The Foreign Account Tax. Sharing Agreements (TISAs) to improve tax compliance. Questions and Answers

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1 The Foreign ccount Tax Compliance ct (FTC) and other Tax Information Sharing greements (TISs) to improve tax compliance uestions and nswers This document provides you with an overview of the FTC and the Crown Dependency agreements and the potential impact on Old Mutual Wealth Life ssurance Limited, Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions Limited ( Old Mutual Wealth Companies ) as Financial Institutions, and their policy/account holders. a What is the FTC? The FTC is a US law aimed at US taxpayers who have placed assets overseas with the intention of evading US tax. The law affects non-us Financial Institutions (also known as Foreign Financial Institutions or FFIs) in that it requires them to introduce measures to identify and report US taxpayers who have accounts, which include life assurance and capital redemption contracts. FFIs include institutions carrying out activities such as deposit taking, investment, custody services and investment based insurance. What other agreements are in place for the purpose of improving tax compliance? The UK Government stated in 2013 that it would look to sign agreements with other jurisdictions as part of its commitment to combat tax evasion. The Isle of Man, Guernsey and Jersey (the Crown Dependencies) and the Cayman Islands, the British Virgin Islands, Bermuda, nguilla, Turks and Caicos Islands, Montserrat and Gibraltar (the British Overseas Territories) have all entered into automatic TISs with the UK. TISs impose similar obligations on Financial Institutions as the obligations under FTC. However, whereas FTC concentrates on US taxpayers, TISs are focussed on Crown Dependency, Gibraltarian and UK taxpayers and policies/accounts held with institutions in the Crown Dependencies, British Overseas Territories and the UK. What is the impact of these agreements on Financial Institutions? FTC it depends on where the Financial Institution is registered and whether the Government for that jurisdiction has signed Model 1 or Model 2 Intergovernmental greement (IG) with the US Internal Revenue Service (IRS). if a Model 1 IG has been signed, Financial Institutions in that jurisdiction will report to their local tax authority. The tax authority will then forward the information to the IRS. The UK has signed a Model 1 IG. if a Model 2 IG has been signed, the Financial Institution will report direct to the IRS. tisas The Crown Dependencies and the British Overseas Territories have signed agreements with the UK, meaning that Financial Institutions will have to provide data on financial accounts held by residents of those territories. For example, a UK registered Financial Institution must provide data to UK HM Revenue & Customs where it has accounts held by Manx residents, and an Isle of Man Financial Institution will provide information to the Isle of Man Treasury where it has accounts owned by UK residents.

2 Complying with FTC and TIS Will we comply? Yes, all Old Mutual Wealth companies have been registered with the IRS and have been provided with a Global Intermediary Identification Number (GIIN). This number demonstrates our intent to comply with the regulations. The register of all complying FFIs is available to view by any third party, through the IRS website lternatively, we can provide our GIIN to a third party, if asked to. When did the agreements for FTC and TIS take effect? The main requirements of the FTC and TIS came into effect on 1 July a What obligations does the legislation impose on us as a Financial Institution? new applications From 1 July 2014, Financial Institutions must obtain a client self-certification from individuals to determine the applicant s tax status. For FTC, this means that the applicant must certify whether or not they are a national or citizen, or resident in the US for tax purposes. For TISs, this means that we must obtain a client self-certification from individuals to determine if the applicant is resident for tax purposes in a Crown Dependency or Gibraltar. if the applicant indicates they are resident in one of the above territories, we must flag the account as reportable and the applicant s Tax Reference Number must be obtained. Tax Reference Number means: US Isle of Man and the United Kingdom Jersey, Guernsey and Gibraltar Tax Identification Number National Insurance Number Social Security Number if the applicant is an entity, which includes individual trustees and corporate trustees, companies and other legal structures or arrangements, the rules are different and complex. However, the broad intention with entity applicants that are not established or incorporated in the US, Isle of Man, Guernsey, Jersey or Gibraltar is to look to the underlying controlling persons to determine where they are resident for tax purposes. We have produced a standalone Tax declaration for trustees and corporates form, which must be completed and sent to us with all corporate and trustee applications. pre-existing cases Financial Institutions are required to carry out a retrospective review of their existing, live book of clients on 30 June 2014 in order to identify US, Crown Dependency or Gibraltarian clients. We do not have to carry out the review on that day, although there are deadlines for it to be carried out which are set out in the next question. 2

