Skip to main content
Why can’t I classify my entity for both CRS and FATCA at the same time?
- This is not logistically possible. While CRS and FATCA have many similarities, they also have many differences—sometimes major, sometimes subtle. Because of these differences, the questions that the AEOI Classification tool asks vary—sometimes subtly and sometimes substantially—depending on whether the classification is being made for CRS or FATCA purposes and, if for FATCA, whether the classification is being made under a FATCA IGA or the U.S. FATCA Regulations. Thus, it is simply not possible to classify an entity for both CRS and FATCA at the same time.
Is the AEOI Classification tool country specific?
- Yes, but currently only with respect the British Virgin Islands (BVI). The tool takes into account all of the BVI legislation and Guidance Notes on both FATCA and CRS as well as the BVI FATCA Inter-Governmental Agreement (IGA). For all other countries, the tool is based on CRS as published by the OECD, the Model 1 and 2 FATCA IGAs, and the U.S. FATCA regulations, as applicable to the country in question.
Will more country-specific classification paths that take into account local FATCA and CRS legislation, regulations, Guidance Notes, FAQs, etc. be added to the AEOI Classification tool?
- This will depend on demand. Please email us at [email protected] if you would like us to create a country-specific classification path for a specific country.
The AEOI Classification tool classifies Companies, Partnerships, and Trusts. What if my entity is something else, e.g., a foundation, a Stiftung, a Kommanditgesellschaft, an Anstalt, a Trust reg., or any other type of entity?
- In such cases, you should treat your entity as if it were whichever of the three types of entity (Company, Partnership, or Trust) it is most similar to. For example, as the CRS/FATCA Dictionary definitions of Trust, Foundation, Company, and Partnership respectively make clear, foundations and Stiftungs are generally treated as Trusts, Anstalts and Trust reg.s are generally treated as companies, and Kommanditgesellschafts are generally treated as partnerships.
I am quite familiar with CRS and FATCA and with their various definitions. Do I really need to consult the CRS/FATCA Dictionary for terms that are underlined in the AEOI Classification tool?
- Absolutely. The CRS/FATCA Dictionary is a crucial part of the AEOI Classification tool. No matter how familiar you may be with CRS and FATCA definitions, you must consult the CRS/FATCA definition for all terms underlined in the AEOI classification tool. The CRS/FATCA dictionary does not just define the various terms but also points out ambiguities, potential interpretations, and the consequences of adopting the various interpretations. Failure to consult the CRS/FATCA Dictionary may result in a misclassification.
CRS and FATCA are not always crystal clear. How does the AEOI Classification tool handle grey areas?
- Ambiguous terms are included in the CRS/FATCA Dictionary. The Dictionary sets forth the various interpretations and then says how those interpretations are likely to effect the ultimate classification of an entity, for example, whether the entity is more likely to be classified as an FI or an NFE and, if an NFE, as an Active or Passive NFE. However, the Dictionary does not stop there. It then discusses the consequences of each potential classification. Thus, where more than one reasonable interpretation is available, users are given all the information necessary to make an informed decision as to which interpretation to adopt.
Can you guarantee that a regulator or a Financial Institution such as a bank will agree with the classification generated by the AEOI Classification tool?
- Unfortunately not. Given the ambiguities in many aspects of CRS and FATCA, reasonable people may differ as to how an entity ought to be classified. Indeed, as discussed in the answer to the previous question, the AEOI Classification tool’s CRS/FATCA Dictionary informs users of ambiguities and gives them the information necessary to make an informed decision as to which interpretation to adopt. Thus, different people using the tool but making different decisions as to how to interpret an ambiguous provision may end up classifying the same entity differently. This reflects the reality that, even absent to AEOI Classification tool, different individuals and firms may disagree on how an entity should be classified.
- Differences of opinion aside, all of the classifications generated by the AEOI classification tool are, in our expert judgment, reasonable based on the OECD’s CRS, the FATCA IGAs, and the U.S. FATCA Regulations, as applicable.
My entity’s FATCA IGA country allows the use of definitions in either the IGA or the U.S. FATCA Regulations. Does the AEOI Classification tool allow IGA entities to make this choice?
- Yes, if an IGA country permits this option, the AEOI classification tool permits it as well.
