Malta: Updates to the CRS guidelines
Mark Galea Salomone
The guidelines issued in relation to the implementation of EU Council Directive 2014/107/EU of December 9 2014, amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (DAC2), in Malta and the common reporting standard (CRS) were updated on July 6 2017. Specifically with respect to trusts, the Commissioner for Revenue has introduced clarifications to the guidelines, which the Inland Revenue Department has deemed necessary for the purposes of a more correct application of the regulations.
By way of background, the qualification of a trust as a reportable Malta financial institution (RMFI) depends heavily on whether the trust is defined as an investment entity. A trust is deemed to be a RMFI if the trustee is a Malta resident, and it does not qualify as a non-reporting financial institution, that is, where the trust is a broad participation retirement fund or narrow participating retirement fund. A trust could also be a non-reporting financial instrument where the trustee itself is a RMFI and reports all information that is required to be reported with respect to all reportable accounts. Once classified as a RMFI, the trust or its trustee has an obligation to report to the IRD.
The guidelines have now clarified that this category does not modify, however, the time and manner of the reporting and due diligence obligations which remain the same as if they still were the responsibility of the trust. By way of example, the guidelines add that a trustee must not report the information with respect to a reportable account of the trustee-documented trust as if it were a reportable account of the trustee. The trustee must report such information as the trustee-documented trust would have reported and identify the trustee-documented trust with respect to which it fulfils the reporting and due diligence obligations.
The updated guidelines have also elaborated on the following parts of the regulation:
A Malta reporting financial institution must obtain a self-certification upon account opening. Where a self-certification is obtained at account opening but validation of the self-certification cannot be completed because it is a delayed process undertaken, for instance, by a back-office function, the self-certification should be validated within a period of 90 days. The guidelines now add that Malta reporting financial institutions are to establish procedures for when the 90-day deadline is not met. These include:
i) making the opening of the account conditional on the receipt of a valid self-certification;
ii) closure or freezing of the account until a valid self-certification is obtained; or
iii) blocking access to the account until a valid self-certification is received.
As opposed to reporting for FATCA purposes (where the balance prior to closure needs to be reported) under CRS it is only the fact that the account was closed that needs to be reported to the Commissioner, instead of the account balance or value. This applies to all types of financial accounts. The guidelines now add that other information (such as name of account holder, TIN, etc.) with respect to such closed accounts must be reported until the date of closure.
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