On June 8, 2023, the OECD published a new reporting framework for crypto-assets, as well as an update of the Common Reporting Standard (CRS) and its commentaries.
These changes have not yet been transposed into Monegasque law, but may soon modify the Monegasque legal framework, in particular Ordinance no. 6.208. In order to anticipate these updates, you will find below some of the key changes made to the Standard.
In order to anticipate these updates as effectively as possible, you will find below some of the key changes made to the Standard (Please note: the elements presented here are not exhaustive).
Extended reporting obligations
New elements will be added to the CRS declaration:
- If the account holder, or the controlling person of a Passive NFE, has provided a valid self-certification
- Whether the account is a pre-existing account or a new account
- The role of the controlling person (already existing but not mandatory)
- If the account is a joint account, and the number of joint account holders
- Type of financial account (deposit account, custodian account, equity or debt security, or insurance contract with cash surrender value)
If the reporting financial institution is a trust (or equivalent) classified as a professionally managed investment entity:
The functions by virtue of which the person to be reported is the holder of the equity security
Procedure in the event of a temporary absence of self-certification
In exceptional cases where the Financial Institution has not obtained a valid self-certification for a new account in time, it is temporarily required to determine the residence of account holders and controlling persons on the basis of the procedure applicable to pre-existing accounts.
Declaration concerning dual-resident account holders
Individuals with dual residence will no longer be able to rely on treaty tie-breaking rules to determine a single residence, and will be required to declare all their jurisdictions of residence when providing a new self-certification.
Incorporation of guidance on citizenship and residence-by-investment programs
Where a Financial Institution has doubts about a person’s tax residency because they claim to reside in a jurisdiction that offers a potentially high-risk CBI/RBI program, it should not rely on this self-certification until it has taken further steps to verify the tax residency of such persons, including asking additional questions, some examples of which are proposed by the OECD. The answers to these questions, together with any supporting documentation, should help the Financial Institution to determine whether or not the self-certification meets the test of reasonableness.
Note: CBI/RBI programs (citizenship and residency by investment programs) enable foreign nationals to obtain citizenship or temporary or permanent residency on condition that they make local investments or pay a lump sum. These programs can be abused to circumvent the CRS.
Addition of a new type of excluded accounts
The following accounts have been added to the list of excluded accounts:
Capital contribution accounts, the purpose of which is to block funds for a limited period with a view to setting up a new company or pending a capital increase, subject to certain conditions and for a maximum period of 12 months.
New category of non-reporting financial institution corresponding to genuine charities
States now have the option of adding a new category of non-reporting financial institution to the system.
This concerns investment entities that are “genuine” not-for-profit entities.
Their exclusion from the scope would be conditional on appropriate verification procedures by the tax authorities of the entity’s jurisdiction of residence.
Including Public Audit Services in due diligence procedures
Financial Institutions will be allowed to use a Public Verification Services (PVS) procedure to document an account holder or controlling person during CRS due diligence procedures. This will be recognized as a functional equivalent of a TIN.
Note: Public Verification Services (VPS) can provide direct confirmation, in the form of a cyberjeton or other unique identifier, from the tax administration of the taxpayer’s jurisdiction of residence in relation to his or her identity and tax residence.
Removal of the “look-through” requirement for Controlling Persons of Listed Entities
The CRS now recognizes that if a passive NFE is owned by a listed entity, it is not necessary to look through this listed entity, in line with the FATF Recommendations on the definition of beneficial owners.
Coverage of new digital financial products
A series of changes have been made to integrate digital currencies and assets into the CRS system, levelling the playing field between these new products and traditional bank or investment accounts.
Integration of frequently asked questions
Much of the guidance provided by the OECD as part of its frequently asked questions since 2014 has now been incorporated into the CRS commentaries.