Tax self-certification

The Automatic Exchange of Information (AEoI) allows governments to exchange information through tax authorities in certain countries.

This legislation is known as the Common Reporting Standard (CRS) and has been adopted in order to create tax transparency worldwide. To date, more than 100 countries, including the UK, Islands (Jersey, Guernsey, Isle of Man) and Gibraltar, have committed to adopting the CRS.

To comply with the CRS, participating countries must obtain certain customer information from their Financial Institutions and exchange that information on an annual basis with other participating countries.

For a list on which countries are participating, please click here.

How does CRS affect me?

Under the CRS, Al Rayan Bank is required to identify customers who are tax resident in a participating country. If you are tax resident outside the country where you bank then we may be required to provide details, including information relating to your accounts, to the national tax authority in the country where the account is held.

Do I need to do anything?

We will contact you if you are affected and will confirm what you need to do to confirm what your tax residency is. If we feel we need further information we will write to you asking you to complete a ‘Self-certification form’. In some cases we will ask you for a reasonable explanation or additional documentary evidence as proof of tax residency. 

What does CRS mean for customers?

Al Rayan Bank is obliged to report to the local tax authority, customers with a financial account who are tax resident in another participating country. The local tax authority will then pass this information on to the tax authority of the country (or countries) where you are tax resident.

Where can I find more about CRS?

Further information is available via the following websites:

• HMRC’s website
• Organisation for Economic Cooperation and Development (OECD) website

It is important to note that Al Rayan Bank cannot provide help or advice to customers on CRS or any other tax related matter. Should you wish to seek such advice, we recommend consulting an independent tax advisor.

FATCA was introduced by the United States (US) Internal Revenue Service (IRS) to identify US persons, both individuals and entities, who have US tax obligations to report their worldwide income on an annual basis, regardless of whether or not they currently reside in the US.

FATCA requires global financial institutions such as Al Rayan Bank to identify all reportable US persons within their client base and provide information on such accounts to the appropriate tax authorities.

The reports are submitted by the UK tax authority to the US IRS through the provisions of an Intergovernmental Agreement (IGA) in place. 

How does FATCA affect me?

Under FATCA, Al Rayan Bank is required to identify customers who have a US connection. If you are tax resident outside the country where you bank then we may be required to provide details, including information relating to your accounts, to the national tax authority in the country where the account is held.

Do I need to do anything?

Where we don't have this information, we'll be communicating with the affected customers to provide full details of the information and documentation All Rayan Bank needs for FATCA purposes. Documents may include US tax forms (also referred to as withholding certificates or W forms) or self-certification forms to confirm your FATCA status.

What does FATCA mean for customers?

Al Rayan Bank is obliged to report to the local tax authority, customers with a financial account who have a US connection. The local tax authority will then pass this information onto the IRS.

Where can I find out more about FATCA?

Further information is available via the following websites:

• HMRC’s website
• IRS website

It is important to note that Al Rayan Bank cannot provide help or advice to customers on FATCA or any other tax related matter. Should you wish to seek such advice, we recommend consulting an independent tax advisor.

Forms

• Individual / Sole Trader / Sole Proprietor - Self Certification Form
• Entity / Corporation / Organisation / Partnership / Trust / Foundation - Self Certification Form

Definitions/Glossary

These are selected summaries of defined terms provided to assist you with the completion of the relevant self certification form. You can find out more here. If you have any questions then please contact your tax adviser or domestic tax authority.

“Account Holder” The term “Account Holder” means the person listed or identified as the holder of a Financial Account. A person, other than a Financial Institution, holding a Financial Account for the benefit of another person as an agent, a custodian, a nominee, a signatory, an investment advisor, an intermediary, or as a legal guardian, is not treated as the Account Holder. In these circumstances that other person is the Account Holder. For example in the case of a parent/child relationship where the parent is acting as a legal guardian, the child is regarded as the Account Holder. With respect to a jointly held account, each joint holder is treated as an Account Holder.

“Active NFE” An NFE is an Active NFE if it meets any of the criteria listed below. In summary, those criteria refer to:
 - active NFEs by reason of income and assets;
 - publicly traded NFEs;
 - Governmental Entities, International Organisations, Central Banks, or their wholly owned
Entities;
 - holding NFEs that are members of a nonfinancial group;
 - start-up NFEs;
 - NFEs that are liquidating or emerging from bankruptcy;
 - treasury centres that are members of a nonfinancial group; or
 - non-profit NFEs.

