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HMRC internal manual

International Exchange of Information Manual

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Non-Reporting Financial Institutions: Collective Investment Vehicles

NRFI: Collective Investment Vehicles

Certain Collective Investment Vehicles (CIV) are Non-Reporting Financial Institutions (NRFI) but the definitions vary between the regimes. It will be necessary for entities that are CIV, and that are Investment Entities [see IEIM400760], to consider each of the definitions separately to determine if they are NRFI for one or more of the regimes.

FATCA

Under the US IGA, the CIV must be regulated as such under UK law. If all of the interests in the CIV are held by or through one or more financial institutions [see IEIM400600] that are not Non-Participating Financial Institutions [see IEIM402360] then the CIV will be a NRFI.

Under the IGA UK Financial Institutions are permitted to use certain definitions of deemed compliant Financial Institutions, which are NRFI, that appear in the US Regulations. One such Deemed Compliant Financial Institution is a Qualified Collective Investment Vehicle (see Section 1471-5 (f)(i)(C)).

The term Qualified Collective Investment Vehicles (QCIV) applies to investment entities that are owned solely through participating Financial Institutions or directly by large institutional investors (e.g. pension funds) not typically subject to FATCA withholding or reporting.

A QCIV must itself be an Investment Entity and must be regulated as a CIV in the UK and every other country in which it operates. A fund is considered to be regulated if its manager is regulated with respect to the fund in all of the countries in which the investment fund is registered and in all of the countries in which the investment fund operates.

A QCIV’s investors can be equity investors, direct debt investors with an interest greater than $50,000 and other financial account holders but are limited to Participating Foreign Financial Institutions, registered Deemed Compliant Foreign Financial Institutions, retirement plans classified as exempt beneficial owners, US Persons that are not Specified US Persons, non-reporting IGA Foreign Financial Institutions, or other exempt beneficial owners.

Each member of a group of Related Entities [see IEIM404000] must be a Participating Foreign Financial Institution, a Registered Deemed Compliant Foreign Financial Institution, a sponsored Foreign Financial Institution, a Non-Reporting IGA Foreign Financial Institution or an Exempt Beneficial Owner.

A QCIV is in the category of registered Deemed Compliant Financial Institution, so any entity seeking to take advantage of this category will still need to register with the IRS and obtain a GIIN.

CDOT

Under the CDOT IGAs, the CIV must be regulated as such under UK law. If all of the interests in the CIV are held by or through one or more Reporting Financial Institutions [see IEIM402100] then the CIV will be a NRFI.

CRS and DAC

The term used here for treating a CIV as a NRFI is an Exempt Collective Investment Vehicle. The CIV must be an Investment Entity that is regulated in the UK as a CIV. It will then qualify to be a NRFI if all the interests in the CIV are held by or through individuals or entities that are not Reportable Persons [see IEIM403440] except where that person is a Passive NFE [see IEIM404040] with Controlling Persons [see IEIM403480] who are Reportable Persons.

If a CIV has issued shares in bearer form such that the beneficial owners of the shares cannot be identified, it may still qualify as an Exempt CIV if the following conditions are met:

  1. The CIV has not issued, and does not issue, any physical shares in bearer form after 31 December 2015;
  2. The CIV retires all such shares upon surrender;
  3. The CIV performs the due diligence procedures required under the CRS or DAC, and reports information where a Reportable Person is identified, when the bearer shares are presented for redemption or other payment; and
  4. The CIV has in place policies and procedures to ensure that such shares are redeemed or immobilised as soon as possible, and in any event prior to 1 January 2018.