3 What information must be reviewed where the account is owned by one or more individuals? There are two levels of review for individually owned accounts. (i) n electronic search of our systems to identify individually owned Lower Value ccounts. This requires a review of all accounts, as at 30 June 2014, with a value of between: US$250,000 and US$1m for life assurance and capital redemption contracts; and us$50,000 and US$1m for other individual accounts, such as the Old Mutual Wealth Collective Investment ccount. For FTC, the review is an electronic search for any US indicia which are defined as: US citizen or resident US place of birth US residence address or US correspondence address US telephone number standing payment out instructions to a US bank account power of attorney or signing authority granted to a person with a US address. For TISs, the review is an electronic search for any Crown Dependency or Gibraltar indicia, whichever is relevant, which are defined as: Crown Dependency or Gibraltar tax residence Crown Dependency or Gibraltar residence address or correspondence address standing payment out instructions to a Crown Dependency or Gibraltar bank account power of attorney or signing authority granted to a person with a Crown Dependency or Gibraltar address. if indicia are found then the account is reportable. However, it is possible for a client to supply evidence that the electronically searched indicia are no longer correct in order to demonstrate that they are not a US, Crown Dependency or Gibraltarian Specified Person. The Lower Value ccount review must be completed by 30 June (ii) paper search of individual owned High Value ccounts. This means we are required to review all accounts with a value of over US$1m as at 30 June For those accounts that exceed US$1m on 31 December of any subsequent calendar year, a paper search must be carried out by the end of June in the following calendar year. The first step is to perform the same electronic search as for Lower Value ccounts (see (i) above), to identify any accounts/policies with electronically searchable indicia. However, for high value accounts, the indicia also include any correspondence (e.g. c/o) address where it is the sole address on the file (regardless of whether this is a US address or not). For any of those indicia that are not electronically searchable, a paper search of the file to identify such indicia must be carried out. However, this paper search is not required if the electronic search can identify: the account holder s nationality or residence status (applicable to FTC only). the account holder s residence and mailing address. the account holder s phone number, if any (applicable to FTC only). whether there are standing payment out instructions. whether there is a care of address on the account. whether there is any power of attorney or signatory authority over the account. The High Value ccount review must be completed by 30 June

4 What must be reviewed where the account is owned by an entity or a trust (whether individual trustee or corporate trustee)? ccounts must be reviewed where the policy/account holder is an entity or trust and where the account balance exceeds US$250,000 (for life assurance contracts) or US$50,000 (for the Collective Investment ccount), as at 30 June For FTC, the review is to identify accounts owned or held by US entities (e.g. those with a US registered address) and those held by non-us entities but which are controlled by US Specified Persons. The same applies under TIS but with respect to entities established in the UK, Crown Dependencies or Gibraltar or with entities not established in those territories but with controlling persons who are. in both cases, the policy/account will be treated as reportable unless certain information is obtained to regard the account as non reportable. n entity review must be carried out by 30 June For those accounts that exceed US$1m on 31 December of any subsequent calendar year, the review must be completed by the end of June the following calendar year. Which products are exempt from the regulations? individual Savings ccounts (ISs), Old Mutual Wealth pensions, including the Collective Retirement ccount and term assurance policies which are not unit linked, such as Protect, are defined as exempt products because these are considered to be products where there is little or no risk of individuals using these products to evade tax. are there any other situations where a Financial Institution must assess if an individual or entity is a US, Crown Dependency or Gibraltarian Specified Person? Yes, a self-certification must be obtained where there is a change of circumstance on an account/policy on or after 1 July change of circumstance is any change on a policy which could indicate US, Crown Dependency or Gibraltar indicia. For example, where a Financial Institution is notified of a change of address or a policy is assigned. The following events, which are indicative and not exhaustive, will also be regarded as a change of circumstance: n assignment to one or more individuals. n assignment to a trust or legal entity. dding a power of attorney or change to a power of attorney. standing instruction to pay to a US, Crown Dependency or Gibraltar bank account. change of controlling persons to an entity or trust. change of phone number to a US phone number. change of beneficiary, trustee or protector of a trust. must the self-certification for a change of circumstance be obtained for all policies/accounts? no, it is not required where the product is an Individual Savings ccount (IS), Old Mutual Wealth pension or Protect policy. 4

