The Government has recently published an update to its Frequently Asked Questions (FAQ) on the automatic exchange of information in tax matters, as well as an updated version of the Practical Guide for Monegasque financial institutions.
The FAQ has mainly been modified to provide updated information on the lists of reporting jurisdictions and partners. The details of the Ministerial Decrees amending these lists is also included.
Here are the main changes to the practical guide:
1. Obligations applicable to TCSPs, trusts and Monegasque civil companies
In the event of a DSF1 audit, these entities must be able to provide documentary evidence (accounting documentation, legal opinion, etc.) clearly showing the methodology adopted to perform the income test and the associated results.
2. Conditions for the validity of self-certifications for passive NFEs
To be valid, the self-certification of an entity that is a passive NFE must mention the completeness of the controlling persons.
3. Conditions for the validity of self-certifications for financial institutions
If an entity classifies itself as a financial institution under the definition of a “professionally managed investment entity”, evidence must be obtained to justify this classification, for example:
- An attestation from the entity’s home jurisdiction confirming that the entity is a reporting financial institution;
- An attestation from a local authority (supervisor, auditor, other) confirming the validity of the certification;
- Proof of the entity’s registration as a financial institution in its jurisdiction of residence.
If there is any doubt, the classification should be refused and the entity classified as a passive NFE by default.
4. Conditions of validity of self-certifications for active NFEs
If an entity classifies itself as an active NFE, evidence must be obtained to justify this classification:
- The entity’s financial statements,
- An extract from the register of commercial companies in its jurisdiction of incorporation,
- Any other evidence to ensure that the criteria for active NFE status are met.
If there is any doubt, classification should be refused and the entity classified as a passive NFE by default.
5. Clients with one or more tax residence jurisdictions
Where a self-certification shows only one jurisdiction of tax residence, while the customer’s file shows indications of residence in other jurisdictions, the RMFI2 must document the reasons for validating this single tax residence (definition of tax residence, use of tax treaty clauses, etc.). MDFIs are encouraged to consult the tax residency criteria by jurisdiction available on the OECD Portal*.
Note: The reference to the use of tax treaty provisions contradicts the provisions of the new update to the CRS Standard published by the OECD. Indeed, it stipulates that individuals with dual residency will no longer be able to rely on the tie-breaker rules provided by tax treaties for the purposes of determining a single residency, and will have to declare all their jurisdictions of residence when providing a new self-certification.
6. Clients resident in jurisdictions offering a residency or citizenship by investment program (CBI/RBI)
When a customer resides in a jurisdiction that offers a CBI/RBI3 program, MDFIs are encouraged to obtain additional verification information and answers to the following questions:
- Have you obtained residency rights under a CBI/RBI program?
- Do you have residency rights in other jurisdictions?
- Have you spent more than 90 days in one or more other jurisdictions in the past year?
- In which jurisdictions did you file tax returns during the previous year?
7. Obtaining tax identification numbers (TINs)
The term “TIN” refers to a tax identification number or its functional equivalent.
As soon as a jurisdiction identifies a functional equivalent on the OECD website*, MRFIs are required to collect it from customers and declare it.
*It appears that the OECD website has recently been redesigned, making all the old links used and available in the Practical Guide inaccessible. We have found an archived version of these links, which we have included in this newsletter. We are doing our utmost to find the updated version of this information on the new OECD site.