Compliance

Regulatory rules of bank's operation


Articles of Association

The Bank's Articles of Association specify the following core aspects of the company: 

1. Firm
2. Type of Business Operation
3. Share Capital and Type of Shares
4. Management Board
5. Supervisory Council
6. Internal Audit Department
7. Audit Committee

The Deposit Guarantee Law specifies that a depositor – a person having a guaranteed deposit with a bank* – may be eligible for their deposit if it becomes unavailable (e.g. if the bank becomes insolvent or its license is cancelled). 

The law specifies that, regardless of the date when a deposit is made, the amount of compensation guaranteed to a depositor for a deposit made with a bank shall be equal to the guaranteed deposit amount, but no more than 100,000 euros, and, in cases of exception where additional guaranteed compensation is provided to a depositor, no more than 200 000 euros within three months following the date of the initial deposit, for deposits made by individuals. If the depositor holds several deposits with the bank, they are added up and the total is treated as a single guaranteed deposit. 

Prior to establishing business relations, the bank must notify the depositor and have the depositor confirm acquaintance with information about:
  the deposit guarantee system in the Republic of Latvia;
■   the amount and currency of guaranteed compensation;
  the procedure and timing of payment of guaranteed compensation;
  possibility of offsetting mutual claims;
  the institution in charge of the deposit guarantee fund (Financial and Capital Market Commission).
Further information is available by clicking this link. 
For more information about the law, please click here. 

* Any bank, savings and lending association, foreign bank’s branch – if registered in the Republic of Latvia; or an European Union member-state bank’s branch in Latvia which, in accordance with the procedure specified in the applicable legislation, participates in the deposit guarantee fund

The Republic of Latvia Law on Protection of Depositors came into force on 1 January 2002 (available in Latvian). If entities that provide investment services (banks, investment management companies or brokerage companies) are unable to fulfil their obligations, their depositors are entitled to compensation. Compensation is provided when these obligations are not fulfilled.

Since 2008, each deposit has been guaranteed repayment equal to 90% of the value of financial instruments that have been irretrievably lost or of losses caused by an investment service that had not been provided, but no more than 20,000 euros.

As opposed to accumulations in the Deposit Guarantee Fund (Noguldījumu garantiju fonds, NGF) and Insured Persons’ Guarantee Fund (Apdrošināto aizsardzības fonds, AAF), the mechanism created to protect depositors intends that funds allocated for compensation are not accumulated in a fund; however, if any entity that provides investment services is unable to deliver of its obligations, the Financial and Capital Market Commission uses the quarterly financial instrument portfolio reports submitted by other parties that provide investment services to calculate a proportionate amount that each market player (entity providing investment services) should deposit to an account opened in the Bank of Latvia to ensure payment of compensation.

If necessary, the Financial and Capital Market Commission supervises market players’ compensation contributions, verifies the substantiation for compensation claims, and organises payment of compensation.

The Single Euro Payments Area allows all consumers, companies and government institutions from any European country to make and receive payments in euros across countries as well as within national borders, based on equal provisions, rights and obligations.

The SEPA is intended to equalise the use of payment instruments (SEPA credit transfers, SEPA card payments and SEPA direct debit payments), specifying that both national and cross-border euro payments must be executed with equal speed, security and simplicity.

SEPA payment standards:

  Payment currency – the euro; 

  The payment is sent to a bank in a European Union member country, Iceland, Liechtenstein, Monaco, Norway or Switzerland; 

  The recipient’s account must be in IBAN format; The recipient bank’s identification code (SWIFT/BIC) must be specified; 

  The payment applicant pays only the commission fee specified by their bank (covered partially);

  The details of the recipient and the recipient bank must be accurate.

Since 1 December 2012, the operation of Credit Register has been regulated by the Credit Register Law. 

The Credit Register is a state information system managed by the Bank of Latvia, gathering, maintaining and archiving data about clients and guarantors of clients of Credit Register participants, their obligations, and the progress of discharging the obligations.

It is worth noting that data included in the Credit Register are used for reference; they do not serve as evidence of the existence or nonexistence of obligations of a client or a client’s guarantor, or any violation of such obligations.

One of the primary goals of the Credit Register is to provide additional alternatives for evaluating the credit capacity of an existing or potential client and the client’s guarantor, contributing to a culture of fair and responsible consumer lending and borrowing practices.


