Dormant accounts

Determination CRS 2017/003 – A dormant account is an excluded account for the period of its dormancy for the purposes of the CRS applied standard and requirements under Part 11B of the Tax Administration Act 1994

Reference

This determination is made under section 91AAW of the Tax Administration Act 1994. This power has been delegated by the Commissioner of Inland Revenue to the position of Group Manager, Investigations and Advice, under section 7 of that Act.

Interpretation

In this determination, unless the context otherwise requires:

“Annuity contract” means an annuity contract as defined in Section VIII(C)(6) of the CRS standard.

“Cash value insurance contract” means a cash value insurance contract as defined in Section VIII(C)(7) of the CRS standard.

“CRS applied standard” means the CRS standard as modified by section 185O for the determination of requirements under the Tax Administration Act 1994.

“CRS publication” means the Standard for Automatic Exchange of Financial Account Information in Tax Matters, published by the Organisation for Economic Co-operation and Development.

“CRS standard” means the Common Standard on Reporting and Due Diligence for Financial Account Information, as amended from time to time, which is a standard—

1. developed by the Organisation for Economic Co-operation and Development and the Group of Twenty countries; and
2. agreed by the Council for the Economic Co-operation and Development on 15 July 2014; and
3. contained in Part IIB of the CRS publication.

“Dormant account” means a financial account, other than an annuity contract, with an aggregate balance that does not exceed 1,000 United States dollars (USD) (which the Reporting NZFI that maintains the account can treat as 1,000 New Zealand dollars (NZD)) and that satisfies either of the following:

1. the account is treated as a dormant account under applicable laws or regulations or the normal operating procedures of the Reporting NZFI that are consistently applied for all accounts maintained by the Reporting NZFI in New Zealand, provided that such laws or regulations or such procedures contain substantially similar requirements to those set out in point 2 below; or
2. The account satisfies the following:
   • the account holder has not initiated a transaction with regard to the account or any other account held by the account holder with the Reporting NZFI in the previous 3 years; and
   • the account holder has not communicated with the Reporting NZFI regarding the account or any other account held by the account holder with the Reporting NZFI in the previous 6 years; and
   • in the case of a cash value insurance contract, the Reporting NZFI has not communicated with the account holder regarding the account or any other account held by the account holder with the Reporting NZFI in the previous 6 years.

“Reporting NZFI” means a reporting financial institution as defined in Section VIII(A)(1) of the CRS standard that is resident in New Zealand under the CRS standard (excluding branches located outside of New Zealand), or is a branch of a non-resident financial institution that is located in New Zealand.

Discussion (which does not form part of the determination)

The CRS commentary contemplates (at pages 190-191) that a dormant account with a balance or value that does not exceed USD 1,000 can be treated as an excluded account (during the period of the dormancy) for the purposes of the CRS standard under Section VIII, subparagraph (C)(17)(g).

Determining that a dormant account is an excluded account, and specifying this under New Zealand law, does not frustrate the purposes of the CRS standard.

Scope of determination

A dormant account, as defined in this determination, does not fully satisfy the requirements for, but has substantially similar characteristics to, a savings or investment account in subparagraph (C)(17)(b) of Section VIII of the CRS standard.

This determination is issued by the Commissioner of Inland Revenue and applies to an account that meets the definition of a dormant account, as set out above, where:

• The account is subject to regulation.

Determination

A dormant account, as outlined in the scope of this determination, is an excluded account for the period of its dormancy for the purposes of the CRS applied standard and requirements under Part 11B of the Tax Administration Act 1994, unless the Reporting New Zealand financial institution that maintains the dormant account elects not to treat the account as an excluded account. A Reporting NZFI that elects not to treat a dormant account as an excluded account will be required to carry out any required due diligence (and potential reporting) on the account for the purposes of the CRS applied standard and the requirements under Part 11B of the Tax Administration Act 1994.

Application date

This determination applies for the reporting period beginning 1 July 2017, and subsequent reporting periods under the CRS applied standard.

Dated at Wellington on the 22nd day of June 2017.

Patrick Goggin
Group Manager, Investigations and Advice