Automatic Exchange of Information

You may be aware that the USA was one of the first countries to legislate on global tax evasion and avoidance. This is now supported by governments around the World. FATCA aims to identify and report specified 'US persons' responsible for paying US tax, who hold accounts and/or investments outside the US.

It requires foreign financial institutions (i.e. those outside of the USA), such as Isle of Man Bank, to identify and report this information to the local tax authority, who in turn will report to the US Internal Revenue Service (IRS). Numerous countries around the world have entered into agreements with the US, and passed local legislation to enable and mandate compliance with FATCA.

More about Foreign Account Tax Compliance Act

To enable the automatic exchange of tax information, the Organisation for Economic Co-operation and Development (OECD) has led the development of a global Common Reporting Standard (CRS). This agreement requires financial institutions (in participating areas) to identify customers who are tax resident in jurisdictions other than where their account is held.

The financial institutions must also report information about these customers to the relevant authority. For example, if a customer holds an account in England, but is tax resident in France, a report must be filed. To ensure we can comply with this legislation we implemented the appropriate policies and processes. 

More about Common Reporting Standard

We’ve a legal requirement to identify customers’ tax residencies and tax statuses. This is because local tax authorities have signed international agreements to share information for tax reasons.

A Taxpayer Identification Number (TIN) is a generic term for the unique reference held for an individual or entity by Tax authorities.

For example this might be your National Insurance number or Social Security Number for individuals. For entities, this might be your Employer Identification Number, Unique Business Reference or Corporation Tax Number. Other examples can be found on the OECD website.

In general, a Passive NFFE/NFE are those whose income is at least 50% derived from passive income, for example, dividends, interest, rents and patent royalties (copyrights) and whose assets are mainly assets that generate such income. Passive NFFE/NFE is a non-financial entity that is not an Active NFFE/NFE.

An Active NFFE/NFE includes most trading entities such as: Building Companies, Retail Companies and Services Companies.

For more details please refer to our Foreign Account Tax Compliance Act and Common Reporting Standard sections.