Reports to the Credit Register

Information about a client, client’s guarantor, their obligations and violations of these obligations is included in the register by a member of the register.

Data about a client’s violations are recorded in the register if the client delays payment under an agreement on the basis of which they receive financial services bearing credit risk, for more than 60 calendar days – provided that the total of all overdue payments by the client, including late interest and contractual penalty, is equal to at least 150 euros or an equivalent in a foreign currency. 


Receiving data from the Credit Register

To receive data from the Credit Register, a client or guarantor submits a written application to the Bank of Latvia, either on paper or as a digital document. Such an application may also be signed by a different person on behalf of a client or guarantor. 

Data in the Credit Register may be received by a client or guarantor free of charge. Their guardian or proxy may also receive data on their behalf.


The Bank of Latvia issues data from the Credit Register to a client or guarantor: 
1. In electronic format; 
2. In person; 
3. By mail. 

Members of the Credit Register are entitled to receive data about: 
1. A current or potential client, their guarantor; 
2. A person with significant participation in a commercial company that is the relevant register member’s client, client’s guarantor, potential client, or potential guarantor of a client; 
3. A commercial company that is a subsidiary of the relevant register member’s (potential) client or guarantor, and any further subsidiary of such a subsidiary; 
4. A commercial company in which the relevant register member’s (potential) client or guarantor has significant participation;
5. Council and/or board member of the relevant register member’s (potential) client or guarantor, if any.


How long data are stored in the Credit Register:

1. Data about a client or its guarantor, including general information about their obligations and violation of obligations, are retained by the Bank of Latvia:
 For 15 years following termination of the obligations of the client or guarantor;
  For 15 years following the day that the rights or obligations under an agreement with the client or guarantor are transferred to a third party;
  For 5 year following remedy of obligations previously violated by the client or guarantor; 
2. Periodical data are stored by the Bank of Latvia for 3 years following expiration of the relevant period. 

You may read more about this law (in Latvian) here.

EMIR (European Market Infrastructure Regulation or Regulation No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories) is an EU regulation which sets common rules for OTC derivatives transactions, for risk mitigation techniques related to those transactions and for reporting of transactions. EMIR came into force on 16 August 2012. Various action-oriented regulations and requirements have come into force gradually in 2013 and 2014.


Objectives of EMIR

EMIR was adopted as a result of the 2009 decision by G20 to regulate the OTC derivatives market with greater accuracy, with the objective of increasing the transparency of the derivatives market and lowering the systemic risk of derivatives transactions within the global financial system.


Area of influence

Requirements of EMIR apply to OTC derivatives transactions, including some of the transactions that can be concluded under the Financial Instrument Account and Transaction Agreement – such as interest rate derivatives and FX derivatives (forwards, swaps, options). EMIR requirements apply to both financial and non-financial counterparties. Requirements of EMIR do not apply to private individuals and certain government institutions.


Main requirements of EMIR

Obligation to report derivatives transactions to a Trade Repository:

■ Obligation to centrally clear transactions with certain OTC derivatives through a Central Counterparty (CCP);

■ Mandatory risk mitigation techniques for non-cleared derivatives transactions.


Obligation to report derivatives transactions to a Trade Repository

Obligation to report transactions applies to all counterparties in derivatives transactions, except private individuals. This means that both counterparties to any derivatives transaction must report the transaction, modifications to the transaction, and termination of the transaction to a licensed trade repository of their choosing. The reporting obligation can also be delegated to one’s counterparty or to a third party. Transaction has to be reported no later than the working day following the conclusion, modification or termination of the transaction.

By signing the Financial Instrument Account and Transaction Agreement, the client authorises Baltikums Bank AS to report derivatives transactions concluded between the bank and the client to a trade repository.

In transaction reports, the counterparties to the transaction must be identified by a Legal Entity Identifier (LEI), which is a new identifier developed globally to identify counterparties to financial transactions. Until LEI format and issuing principles are finalised, an "interim" LEI code (or pre-LEI) must be used.

Obtaining a LEI (or equivalent identifier) is the responsibility of each counterparty to a derivatives transaction. If the client has not obtained a LEI (or equivalent identifier), it might not be possible for Baltikums Bank AS to report transactions on behalf of the client, and therefore the client might need to report the transactions themselves. Baltikums Bank AS can also refuse to conclude new derivatives transactions with clients who do not have a required identifier. A LEI code can be obtained over the internet. A full list of organisations issuing LEIs is listed on the website www.leiroc.org. Costs related to obtaining and maintaining the LEI (or an equivalent identifier) must be borne by the client.