An entity will be classified as Active NFE if it meets any of the following criteria:

a) 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;

b) 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;

c) the NFE is a Governmental Entity, an International Organisation, a Central Bank, or an Entity wholly owned by one or more of the foregoing;

d) 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, 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;

e) the NFE is not yet operating a business and has no prior operating history, (a “start-up NFE”) but is investing capital into assets with the intent to operate a business other than that of a Financial Institution, 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;

f) the NFE was not a Financial Institution 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 a Financial Institution;

g) the NFE primarily engages in financing and hedging transactions with, or for, Related Entities that are not Financial Institutions, 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 a Financial Institution;

or

h) the NFE meets all of the following requirements (a “non-profit NFE”):
h i) it is established and operated in its jurisdiction of residence exclusively for religious, charitable, scientific, artistic, cultural, athletic, or educational purposes; or it is established and operated in its 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;
h ii) it is exempt from income tax in its jurisdiction of residence;
hiii) it has no shareholders or members who have a proprietary or beneficial interest in its income or assets;
h iv) the applicable laws of the NFE’s 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
h v) the applicable laws of the NFE’s 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 jurisdiction of residence or any political subdivision.

“Control” over an Entity is generally exercised by the natural person(s) who ultimately has a controlling ownership interest (typically on the basis of a certain percentage (e.g. 25%)) in the Entity. Where no natural person(s) exercises control through ownership interests, the Controlling Person(s) of the Entity will be the natural person(s) who exercises control of the Entity through other means. Where no natural person or persons are identified as exercising control of the Entity through ownership interests, the Controlling Person of the Entity is deemed to be the natural person who holds the position of senior managing official.

“Controlling Person” This is a natural person who exercises control over an entity. Where that entity is treated as a Passive Non-Financial Entity (“NFE”) then a Financial Institution must determine whether such Controlling Persons are Reportable Persons. This definition corresponds to the term “beneficial owner” as described in Recommendation 10 and the Interpretative Note on Recommendation 10 of the Financial Action Task Force Recommendations (as adopted in February 2012).

“Controlling Person of a trust” means the settlor(s), the trustee(s), the protector(s) (if any), the beneficiary(ies) or class(es) of beneficiaries, and any other natural person(s) exercising ultimate effective control over the trust (including through a chain of control or ownership). The settlor(s), the trustee(s), the protector(s) (if any), and the beneficiary(ies) or class(es) of beneficiaries, must always be treated as Controlling Persons of a trust, regardless of whether or not any of them exercises control over the activities of the trust. Where the settlor(s) of a trust is an Entity then the CRS requires Financial Institutions to also identify the Controlling Persons of the settlor(s) and when required report them as Controlling Persons of the trust. In the case of a legal arrangement other than a trust, such term means persons in equivalent or similar positions.

“Entity” The term “Entity” means a legal person or a legal arrangement, such as a corporation, organisation, partnership, trust or foundation.

“Financial Account” A Financial Account is an account maintained by a Financial Institution and includes: Depository Accounts; Custodial Accounts; Equity in certain Investment Entities; Cash Value Insurance Contracts; and Annuity Contracts.

“Investment Entity located in a Non-Participating Jurisdiction and managed by another Financial Institution” is 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 resident in, or a branch located in, a Participating Jurisdiction.

“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.

“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 and that is identified in a published list.

“Passive NFE” Under the CRS a “Passive NFE” means any NFE that is not an Active NFE. An Investment Entity located in a Non-Participating Jurisdiction and managed by another Financial Institution is also treated as a Passive NFE for purposes of the CRS.

“Reportable Account” The term “Reportable Account” means an account held by one or more Reportable Persons or by a Passive NFE with one or more Controlling Persons that is a Reportable Person.

“Reportable Jurisdiction” A Reportable Jurisdiction is a jurisdiction with which an obligation to provide financial account information is in place and that is identified in a published list.

“Reportable Person” A Reportable Person is an individual (or entity) that is tax resident in a Reportable Jurisdiction under the laws of that jurisdiction. The Account Holder will normally be the “Reportable Person”; however, in the case of an Account Holder that is a Passive NFE, a Reportable Person also includes any Controlling Persons who are tax resident in a Reportable Jurisdiction. Dual resident individuals may rely on the tiebreaker rules contained in tax conventions (if applicable) to solve cases of double residence for purposes of determining their residence for tax purposes.

“TIN” (including “functional equivalent”) The term “TIN” means Taxpayer Identification Number or a functional equivalent in the absence of a TIN. A TIN is a unique combination of letters or numbers assigned by a jurisdiction to an individual or an Entity and used to identify the individual or Entity for the purposes of administering the tax laws of such jurisdiction. Further details of acceptable TINs can be found here. Some jurisdictions do not issue a TIN. However, these jurisdictions often utilise some other high integrity number with an equivalent level of identification (a “functional equivalent”). Examples of that type of number include, for individuals, a social security/insurance number, citizen/personal identification/service code/number, and resident registration number.