• Marco Zawar MBA/LLM (Tax)

Chinese Tax Authorities updated AEoI frequently asked questions

On November 18, 2019 the Chinese State Taxation Administration released updates on their AEoI frequently asked questions.

The tax administration introduced under Chapter 4 “Definition of investment agency-professionally managed” a new sub chapter 3.

Sub-Chapter 3 clarifies, that “investment institutions” should be consistent with the definition of “financial institution” in the FATF Recommendation.

Financial institutions under FATF means any natural or legal person who conducts as a business one or more of the following activities or operations for or on behalf of a customer:

  • Acceptance of deposits and other repayable funds from the public and includes Private Banking Institutes;

  • Lending includes inter alia consumer credit; mortgage credit; factoring, with or without recourse; and finance of commercial transactions (including forfeiting).

  • Financial leasing except financial leasing arrangements in relation to consumer products

  • Money or value transfer services but excludes persons that provides financial institutions solely with message or other support systems for transmitting funds.

  • Issuing and managing means of payment (e.g. credit and debit cards, cheques, traveller's cheques, money orders and bankers' drafts, electronic money).

  • Financial guarantees and commitments.

  • Trading in

(a) money market instruments (cheques, bills, certificates of deposit, derivatives etc.);

(b) foreign exchange;

(c) exchange, interest rate and index instruments;

(d) transferable securities;

(e) commodity futures trading.

  • Participation in securities issues and the provision of financial services related to such issues.

  • Individual and collective portfolio management.

  • Safekeeping and administration of cash or liquid securities on behalf of other persons.

  • Otherwise investing, administering or managing funds or money on behalf of other persons.

  • Underwriting and placement of life insurance and other investment related insurance and applies for insurance undertakings and intermediaries.

  • Money and currency changing.

My observation

In accordance to the clarification, Chines Financial Institutions shall review their internal classification to identify their correct status as reportable/non-reportable Financial Institution.

Under FAQ Section 29 “Partnership – Identification of Controlling Persons” the tax administration provides clarification how to identify the controlling person if there is no natural person within the partnership who holds more than 25% partnership interests.

If there is no natural person with a partnership interest of more than 25%, a financial institution may determine the controller of the partnership enterprise by referring to the company controller standard.

If it is still not possible for the Financial Institutions to determine the controller of a partnership enterprise by adopting the above measures, a financial institution shall at least determine the general partner or partnership executive of the partnership enterprise as the controller.

My Observation

Financial Institutions might strengthen their existing Client Due Diligence and Know-Your-Customer procedures to identify the controlling person within partnerships when there is no partner holds more than 25% partnership interest.

How I can support your needs to strengthen your Client Due Diligence Procedures to identify controlling persons?

I provide 30+ years experience gained in the compliance, operations and international tax environment of leading private banking & wealth management organisations and financial service provider in Europe and the APAC Region

I am focused on tax compliance and tax transparency initiatives combating international tax evasion including Automated Exchange of Financial Account Information (AEoI), OECD Common Reporting Standard (CRS), FATCA and U.S Qualified Intermediary (QI) Regime including IRC Section 871(m) for Australia, Canada, Hong Kong, Singapore & Switzerland.

Skilled in the analysis and interpretation of changes in local tax law and their potential impacts on existing tax policies and procedures.

Experienced in designing Client Due Diligence (CDD) and Know Your Customer (KYC) procedures with the understanding of local AML to support the identification, verification and documentation of beneficial owners and account holders tax residence(s) under CRS, RBI or U.S Taxpayer Status under FATCA.

7 views0 comments

©2019 by Marco Zawar