The reporting obligation will come into force on 12 February 2014. In addition to new transactions concluded from that date forward, all derivatives transactions that were open on 16 August 2012 or have been concluded after that date have to be reported.


Obligation to centrally clear transactions with certain OTC derivatives through a Central Counterparty

The clearing obligation applies to transactions with standardised OTC derivatives. Instruments covered by that date have to be reported.


Obligation to centrally clear transactions with certain OTC derivatives through a Central Counterparty

The clearing obligation applies to transactions with standardised OTC derivatives. Instruments covered by that obligation will be published on the ESMA (European Securities and Markets Authority) website www.esma.europa.eu.

The clearing obligation applies to financial counterparties and to non-financial counterparties exceeding the so-called clearing threshold. Clearing thresholds have been set so that only companies holding very large speculative positions in derivatives would exceed them.


Mandatory risk mitigation techniques for non-cleared derivatives transactions

Main risk mitigation techniques affecting non-financial counterparties:

■ Timely confirmation of transactions. EMIR sets deadlines for confirming transactions depending on the counterparty and instrument type;

■ Portfolio reconciliation. Parties to a derivatives transaction have to agree on a process for regularly reconciling transactions to identify any discrepancies. EMIR sets deadlines on how often reconciliation has to be performed based on the counterparty type and number of open transactions between counterparties;

■ Dispute resolution. Counterparties to a derivatives transaction must agree on a process to resolve disputes. Baltikums Bank AS has specified the dispute resolution process in Financial Instrument Account and Transaction Agreement.


Counterparty classification

Application of different EMIR requirements depends on the classification of a counterparty – whether the counterparty is a financial or non-financial counterparty (in the latter case, it also depends on what types of transactions the counterparty concludes, for what purpose and in what amount). Financial counterparties under EMIR include banks, investment firms, insurance companies, fund management companies, providers of employer pension and central counterparties. All other undertakings are non-financial counterparties.

Baltikums Bank AS is a financial counterparty under EMIR.

Additional information on the ESMA (European Securities and Markets Authority) website www.esma.europa.eu

In order to prevent tax evasion and fulfil the inter-governmental agreement between Latvia and the U.S., the State Revenue Service of the Republic of Latvia (SRS) and the U.S. Internal Revenue Service (IRS) will be exchanging information about the accounts of one country’s persons that are held with the other country’s banks, starting in 2015. The basis for concluding the agreement and exchanging this information is implementation of FATCA requirements.


What is FATCA?

1. On 18.03.2010, the U.S. senate adopted the U.S. Foreign Account Tax Compliance Act, FATCA for short.

2. Its purpose is to prevent persons responsible for tax payments in the U.S. from avoiding taxation by concealing their assets or income in other states.

3. FATCA applies to financial institutions worldwide and, on from 01.07.2014, implementation of the provisions of this act will commence a global scale.


How will FATCA be implemented in Latvia?

1. On 08.04.2014, the Republic of Latvia Cabinet approved the U.S.-Latvia agreement on improving fulfilment of international tax obligations and implementing FATCA.

2. The inter-governmental agreement stipulates that financial institutions will provide data requested by the IRS to the Republic of Latvia SRS, and tax authorities will exchange information that is provided automatically under the current cooperation agreement.

3. Tax authorities ensure adequate security, data protection and confidentiality measures, restricting use of data solely to the purpose of tax administration.

4. The inter-governmental agreement between Latvia and the U.S. stipulates the following obligations for banks:

■ Identification of accounts for which reports should be provided;

■ Annual reporting to the SRS;

■ Ensuring compliance with FATCA provisions and registering with the IRS to receive an identification number;

■ If a bank operates as a qualified intermediary or a foreign counterparty that has opted to withhold tax under the U.S. Internal Revenue Code – withholding 30% tax on payments originating from the U.S.1;

■ If a bank does not have the status of a qualified intermediary or foreign counterparty that has opted to withhold tax – to provide information about its clients as necessary for collection of funds and provision of reports.


To what bank clients does FATCA apply?

