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Common Reporting Standard (CRS) – Upcoming changes and what you need to know

*Updated: 13 June 2017

As we let you know in the May 2 issue of ivari info, there are some changes to the way you do business and what you need to collect from your client for CRS and AML compliance.

What is Common Reporting Standard (CRS)?

The CRS was developed by the Organization for Economic Co-operation and Development (OECD), with support of Canada and other G20 countries to combat global tax evasion and improve tax compliance.

It will be implemented in Canada effective July 1, 2017 under Part XIX of the Canadian Income Tax Act.

As a financial institution, ivari is required to collect and review policyowners’ information to determine its reporting requirement to Canada Revenue Agency (CRA). CRA may, in turn, share the information with participating countries.

How is CRS different from the Foreign Account Tax Compliance Act (FATCA)?

CRS is an extension of FATCA that requires financial institutions to report information to CRA about certain accounts held by persons who are resident for tax purposes in a country other than Canada and the United States. Although the concept is similar, the application can be different. CRS does not replace FATCA.

When does CRS take effect and how does it affect advisors and clients?

CRS takes effect in Canada on July 1, 2017.

You will need to know that we have updated our applications and certain forms to incorporate the requirement for policy owner(s) to declare their tax residency and the entity’s classification.

This requirement applies to all life insurance policies with cash value and non-registered annuity contracts (including segregated funds contract) when:

  • Applying for new life insurance or annuity account (other than term or registered policies)
  • When transfer of ownership is requested on such policies
  • When converting a term policy to a permanent insurance contract with value
  • When changing client information or other transactions on such policies that could indicate a change in tax residency
  • When death benefits paid and the beneficiary has a foreign address or phone number

What do advisors need to do?

Advisors should be aware that they will have to collect new information about client’s tax residency status in situations as noted above.

What applications and forms will be updated with the CRS changes?

The following applications and forms are affected and the updated versions will be available in the Administration/Forms section on June 9:

  • Insurance application (LP257*) and eApplication
  • Policy Change application (LP386)
  • Conversion application (LP1285)
  • Allocation form (PS425)
  • Allocation form (WFG version) (WFG-LP1221)
  • Notice of Transfer of Ownership (PS371)
  • Identity and Third Party Determination (IP-LP782)
  • Politically Exposed Persons and Head of International Organization (IP-LP1165) – new name
  • Declaration of tax residency for an entity (IP-LP1601) – new name
  • Policy Ownership for corporate & non-corporate entities or trusts (IP-LP1747)
  • Corporate and Non-corporate entity form (IP-LP1166)
  • Dealer Nominee Transfer (IP1186)
  • Transfer of Ownership (IP1270)
  • Non-financial Service (IP426)

*The 2/15 version of the insurance application will not be accepted after August 24, 2017.

If you have the 11/16 version of the insurance application, you must include the new 2017 version of the IP-LP1165, IP-LP1601 or IP-LP782 in order to be compliant with the new CRS legislation.

An example of the CRS requirements for an individual in the application/form consists of the following three statements:

Depending on your situation, you may answer “yes” to more than one.

  1. I am a tax resident of Canada.
  2. I am a tax resident or a citizen of the United States.
    • Please provide your taxpayer identification number (TIN) from the United States:
      OWNER 1  OWNER 2
    • If you do not have a TIN from the United States, have you applied for one?
  3. I am a tax resident in a country other than Canada or the United States.
    • If “yes”, to statement c), provide your country of tax residence and taxpayer identification numbers (TIN). If you do not have a TIN for a specific country, give the reason using one of these choices:
    • Reason 1: I will apply or have applied for a TIN but have not yet received it.
    • Reason 2: My country of residence does not issue TINs to its residents.
    • Reason 3: Other reason, provide details.
      OWNER 1 YES NO  OWNER 2 YES NO

An example of the CRS requirements for an entity in the application/form consists of the following three statements:

Depending on the entity’s situation, you may answer “yes” to more than one.

  1. The entity is a tax resident of Canada. YES NO
  2. The entity is a tax resident of Canada. YES NO
  3. I am a tax resident in a country other than Canada or the United States.
    • If “yes”, to statement c), provide the entity’s country of tax residence and taxpayer identification numbers (TIN). If you do not have a TIN for a specific country, give the reason using one of these choices:
    • Reason 1: The entity will apply or has applied for a TIN but has not yet received it.
    • Reason 2: The entity’s country of residence does not issue TINs to its residents.
    • Reason 3: Other reason, provide details.

Frequently Asked Questions (FAQ)? New

Where can I go for more information?

The following website provides information about the new reporting requirements.

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/enhanced-financial-account-information-reporting.html

We will keep you updated on CRS in future issues of ivari info.

If you have any questions, call us at 1-800-846-5970 between the hours of 8:00 a.m. and 7:00 p.m. ET, Monday to Friday.