About provision of tax residence information and international tax information exchange

24.03.2020 - 11:40

Tax information exchange

Financial institutions that manage financial assets of customers, for example, banks, managers and funds, as well as insurance companies that offer savings products, are obliged to obtain and document information about the tax residence country and taxpayer identification number of their customers and to provide this information to the State Revenue Service pursuant to the law “On Taxes and Duties” and derived laws and regulations.

Tax information exchange with the United States of America (USA) is governed by the Foreign Account Tax Compliance Act (FACTA).

Tax information exchange with member countries of the Organisation for Economic Co-operation and Development (OECD), as well as with other countries is governed by the Common Reporting Standard (CRS).

Information exchange in accordance with FACTA

On 1 July 2014, the U.S. Foreign Account Tax Compliance Act (FACTA) came into effect, setting requirements applicable to financial institutions worldwide.

The purpose of FACTA is to prevent the possibility for people in USA to evade taxes through investments abroad.

On 27 June 2014, the government of the Republic of Latvia and the government of USA signed an agreement on improvement of international tax compliance and enforcement of the Foreign Account Tax Compliance Act. The Saeima accepted and approved this intergovernmental agreement by adopting the law of 11 December 2014. According to the concluded agreement and the effective law, financial institutions are obliged to identify customers linked to USA and to provide the information prescribed by the law to the State Revenue Service.

AS “SEB banka” is listed in the FACTA register under international identification number allocated by the USA tax administration 6BRL9A.00041.ME.428 (Global Intermediary Identification Number, GIIN) and its reporting takes place under the Model 1 IGA (Reporting Model 1 FFI)

According to the effective regulation, information is to be provided to SRS about the USA people, including USA taxpayers, which shall be deemed to be:

USA citizens and tax residents;
USA residents (including those who have received USA residence permits and Green Cards);
Companies registered in USA.

Information exchange in accordance with CRS

On 29 October 2014, the Common Reporting Standard (CRS) was approved at the Global Forum on Transparency and Exchange of Financial Account Information arranged by the Organisation for Economic Co-operation and Development (OECD). It provides for rights of tax administrations of the CRS member countries to receive information from financial institutions about financial accounts of taxpayers of other member countries and to send it to the tax administration of the taxpayer’s country. Latvia has joined CRS and enforces it based on the law “On Taxes and Duties”.

Tax residence

In compliance with statutory requirements, financial institutions obtain information from customers about their tax residence country and taxpayer identification number.

A physical person can be a tax resident in several countries at the same time, and accordingly, the customer’s obligation is to provide information to the financial institution about each of these countries.

Normally the tax residence country is the domicile and place of employment where income tax is imposed on a person’s income regardless of in which country it is received.

If a person only pays taxes imposed on specific objects in a country, for example, real property tax, dividend tax or value added tax (VAT), they are not regarded as this country’s tax resident. An exception is USA where citizens are regarded as USA tax residents even when their domicile and place of employment is in another country.

A legal entity’s obligation is to provide both its tax residence information and information about the tax residence of the beneficial owners. Submitting information about the beneficial owners is obligatory in cases when a legal entity has passive income, which exceeds 50% of the total income. Passive income is normally deemed to be interest payments, dividends, rent/lease payments, royalties, income from currency exchange transactions, etc.

Please be advised that the information provided in this reference material is only of informative character.

AS “SEB Banka” does not give consultations about tax residence and taxation matters. Information about a person’s tax residence can be clarified with tax administration of the residence country or with tax consultants,

Provision of tax residence information

There are several ways of submitting information on tax residence to SEB bank.
Physical persons:

On internet bank, in section: Settings -> My data;
Updating customer data questionnaire in presence at SEB;
Calling the Customer Centre and using Smart-ID or code calculator for identification;
In another way priorly agreed with an employee of SEB.

Legal entities (regarding beneficial owners):