1. FATCA will apply to clients that are considered U.S. persons for tax purposes and to clients that are related to the U.S. through e.g. U.S. citizenship, birthplace in the U.S., postal address in the U.S., U.S. phone number.

2. FATCA will also affect companies not registered in the U.S. if their direct or indirect owners are U.S. persons with considerable equity in the respective companies.


What will banks do to comply with FATCA?

1. FATCA requires financial institutions throughout the world to identify accounts held directly or indirectly by U.S. persons and to report the relevant information to IRS, which is the U.S. tax authority.

2. In order to determine the status of clients as U.S. taxpayers, FATCA requires financial institutions to obtain additional information or documentation from their clients.

3. If a client fails to provide the necessary information or documentation, a financial institution must withhold 30% tax on certain kinds of U.S. income paid to that client.


What information will banks provide to the IRS?

Banks are to report U.S. persons starting from the 2014 period, by the end of September of each subsequent year:

■ From 2014 – information about account holders: surname, taxpayer number, account number, account balance or value;

■ From 2015 – information about holders of securities accounts: gross interest, gross dividends and other income from assets held on an account;

■ From 2015 – information about holders of deposit accounts and any other accounts, including total amounts paid or deposited within a calendar year;

■ From 2016 – the year’s total gross income from property sale or recovery.


What information or documentation may banks require from their clients?

1. Banks may require clients to fill out W-8BEN or W-9 forms or a declaration to determine their U.S. taxpayer status.

2. Banks in Latvia will minimise information and documentation requirements for their clients by implementing Know Your Client provisions specified in the Law on Combating Money Laundering and Terrorist Financing.


What would be the consequences for clients that do not provide banks with requested information?

1. Banks will report non-compliant account holders to the IRS in summary form.

2. Banks may refuse to open accounts or terminate their business relations such clients.


How and where may clients receive additional advice on FATCA?

On matters of U.S. taxation, clients should seek assistance from professional tax consultants or from the IRS. Further information about FATCA is available:

■ From the U.S. State Treasury: http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx;

■ From the U.S. tax authority: 

http://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-FATCA;

■ From the Republic of Latvia Cabinet – about the inter-governmental agreement (in Latvian):
 http://www.mk.gov.lv/lv/mk/tap/?pid=40319276&mode=mk&date=2014-04-08.


1 Banks in Latvia are not currently registered as qualified intermediaries or foreign counterparties that have opted to withhold tax under the U.S. Internal Revenue Code, and will therefore be performing reporting but not tax collection duties.

Customer complaints and suggestions


Submitting complaints to the Bank

How to submit claim or suggestion:

If you have any complaints or claims regarding client service or a service provided by the Bank, we are always ready to consider each case individually, provide explanations, and solve possible problems.

You may submit your complaint, suggestions or feedback:

- by email, sending them to: info@blueorangebank.com 

- by fax: :  +371 67 031 300 

- personally or mail them to the Bank’s address: Smilšu iela 6, Rīga, LV-1050, Latvija

- via Internet Bank


Information to be included in a complaint:

■ Data about the submitting person (for individuals – name, surname, and identity code or passport details if there is no identity code; for legal entities – the title and registration number, as well as the representative’s position, name, and surname);

■ The submitting person’s address;

■ The essence of the complaint or claim;

■ Documents on which the complaint or claim is based;

■ The submitting person’s phone number, fax number, and e-mail.

The Bank will consider your complaint or claim and will reply to you within thirty days after receipt. If more time is necessary for consideration of the complaint or claim and preparing a reply, you will be notified within thirty days following receipt of your complaint or claim.


Submitting a complaint to the Ombudsman

If you received an unsatisfactory reply from the Bank to a complaint concerning non-cash transfers or transactions with electronic account management tools, the complaint may be submitted to the Ombudsman of the Association of Latvian Commercial Banks (ACBL).