5 Financial advisers and their clients i am a financial adviser and I do not have any clients who fall within scope for FTC or TIS. Do I still have to provide information on my clients, in accordance with FTC and TIS? The information requested is mandatory and is requested so that we can meet the obligations to determine if the customer is, for example a US Specified Person or Crown Dependency or Gibraltarian Specified Person. If the information is not supplied to us, the account will be treated as reportable even if the customer is not a US Specified Person or Crown Dependency or Gibraltarian Specified Person. if I do provide the Old Mutual Wealth companies with the required information and my client is not a US Specified Person or Crown Dependency or Gibraltarian person, will this be reported? no, this information will not be reported. as a financial adviser, am I an FFI and do I have to comply with FTC or TIS? The regulations are complex and in some circumstances financial advisers may be regarded as an FFI. It is suggested that legal advice is sought to determine your status under the regulations. i am unsure if the entity I am acting for is a Financial Institution, Passive Non-Financial Foreign Entity (Passive NFFE) or an ctive Non Financial Foreign Entity (ctive NFFE). What is the difference between them? Financial Institution financial institution is an entity which carries out activity related to any of the following: Deposit taking; Investment activity; Insurance services; or Custody services. This includes Banks, Insurance Companies, Custodial Institutions and investment entities. n entity is an Investment Entity that primarily conducts as a business one or more of the following activities on behalf of a customer: trading in money market instruments, foreign exchange, exchange, interest rate and index instruments, transferable securities or commodity future trading; individual and collective portfolio management; or otherwise investing, administering or managing financial assets or money on behalf of other persons. it is possible for a trust to be an investment entity, particularly where a professional trustee service provider such as a trust company, is acting as trustee. if an entity does not fall within the Financial Institution definition then it is likely that entity will be either a Passive NFFE or an ctive NFFE. ctive NFFE n ctive NFFE is generally an actively trading non-financial services business. This includes all actively trading companies and partnerships that are not financial institutions and do not exist to simply hold investments, or to receive income. The Regulations define an ctive NFFE will meet any one of the following criteria: pplies to FTC and TIS (a) less than 50% of the NFFE s gross income for the preceding calendar year or other appropriate reporting period is passive income, which generally means income is not derived from trading activities, and less than 50% of the assets held by the NFFE during the preceding calendar year or other appropriate reporting period are assets that produce or are held for the production of passive income; (b) The stock of the NFFE is regularly traded on an established securities market or the NFFE is a Related Entity of an entity the stock of which is traded on an established securities market; (c) The NFFE is a government, a political subdivision of a government (which includes a state, province, county or municipality), an international organisation, a non-us central bank of issue, or an entity wholly owned by one or more of the foregoing. 5

