant foreign tax residents that hold or control accounts with their financial institutions.
Under the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017, law firms may have CRS due diligence, reporting and record keeping obligations, along with obligations to retain and provide information on behalf of their clients to their financial institution.
What is required
The CRS facilitates the international exchange of information by requiring:
Financial institutions to:
- review their financial accounts, using specified due diligence procedures, to identify accounts held (and, in certain circumstances, controlled) by relevant foreign tax residents;
- annually report prescribed information about such “foreign” accounts to Inland Revenue for exchange with the applicable jurisdictions of tax residence under tax treaties; and
Account holders (and other persons connected with an account) to:
- assist financial institutions in carrying out their own due diligence (i.e. by responding to requests about their tax residency).
Although law firms are unlikely to be financial institutions themselves, Inland Revenue says they may have CRS obligations if they:
- set up or manage entities (such as corporate trustees and trusts) that can (depending on the circumstances) be financial institutions with CRS due diligence and reporting obligations; and/or
- hold trust accounts (for clients) with other financial institutions (such as banks). In this context, you will need to obtain information about the tax residency of the clients (and the client’s controlling persons) and provide this information to that institution (i.e. obtaining and providing information to the bank), so that the institution is able to comply with its own CRS due diligence and reporting obligations.
Law firm clients will, in turn, have obligations to respond to their lawyers' requests for this information.
New industry self-certification forms have been developed in conjunction with the New Zealand Law Society and the New Zealand Bankers' Association. These are an Entity Tax Residency Self-Certification and an Individual Tax Residency Self-Certification.
Further information about CRS is available on the CRS section of the Inland Revenue website.
Inland Revenue is also able to respond to questions and feedback on implementation of the CRS, through the email firstname.lastname@example.org.