The Ombudsman only considers complaints that have all of the following features:

■ The complaint was submitted by a client who is not a credit institution or a financial institution;

■ The complaint concerns non-cash credit transfers or transactions with electronic payment tools;

■ The complaint concerns the actions of a credit institution registered in Latvia;

■ The amount of the transaction (the total amount of transactions which are obviously related) that is the subject of the complaint does not exceed EUR 50,000.00;

■ The complaint does not concern document forgery;

■ The complaint does not concern the reasonability of pricelists of credit institutions, the granting, cancellation or amendment of credit limits, the terms and conditions of credit limits, or other similar issues;

■ The client has turned to the credit institution with the same claim and failed to receive a satisfactory response to their claim within one month as of the day of submittal (sending) thereof;

■ No claim on the same subject has been submitted to a court or court of arbitration;

■ The client has not submitted the same complaint to the Consumer Rights Protection Centre;

■ No complaints on the same subject from the same client have been submitted to the ombudsman;

■ The complaint is filed in writing according to all requirements of the ACBL and is submitted to the ACBL Ombudsman at Pērses iela 9/11, Rīga, LV-1011, Latvija.

More information on the ACBL ombudsman, its regulations and procedures (in Latvian) are available on the website, http://lka.org.lv/lv/ombuds/reglaments.html and http://lka.org.lv/lv/ombuds/nolikums.html.


Submitting a complaint to the Consumer Rights Protection Centre

Clients who are considered consumers in the interpretation legal acts of the Republic of Latvia are entitled to submit complaints on violations of requirements of legal acts to the Consumer Rights Protection Centre.

More information on the Republic of Latvia Consumer Rights Protection Centre is available on the website, www.ptac.gov.lv.


Common Reporting Standard


OECD CRS

In compliance with the OECD CRS (Common Reporting Standard), tax authorities all over the world shall receive information from financial institutions and exchange this information on taxpayers of respective countries once a year automatically.
Latvia along with 53 other countries has joined the group of early adopters of OECD CRS, and the regulatory enactments necessary to implement the exchange of information have already come into force in Latvia (amendments to the Law On Taxes and Duties, amendments to the Law On Credit Institutions, and Cabinet Regulations); therefore, the first automatic exchange of information will take place by the end of September 2017, providing information for the year 2016. As of 1 January 2016, financial institutions in the Republic of Latvia are required to identify a client’s country of residence for tax purposes, the taxpayer identification number, and every year, starting with 2017, provide the State Revenue Service of the Republic of Latvia with information on accounts of respective clients as required by applicable law.
The current list of countries that have joined the initiative is available at http://www.oecd.org/tax/transparency/AEOI-commitments.pdf.
To comply with the OECD CRS, the Bank may ask a client and/or a client’s beneficial owners to provide information or documentary evidence certifying their tax residence (see Section “Tax residence”), and in case the client is a legal entity – client classification pursuant to OECD CRS (see Section “Classification of clients according to OECD CRS”), as well as the taxpayer identification number(s) of the client and/or client’s beneficial owners in the country of residence.


Tax residence

Considering that the OECD CRS provides no standard definition of tax residence, the client and/or the client’s beneficial owners, shall follow the tax laws of their country of residence while determining tax residence.
Normally, an individual is considered a tax resident in a country where:
1. In accordance with the applicable laws this person is liable to pay income taxes;
2. Based on their permanent place of residence or citizenship (individuals);
3. Based on residency, headquarters address, place of incorporation or place of registration (legal entities);
4. Any other similar criteria.
Please take into consideration that each country has its own regulations regarding the criteria for determining tax residence (for more information, please refer to the OECD website: http://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/.
In certain cases, when, for example, permanent residency is in more than one country, the client can be considered a tax resident of several countries simultaneously.
If an entity is not liable to pay income taxes in any country, it will be recognised as the tax resident in the country where its actual management is located (the actual headquarters address).
The actual headquarters address is the address of the headquarters, where usually the official meetings of the supreme management body (board of directors, council, board) take place to discuss and/or decide on key issues regarding management and core operations of the enterprise. It is essential to evaluate all relevant facts and circumstances in order to determine the actual address of company headquarters.
NB! This section contains information of general content and includes common criteria.


Which institutions are required to report to the State Revenue Service (SRS)?

