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New Quick Guide: Automatic Exchange of Information

02 Jun 2017

New Zealand has signed up to an international agreement to share information with other tax authorities.  This is a government initiative, designed to make sure everyone pays the right amount of tax when they have interests in multiple countries.  

The changes come into effect on 1 July 2017 and will affect you if you have any financial interests overseas.  Our quick guide covers what this means for you, and what will happen to the information you provide.

What does the information sharing agreement involve?

Inland Revenue (IRD) will collect identity and financial information from banks about accounts held, or in some cases controlled, by foreign tax residents.  IRD will then share this information with any foreign tax authorities who are part of the information sharing initiative where there is a tax interest.  In return, IRD will receive information from foreign tax authorities about New Zealand residents’ offshore investments.  This change will mean IRD can check everyone is paying the right amount of tax for their interests in New Zealand.

What does this mean for you?

You may notice that your bank asks you for additional information about your existing accounts or any new accounts you want to open after 1 July 2017.  It is important to note that your bank is making these changes as a result of external legal requirements.

Your bank is unable to give you advice on how to answer questions about tax residency. If you have any questions, you should seek external advice from an accountant or financial advisor.

For accounts held by entities (companies, trusts, partnerships), your bank may ask for:

  • The entity’s tax residence
  • The nature of the entity’s business
  • How the entity derives its income
  • How the entity is managed
  • The nature of the entity’s assets, and
  • In some circumstances, the tax residence of individuals who control the entity.

What do you need to do?

It is important that you reply truthfully and within a reasonable timeframe if your bank asks you for information about your tax residency, the nature of your entity, or accounts you control.

If you do not provide the requisite information about existing accounts, the bank may need to treat you as a foreign tax resident.  Similarly, if the bank does not receive the information it is required to collect about new accounts, it may not be able to open the account.

It is important to note your bank may ask you these sorts of questions even if you don’t have interests in other countries.  This is because the legal requirements need to be incorporated into standard processes.

IRD can impose a fine of up to $1000 if you provide false information or if you fail to provide information altogether.  Misleading information can also incur criminal charges.

What happens to your financial account information?

IRD will share relevant information it collects from banks with foreign tax authorities if they are part of the agreement and you have tax interests in that county, and vice versa. This information sharing will enable tax authorities to ensure everyone pays the right amount of tax.

For further information:

http://www.ird.govt.nz/international/exchange/crs

http://www.ird.govt.nz/resources/f/2/f231e7fb-a118-4ff3-bbcd-5102b320f595/ir1033.pdf

www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/