Version 4.7 of the Implementing Guidelines on Automatic Exchange of Financial Account Information (鈥渢he Guidelines鈥�) introduced key updates on the entity classification of an investment entity, undocumented accounts, as well as updates to the list of reportable and participating jurisdictions in Appendix 1 and Appendix 2.
1. The Definition of an Investment Entity was Amended (Section 2.2.3 of the Guidelines)
The definition of the second type of Investment Entity has been amended. Previous versions of the Guidelines stated that entities managed by a Reporting Financial Institution that are dedicated to managing the wealth of a limited number of related shareholders (max. 7 individuals and 3 entities that are controlled by the same 7 individuals) were not considered Investment Entities for FATCA-CRS purposes. These entities were classified as Passive NFEs/NFFEs, provided that they:
- Do not operate or present themselves as investment funds.
- Have not raised capital from the public.
- Have no reason to believe their managing Reporting Financial Institution is non-compliant.
However, the above-mentioned clarification was removed in Version 4.7 of the Guidelines, and therefore such entities may now fall under the definition of Investment Entities. It is advisable that any entities which were classified as Passive NFEs/NFFEs due to the above exclusion revisit their entity classification, as they may now have FATCA-CRS registration, due diligence, and reporting obligations in Malta.
2. Undocumented Accounts (Section 14.1 of the Guidelines)
Version 4.7 of the Guidelines has clarified that an undocumented account may arise when the only indicia found for a financial account is a 鈥渉old mail鈥� instruction or 鈥渋n-care-of鈥� address in a reportable jurisdiction, and there is no other address and no other indicia are identified for the account holder. This implies that self-certification forms or documentary evidence need to be obtained to establish the tax residence of the account holder. Where self-certification forms or documentary evidence are not provided, the financial institution must report the account as an undocumented account. Reporting Financial Institutions with a disproportionate number of undocumented accounts will be subject to a compliance review by the (MTCA).
3. Jurisdiction List Updates (Appendices 1 and 2)
The following jurisdictions have been added to both the reportable and participating jurisdiction lists from 2024 reporting period (i.e. first information exchange intended in 2025): Armenia, Belize, Georgia, Kenya, Moldova, Uganda, and Ukraine.