6 (d) Substantially all of the activities of the NFFE consist of holding, in whole or in part, the outstanding stock of, and providing financing and services to, one or more subsidiaries that engage in trades or businesses other than the business of a Financial Institution. However, an entity will not qualify as an active NFFE if the NFFE functions as, or holds itself out to be, an investment fund, such as a Private Equity Fund, Venture Capital Fund, Leveraged Buyout Fund or any Investment Vehicle whose purpose is to acquire or fund companies and then hold interests in those companies as capital assets for investment purposes. In these circumstances the entity will be a passive NFFE; (e) The NFFE is not yet operating a business and has no prior operating history, but is investing capital into assets with the intent to operate a business other than that of a Financial Institution; provided that the NFFE shall not qualify for this exception after the date that is 24 months after the date of the initial organisation of the NFFE; (f) The NFFE was not a Financial Institution in the past five years, and is in the process of liquidating its assets, or is reorganising with the intent to continue or recommence operations in a business other than that of a financial institution; (g) The NFFE primarily engages in financing and hedging transactions with, or for related entities that are not Financial Institutions, and does not provide financing or hedging services to any entity that is not a related entity, provided that the group of any such related entities is primarily engaged in a business other than that of a financial institution; or pplies to FTC only (h) NFFE meets all of the following requirements: i. it is established and maintained in its country of residence exclusively for religious, charitable, scientific, artistic, cultural or educational purposes; ii. it is exempt from income tax in its country of residence; iii. it has no shareholders or members who have a proprietary or beneficial interest in its income or assets; iv. The applicable laws of the entity s country of residence or the entity s formation documents do not permit any income or assets of the entity to be distributed to, or applied for the benefit of, a private person or non-charitable entity other than pursuant to the conduct of the entity s charitable activities, or as payment representing the fair market value of property which the entity has purchased; and v. The applicable laws of the entity s country of residence or the entity s formation documents require that, upon the entity s liquidation or dissolution, all of its assets be distributed to a governmental entity or non-profit organisation, or escheat to the government of the entity s country of residence or any political subdivision thereof. (i) The NFFE is organised in a US Territory and all of the owners of the payee are bona fide residents of that US Territory. US Territory is defined in rticle 1(1)(b) of the US greement. Passive NFFE Passive NFFE is an entity which does not actively trade. You would expect a Passive NFFE to hold investments or income on behalf of another, such as: a private company; a partnership; or other legal arrangement such as a non professionally managed trust. if an entity does not meet the definition of an ctive NFFE, it will be a Passive NFFE unless the entity is established for religious, charitable, scientific,artistic, cultural, athletic or educational purposes. Trusts i am a financial adviser and I do not have any clients who fall within the scope of FTC or TIS as they have no US or UK connection. Do my clients have to complete the Self-Certification forms even though the Regulations do not apply to them? Yes, the self-certification forms and information we request is a mandatory requirement for all Financial Institutions compliant with FTC or TIS and apply to all clients of those institutions. It is requested so that we can meet our obligations under the relevant Regulations. s a financial institution we must determine, based on the information provided to us, if a customer, which includes any Controlling Person of a company or trust, is for example a US Specified Person or a Crown Dependency or Gibraltarian Specified Person. depending on the answers to the questions set out in the self-certification forms, we will assess whether we have any reporting obligations in relation to that policy/account. For example, if there is a trust we will not need to report to the relevant tax authority provided none of the parties to the trust (eg settlor, trustee, beneficiary or protector, if any) is a US Specified Person or Crown Dependency or Gibraltarian Specified Person. if you do not supply us with a self-certification form, or any other information we may request as part of this information gathering process, the account will automatically be treated as reportable to the relevant tax authority even if the customer is not a US Specified Person or Crown Dependency or Gibraltarian Specified Person. 6

7 my clients are trustees; do we need to register for a GIIN? Trustees only need to register for a GIIN if, in line with the Regulations, the trust is regarded as a financial institution in a Model 1 or Model 2 country. When will a trust be deemed to be a Financial Institution? trust will be a financial institution where there is either a corporate trustee appointed which professionally manages the trust, or where the trustees have appointed a Discretionary Fund Manager to manage the assets under the trust. So for example, where a trust has corporate trustees and/or a Discretionary Fund Manager and the asset of the trust is an Old Mutual Wealth Collective Investment ccount, the trust will be a financial institution. does the same rule apply where the asset of the trust is a life policy? no, if the only asset of a trust is a life policy and there is a discretionary fund manager appointed, the trust will not be deemed to be a financial institution. The trust will instead be deemed to be a Passive NFFE. if there is a corporate trustee appointed to a trust where the sole asset is a life policy the trust will be a financial institution and will need to register. my clients are individuals and act as trustees; do they have to register as a Financial Institution? no, where the only trustees of a trust are individuals acting as trustees, the trust is not regarded as a financial institution and does not need to register. They will instead need to determine if they are a Passive or ctive NFFE. If the sole asset of the trust is a life policy, the trust will be a Passive NFFE. if the sole asset of the trust is an Old Mutual Wealth Collective Investment ccount, the trustees must determine if it is an ctive or Passive NFFE. my clients are individual trustees and have appointed a Discretionary Fund Manager to the trust. Will the appointment of a Discretionary Fund Manager make the trust a Financial Institution? It depends on the underlying assets of the trust. If the sole asset of the trust is a life policy, the trust will not be a financial institution. It will be a Passive NFFE. if the sole asset of the trust is an Old Mutual Wealth Collective Investment ccount, the trust will be a financial institution and must register. This means that a Collective Investment ccount owned by trustees (corporate or individual) which has the Managed Portfolio Service will be a financial institution. i have corporate trustees as clients who have appointed an Investment dviser who does not have discretionary authority. Will the appointment of the Investment dviser make the trust a Financial Institution? no, the appointment of an Investment dviser does not make the trust a financial institution although the corporate trustees may be classed as a financial institution and have to register and report on the trust. i have individual trustees as clients who have appointed an Investment dviser who does not have discretionary authority. Will the appointment of the Investment dviser make the trust a Financial Institution? no. 7

