What's the impact of Measures on the Due Diligence of Non-resident Financial Account Information in Tax Matters to be effective from July 1, 2017 on us?

I. What's the impact on the public?

The impact of Measures on the Due Diligence of Non-resident Financial Account Information in Tax Matters on the general public is moderate.It mainly affects individuals and institutions opening new accounts with financial institutions. Starting from July 1, 2017, individuals and institutions opening new accounts (e.g., deposit accounts with commercial banks), or purchasing commercial insurance products from insurance companies, shall provide their tax ID number (TIN) in the application form or additional statement as requested. As most individual and institutional account holders in China are Chinese tax residents, they need only tickle the "Chinese Tax Resident" check box in the statement. Therefore, the impact on account opening experience is marginal. In most circumstances, existing individual and institutional account holders are not required to provide a tax resident ID statement when opening new accounts with the same financial institutions after July 1, 2017. The financial institutions will verify their tax resident ID status using the information in their databases.

 　　In rare situations where the financial institutions cannot verify their tax resident ID status, individual and institutional account holders may have to provide the documents needed when opening new accounts after July 1, 2017.

II. Who are the most impacted?

Non-residents that apply for the opening of accounts within PRC or passive financial institutions with non-resident controllers might be most impacted by Measures on the Due Diligence of Non-resident Financial Account Information in Tax Matters.  Non-resident herein refers to any non-tax resident individual or enterprise (including other organizations), not including government agencies, international organizations, central banks, financial institutions or companies traded on securities markets ratified and regulated by local governments and their affiliates.

 　　When opening financial accounts, non-residents or passive financial institutions with non-resident controllers need to provide the tax resident ID information of the account holders or controllers, including name, current address, tax resident's country (region), TIN of the country (region), birth place and birth date, and ensure the authenticity and accuracy of the information.

 　　Upon reception, SAT will transfer the above information to the home taxation authority of the account holders in accordance with relevant agreements China has signed.

III. What should Chinese residents keep in mind when opening accounts overseas?

Financial institutions in countries (regions) that pledge to implement the Standard for Automatic Exchange of Financial Information in Tax Matters ("the AEOI Standard”) released by OECD for G20 in July 2014 are required to identify non-resident accounts and report the account information to local taxation authorities. When opening financial accounts in these countries (regions), Chinese tax residents need to provide their tax resident ID information, including TIN. According to the relevant regulations of China, individuals with valid Chinese resident ID certificate may use their ID number as their TIN. As financial institutions need to verify their ID documents, Chinese residents may need to bring their ID certificates with them when opening accounts overseas.

IV. What's the impact on overseas Chinese?

Overseas Chinese opening new accounts with financial institutions in PRC should provide their tax resident ID documents. Overseas Chinese holders of accounts already opened financial institutions in PRC should assist the financial institutions in verifying whether they are non-residents if their existing account information includes non-resident signs, e.g., overseas address and telephone number. Financial institutions will collect account information of overseas Chinese confirmed as non-residents and file it to SAT for transfer to their home taxation authorities. No account information will be collected and transferred for those confirmed as Chinese tax residents.

 　　Overseas Chinese holders on financial accounts outside China shall assist local financial institutions in verifying whether they are non-residents if the Standard for Automatic Exchange of Financial Information in Tax Matters ("the AEOI Standard”) released by OECD for G20 in July 2014 is being implemented in their home countries (regions). For those confirmed to be Chinese tax residents, the taxation authorities of their home countries (regions) will transfer their account information to SAT. For those confirmed as tax residents of home countries (regions), no account information will be transferred back to China.

 　　If the Standard for Automatic Exchange of Financial Information in Tax Matters ("the AEOI Standard”) released by OECD for G20 in July 2014 is not being implemented in their home countries (regions), overseas Chinese will not be affected in most circumstances. However, if a person is the controller of an investment institution, which is opening an account in a country (region) where the Standard for Automatic Exchange of Financial Information in Tax Matters ("the AEOI Standard”) released by OECD for G20 in July 2014 is being implemented, the financial institution will collect information about the controller, i.e., that of the person himself/herself.