Financial institutions shall identify financial accounts with respect to which reporting is required and report to the SRS, providing information as specified in the applicable laws.
Financial institution means a custodial institution, a depository institution, an investment entity, or a specified insurance company.
Custodial institution means any entity that holds, as a substantial portion of its business, financial assets for the account of others. An entity holds financial assets for the account of others as a substantial portion of its business if the entity’s gross income attributable to the holding of financial assets and related financial services equals or exceeds 20 per cent of the entity’s gross income during the shorter of:
- The three-year period that ends on December 31 (or the final day of a non-calendar year accounting period) prior to the year in which the determination is being made whether the entity is a custodial institution;
- The period during which the entity has been in existence or the period during which the entity has been holding an investment services licence.
Depository institution means any entity that accepts deposits and other repayable funds, performing the activity of a credit institution, savings and loan association, payment institution, electronic money issuer, or similar business activity.
Investment entity means any entity:
1. That primarily conducts as a business one or more of the following activities or operations for or on behalf of a client:
- Trading in money market instruments (such as cheques, bills, certificates of deposit, derivatives); foreign exchange; exchange, interest rate and index instruments; transferable securities; or commodity futures trading,
- Individual or collective portfolio management based on the investors’ authorisation,
- Otherwise investing, administering, or managing financial assets or money for or on behalf of a client;
2. the gross income of which is primarily attributable to investing, reinvesting, or trading in financial assets, if the entity is managed by another entity that is a depository institution, a custodial institution, a specified insurance company or an investment entity described in paragraph 1 of this definition of an investment entity (a passive non-financial entity).
Specified insurance company means an insurance company (or the holding company of an insurance company) that issues, or is obligated to make payments with respect to, a cash value insurance contract or an annuity contract.


Classification of clients:
Individuals
Entities
Entity means a legal person or a legal arrangement, including a corporation, partnership, association, trust or foundation.
Related entity means an entity related to another entity:
- If either entity controls the other entity; or
- The two entities under common control; or 
- The two entities are investment entities (defined in paragraph 2 of the definition of the Investment entity term) that are under common management.
For this purpose, control includes direct or indirect ownership of at least 50 per cent of voting shares (investment parts) or equity capital (total investment) in an entity.
Non-financial entity means any entity that is not a custodial institution, a depository institution, an investment entity or a specified insurance company.
Active non-financial entity means any non-financial entity (with or without the status of a legal person) that meets any of the following criteria:
1. Less than 50 per cent of the non-financial entity’s gross income for the preceding calendar year or other appropriate reporting period is passive income and less than 50 per cent of the assets held by the non-financial entity during the preceding calendar year or other appropriate reporting period are assets that produce, or are held for the production of, passive income;
Passive income means the portion of gross income of a non-financial entity that generally consists of:
1.) Dividends;
2.) Interest and payments equivalent to interest;
3.) Rents and royalties (other than rents and royalties derived in the active conduct of a trade or business);
4.) Annuities;
5.) Income derived from the alienation of financial assets, generating income specified in subparagraphs 1-4 (excluding income derived in the course of professional broker/dealer activities);
6.) Income from transactions (including futures, options and similar transactions) with financial assets (excluding income derived in the course of professional broker/dealer activities);
7.) Income from foreign currency exchange transactions (excluding income derived in the course of professional broker/dealer activities);
8.) The result of swap transactions (excluding income derived in the course of professional broker/dealer activities);
9.) 
Amounts received under cash value insurance contracts;
10.) Other income equivalent to income described in subparagraphs 1-9 in its economic essence.
2. The stock of the non-financial entity is regularly traded on an established securities market or the non-financial entity is a related entity of an entity the stock of which is regularly traded on an established securities market;
3. The non-financial entity is a governmental entity, an international organization, a central bank, or an entity wholly owned by one or more of the foregoing;
4. A substantial amount or all of the activities of the non-financial entity consist of holding (in whole or in part) the outstanding stock of, or providing financing and services to, one or more subsidiaries that engage in trades or businesses other than the business of a financial institution, except that an entity does not qualify for the status of an active non-financial entity if it functions (or declares itself) as an investment fund, such as a private equity fund, venture capital fund, leveraged 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;
5. The non-financial entity 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 non-financial entity does not qualify for this exception after the date that is 24 months after the date of the initial organization of the non-financial entity;
6. The non-financial entity 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;
7. The non-financial entity 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;
8. The non-financial entity meets all of the following requirements:
- It is established and operated in its jurisdiction of residence exclusively for religious, charitable, scientific, artistic, cultural, athletic, or educational purposes; or it is established and operated in its jurisdiction of residence and it is a professional organisation, business league, chamber of commerce, labour organisation, agricultural or horticultural organisation, civic league or an organisation operated exclusively for the promotion of social welfare;
- It is exempt from income tax in its participating jurisdiction or other country of tax residence;
- It has no shareholders or members who have a proprietary or beneficial interest in its income or assets;
- The applicable laws of the non-financial entity’s participating jurisdiction or other country of tax residence or the non-financial entity’s formation documents do not permit any income or assets of the non-financial 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 non-financial entity’s charitable activities, or as payment of reasonable compensation for services rendered, or as payment representing the fair market value of property which the non-financial entity has purchased;
- The applicable laws of the non-financial entity’s jurisdiction of residence (that is a participating jurisdiction) or formation documents require that, upon the non-financial entity’s liquidation or dissolution, all of its assets be distributed to a governmental entity or other non-profit entity.
Passive non-financial entity means:
1. A non-financial entity (with or without the status of a legal person), that does not meet with criteria of an active non-financial entity;
2. An Investment entity specified in paragraph 2 of the definition of the Investment entity term.