8 Completing the self certification my clients are an ctive NFFE. Which sections of the tax declaration for trustees and corporates form must be completed? They must complete: Part 1 and tick 1.3 to indicate that they are an ctive NFFE. part 2 in order to confirm where the entity is resident for tax purposes. If they are domiciled in more than one country for tax purposes all should be included. The tax reference number(s) must also be included. Part 3 should be ignored. Part 4 must be completed. my clients are a Passive NFFE. Which sections of the tax declaration for trustees and corporates form must be completed? Part 1 and tick 1.2 to indicate that they are a Passive NFFE. part 2 in order to confirm where the entity is resident for tax purposes. If they are domiciled in more than one country for tax purposes all should be included. The tax reference number(s) must also be included. Part 3 should be ignored. Part 3B must be completed to identify all controlling persons. For companies this includes shareholders who own or control more than 25% of the shares or voting rights or otherwise exercise control over the company. For trusts, this includes settlors, trustees, protectors and any beneficiary entitled to 25% or more of the trust property. Part 4 must be completed. Who must sign the tax declaration for trustees and corporates form and individual self-certification form? Where the account/policy is being applied for/owned by more than one person, each person must sign the declaration. If there is a valid power of attorney in place for one or more individuals, the ttorney can sign on behalf of that person. Where a company is the applicant/policyholder the directors/authorised signatories for the company must sign the declaration. If the account/policy is being applied for/owned by trustees, each trustee must sign the declaration. Reporting if information relating to my client is reported to the IRS or local tax authority does this mean my client will be liable to tax? no, neither FTC nor TIS imposes additional taxes on individuals. They do however provide the relevant tax authorities with information which they may or may not use to assess whether individuals or companies are liable to any taxes which have not been paid. When must FFI s start reporting? it depends on the nature and the value of the financial account. FTC ccounts which are regarded as High Value ccounts must be subject to reporting from If the policy/account starts on or after 1 July 2014, up to and including 31 December 2014, reporting must be completed by 31 May 2015 if the report is in respect of FTC. Under TIS, the same policy/account is reportable by 30 June Where the policy/account starts in the 2016 calendar year, it must be reported by 31 May Where policies/accounts commence in any preceding calendar year, they must be reported by 31 May in the following calendar year. tisa Reports must be submitted by 30 June 2016 for policies/accounts which started on or after 1 July 2014, up to and including 31 December Where policies/accounts commence in any preceding calendar year, they must be reported by 30 June in the following calendar year.

9 Calls may be monitored and recorded for training purposes and to avoid misunderstandings. Old Mutual Wealth provides you with access to its investment platform. Within this platform you can open an IS and Collective Investment ccount provided by Old Mutual Wealth Limited and a Collective Retirement ccount and Collective Investment Bond provided by Old Mutual Wealth Life & Pensions Limited. The WealthSelect Managed Portfolio Service is provided by Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions Limited Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions Limited are registered in England and Wales under numbers and respectively. Registered Office at Old Mutual House, Portland Terrace, Southampton SO14 7EJ, United Kingdom. Old Mutual Wealth Limited is authorised and regulated by the Financial Conduct uthority. Old Mutual Wealth Life & Pensions Limited is authorised by the Prudential Regulation uthority and regulated by the Financial Conduct uthority and the Prudential Regulation uthority. Their Financial Services register numbers are and respectively. VT number Old Mutual Global Investors is a trading name for Old Mutual Global Investors (UK) Limited and Old Mutual Investment Management Limited both of which are authorised and regulated by the Financial Conduct uthority. Their Financial Services register numbers are and respectively. Old Mutual Global Investors is registered in England & Wales under number and its registered office is 2 Lambeth Hill London EC4P 4WR. Old Mutual Investment Management is registered in England & Wales under number and its registered office at Millennium Bridge House, 2 Lambeth Hill, London, EC4V 4J. PDF9977/ /pril 2015