My entity’s IGA country also allows the use of the specific definition of an Investment Entity in CRS to be used for FATCA purposes. Does the AEOI Classification tool allow IGA entities to make this choice?
- Yes, if an IGA country permits this option, the AEOI classification tool permits it as well
Does the AEOI Classification Tool classify U.S. entities?
Does the AEOI Classification Tool classify entities incorporated in a U.S. Territory such as the U.S. Virgin Islands or Puerto Rico?
Does the AEOI Classification tool take into account U.S. “entity classification” elections, otherwise known as “check the box” elections?
My entity’s IGA country says that U.S. “entity classification” elections, otherwise known as “check the box” elections, should be ignored. Does the AEOI Classification tool allow entities to ignore such elections?
- Yes, if an IGA country says that U.S. “entity classification” should be ignored, the AEOI Classification tool also permits such elections to be ignored.
Why are the U.S. FATCA Regulations’ definitions of “Excepted NFFEs” incorporated into the AEOI Classification tool for entities that are covered by an IGA even though the IGAs don’t have this category of entity?
- Because the IGA definition of an “Active NFFE” specifically includes any entity that is “excepted NFFE” under U.S. FATCA Regulations.
Does the AEOI Classification tool follow the OECD’s CRS FAQs?
- For the most part, yes. However, following the OECD’s FAQs is required only if the entity in question is resident in a country that mandates following the FAQs. The CRS/FATCA Dictionary notes where the OECD’s FAQs are arguably inconsistent with CRS itself and—unless the entity in question is resident in a country that mandates following the FAQs—gives users the option of following either CRS itself or the OECD CRS FAQs.
Will the AEOI Classification tool be updated to take into account changes in FATCA and CRS, including the OECD’s proposed amendments to CRS and country-specific changes?
- Yes, but country-specific updates will depend on demand. A country-specific classification path will be decommissioned rather than updated if demand for that specific country does not warrant the time and expense of updates.
The definitions in the CRS/FATCA Dictionary of the following FATCA terms are quite complex: Expanded Affiliated Group (EAG), Nonfinancial Group, and Participating FFI Group. Can these be simplified?
- Unfortunately, not any further than we have already done in the CRS/FATCA Dictionary. The definitions come from the U.S. FATCA Regulations, which are hyper-technical. Oversimplifying the definitions runs the risk of misclassifications. On the other hand, to keep things simple, many people take a pragmatic approach and simply assume that their entities are not members of an EAG, Nonfinancial Group, or Participating FFI Group. If, after reading the CRS/FATCA Dictionary definitions of these terms, you are still unsure of whether your entity is a member of an EAG, Nonfinancial Group, or Participating FFI Group and would prefer not to adopt this pragmatic approach, please consult your tax team or a qualified FATCA advisor.
The AEOI Classification tool classifies entities as Financial Institutions (FIs), Passive NFEs, and Active NFEs including specific subcategories of these classifications. Does the tool categorise FIs as Reporting or Non-Reporting FIs under CRS or, for example, as Sponsored Investment Entities (SIEs), Sponsored Closely Held Investment Vehicles (SCHIVs), or other types of Deemed-Compliant Financial Institutions under FATCA?
- No. The categories of Reporting and Non-Reporting FIs under CRS and SIEs, SCHIVs, and other types of Deemed-Compliant Financial Institutions under FATCA determine whether and to what extent an FI must comply with CRS or FATCA. Sometimes this categorisation is automatic (for example, certain retirement funds are automatically Nonreporting FIs under CRS) and sometimes it depends on the FI’s choice (for example, whether an entity is treated as an SIE or SCHIV under FATCA). Such compliance categories are beyond the scope of the AEOI Classification tool.
How long is my entity classification valid?
- For only so long as CRS, FATCA, and any applicable local legislation, regulations, Guidance Notes, and FAQs have not changed. In addition, an entity’s classification may change if the entity’s own circumstances changes. For example, some criteria for classifying entities look back to the entity’s income or assets in a previous period, and these can vary—sometimes substantially—from year to year. Therefore, we strongly recommend that classifications be updated no less frequently than annually and, in any event, whenever CRS, FATCA, or local CRS and FATCA legislation, regulations, Guidance Notes, or FAQs have been amended.