A reportable person
Any person of a participating country other than:
- A corporation whose capital shares are regularly traded on one or several regulated financial instruments markets, or a related corporation; 
- A governmental entity;
- An international organisation;
- A central bank;
- A financial institution.


A reportable account
A financial account held by one of the following persons:
- One or more reportable persons;
- A passive non-financial entity with one or more beneficial owners identified as reportable persons pursuant to account due diligence procedures performed.


Classification of accounts depending on the time an account was opened
A pre-existing account (for both individuals and entities) – an account that has been opened prior to 31 December 2015;
New account (for both individuals and entities) – an account opened from 1 January 2016.


The following subcategories of pre-existing accounts for individuals are distinguished depending on the amount of fixed assets they hold:
- Lower value account means an account with an aggregate balance or value as of 31 December 2015 or as of 31 December of each subsequent year that does not exceed the amount, which is equivalent to euro (according to euro reference rate published by the European Central Bank) and corresponds to USD 1,000,000;
- High value account means an account with an aggregate balance or value as of 31 December 2015 or as of 31 December of each subsequent year that exceeds the amount, which is equivalent to euro (according to euro reference rate published by the European Central Bank) and corresponds to USD 1,000,000.

Detailed information on client classification and other definitions specified in this section is available at: http://likumi.lv/ta/id/278751-grozijumi-likuma-par-nodokliem-un-nodevam-.

Reportable information

1. Information on account holder:
- Name, surname/Company name
- Date and place of birth (for an individual)
- Place of residence (for an individual)/Registered office (for an entity)
- Name of the relevant CRS jurisdiction
- Taxpayer identification number (if any)
- A passive non-financial entity with several controlling persons (beneficial owners) who are reportable persons – information about taxpayer status in the CRS jurisdiction and other country; with respect to each controlling person (beneficial owner) – name, surname, date and place of birth, address, name of the relevant CRS jurisdiction, taxpayer identification number (if any).
2. Account number (or its functional equivalent).
3. Name and identification number (if any) of the financial institution that submits a report.
4. Account balance at the end of a calendar year or another relevant reporting period, and if the account was closed within a corresponding calendar year or another relevant reporting period – information regarding closing of the account.


Detailed information and explanations of key terms:

1. Amendments to the Law On Taxes and Duties: http://likumi.lv/ta/id/278751-grozijumi-likuma-par-nodokliem-un-nodevam- (in Latvian);

2. Cabinet Regulation No. 20 “Due diligence procedures on financial accounts conducted by a financial institution and provision of financial account data to the State Revenue Service”: http://likumi.lv/ta/id/279206-kartiba-kada-finansu-iestade-izpilda-finansu-kontu-pienacigas-parbaudes-proceduras-un-sniedz-valsts-ienemumu-dienestam (in Latvian);

3. OECD CRS (Common Reporting Standard) http://www.oecd.org/ctp/exchange-of-tax-information/standard-for-automatic-exchange-of-financial-account-information-for-tax-matters-9789264216525-en.htm.

Information provided herein is intended for reference only. The information does not contain or constitute, and may not be considered to be, a legal and/or tax analysis, recommendation, or advice. The information is prepared using the sources specified herein, which are deemed reliable but have not been reviewed specifically.
Bank advises clients to examine thoroughly all information relating to tax residence of the client/client’s beneficial owners and status/classification under the OECD CRS.
In case of any doubts, please find an opportunity to consult with competent tax authorities and/or professional legal or tax advisers.

Information disclosure

Information about Remuneration policy, Normative Regulations for Disclosure of Encumbered and Unencumbered Assets is available here.