The Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) reporting season is here again, with New Zealand Financial Institutions (NZFIs) required to submit their annual FATCA and CRS reporting information for the year ended 31 March 2024 to Inland Revenue by 30 June 2024.
Inland Revenue has ramped up its audit and oversight activities, expanding review actions to cover a broader spectrum of NZFIs, including a significant number of family trusts. Compliance measures include on-site reviews, completion of questionnaires, and requests for explanations about entities’ CRS statuses.
The Annual Questionnaire seeks breakdowns of reported and non-reported information, offering insight into back-end operations. A new section requires details for each financial institution in the group, emphasizing the need to verify entities claiming to be Financial Institutions beyond a GIIN.
Inland Revenue’s compliance checks extend to identifying entities not registered for CRS but should be. Many trusts have received letters requesting explanations for non-registration as Reporting NZFIs.
Entities like family trusts may be deemed financial institutions if they hold financial assets and have discretionary investment management services. Corporate trustees or related parties involved in trust management may also fall under financial institution definitions.
It’s advisable for entities to review their FATCA and CRS status and for NZFIs to ensure their systems remain compliant. Conducting health check reviews can help identify and address gaps or remediation required to demonstrate compliance and avoid penalties.
Inland Revenue encourages voluntary disclosures, signaling stricter enforcement measures compared to previous years.
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