Regulatory rules of bank's operation
The Bank's Articles of Association specify the following core aspects of the company:
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.
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.
In order to implement the Directive 2014/92/EU of the European Parliament and of the Council of 23 July 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features, amendments to the Law on Payment Services and Electronic Money were adopted in the Republic of Latvia that took effect on 28 March 2017. To provide consumers and payment service providers with information regarding the procedure for providing the account switch service, and to ensure equal competitive conditions for payment service providers, the Financial and Capital Market Commission (FCMC) adopted, in accordance with Part two of the Article 75.2 of the Law, a normative regulation No.195 “Regulation on the procedure for providing account switching services”, hereinafter referred to as the Regulation. The Regulation is in force as of 01 January 2018 and is available here.
The Regulation is applicable when a consumer wants to switch accounts, where one (transferring) payment service provider transfers the information required for switching an account to another (receiving) payment service provider, given that they provide payment services in Latvia and the payment account currency is euro.
Below is the information about the order and terms for switching current accounts of a consumer, samples of documents that are necessary for switching accounts.
Required documents: a completed application form for switching accounts, an identity document. Please note that the consumer signs and submits the application for switching accounts personally by visiting the Bank.
The account switching service is free of charge.
Information about the amicable dispute resolution procedure is available under the section Clients’ suggestions and complaints (submission options and procedure).
Please be informed that AS BlueOrange Bank is the participant of the Deposit Guarantee Fund. More information is available under the section the Deposit Guarantee Law.
Please note that AS BlueOrange Bank as a receiving payment service provider will not be able to ensure all operations mentioned in the application form for switching accounts if it specifies services other than those provided by AS BlueOrange Bank to consumers. For more service-related information, please contact AS BlueOrange Bank.
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 payment applicant pays only the commission fee specified by their bank (covered partially);
1 January 2008 was the launch date of the Credit Register of the Bank of Latvia – a state information system managed by the Bank of Latvia, which collects, accumulates and stores data on the customers (and pledgors of the customers) of Credit Register participants and Credit Register limited participants, the obligations of these parties, and the progress of fulfilling their obligations.
As of 1 December 2012, the operations of the Credit Register have been regulated by the Credit Register Law, the Bank of Latvia Credit Register Regulations (issued in accordance with the Credit Register Law), and the Regulations on digital exchange of information with the Bank of Latvia (issued in accordance with the Credit Register Law and the Law on the Bank of Latvia).
On 1 January 2008, the Credit Register automatically registered information on debtors previously maintained within the Debtors Register of the Bank of Latvia.
Please note that data included in the Credit Register are provided for reference only and do not constitute proof of the existence, or non-existence, of obligations, or any breach of obligations by a customer or their pledgor.
For detailed information, please refer 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 AS BlueOrange Bank 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 AS BlueOrange Bank to report transactions on behalf of the client, and therefore the client might need to report the transactions themselves. AS BlueOrange Bank 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. AS BlueOrange Bank has specified the dispute resolution process in Financial Instrument Account and Transaction Agreement.
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.
AS BlueOrange Bank 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:
■ From the Republic of Latvia Cabinet – about the inter-governmental agreement (in Latvian):
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.
MiFID (Markets in Financial Instruments Directive) is a directive of the European Parliament and Council to regulate financial markets and protect investor interests better through flawless operation of the financial instruments market. MiFID took effect on 1 November 2007. On 03.01.2018, the MiFID II directive and related MiFIR regulation took effect, along with a number of related regulations applicable to financial instruments, i.e. stocks, investment funds, debt securities, money market instruments, derivatives (forex, securities, commodities, interest rates etc.), among other things.
MiFID specifies activities that BlueOrange Bank must perform in providing financial investment services to clients. MiFID requirements dictate a higher degree of client service, more detailed scope of information that must be disclosed to clients, including information on types of investment and inherent risks.
- KID FX
Futures and Options
The Bank strictly adheres to anti-money laundering and counter-terrorist financing (AML/CTF) regulations and sanctions. The Bank ensures compliance of its financial services and customer transactions (payments) with the requirements laid down in the laws and regulations of the Republic of Latvia and European Union, as well as ensures compliance with sanctions implemented by the European Union, the United Nations and the United States with regard to all currencies. The Bank does not allow execution of transactions or offering of financial services that infringe the applicable regulations.
Customer suggestions and complaints
If you have any suggestions or complaints regarding customer service or any service of BlueOrange Bank, we are always willing to consider each case individually, provide explanations and find solutions to any possible issues.
You may submit your complaint or claim (hereinafter – the Complaint) in English, Latvian or Russian by sending it:
• by e-mail to: firstname.lastname@example.org (signing it with the safe electronic signature);
• by post to the Bank’s address: Smilšu iela 6, Rīga, LV-1050, Latvija, or by submitting it personally at the Bank’s Client Service Centre in Riga, Jēkaba iela 2;
• via the Internet Bank: https://ib.blueorangebank.com
Please note that the Bank will not review anonymous Complaints.
If a Complaint concerns a specific business relationship, the Bank will perform identification of the applicant during review of the relevant Complaint.
Information to be included in a Complaint:
• Data about the submitting person:- for individuals – name, surname, identity code/date of birth;- for legal entities – name and registration number, the representative’s position, name, surname, and representation basis;
• The date and place of drawing up the complaint;
• Circumstances and documentation substantiating the Complaint;
• The submitting person’s address (for individuals – the declared and/or actual residence address; for legal entities – registered or actual address), phone number, and e-mail address.
The Bank will consider your Complaint and reply within fifteen business days after receipt. If, for objective reasons, more time is necessary for consideration of the Complaint and preparing a reply, you will be notified within fifteen business days following receipt of your Complaint. For Complaints about the processing of personal data or breaches thereof, the Bank shall give a reply immediately – without undue delay, but not later than one month following receipt of the Complaint.
If a response provided by BlueOrange Bank is not satisfactory to you, please note that you have the right to file a complaint with the following independent supervisory or out-of-court arbitration institutions:
Ombudsman of the Finance Latvia Association
if the complaint falls within the competence of the ombudsman in accordance with the ombudsman’s bylaws. More information about the ombudsman and the procedure of reviewing complaints is available on the Finance Latvia Association website: https://www.financelatvia.eu/en/ombudsman/
Consumer Rights Protection Centre
to report violations of consumer rights protection regulations – if, in accordance with the Consumer Protection Law, you are considered a consumer. Detailed information on the Consumer Rights Protection Centre, as well as the procedure for submitting complaints, is available on the CRPC website: http://www.ptac.gov.lv/en
Financial and Capital Market Commission
which reviews complaints regarding the violation of the Payment Services and Electronic Money Law submitted by users of payment services who are not considered consumers in the interpretation of the Consumer Protection Law, provided that it has caused, or may cause, substantial damage to the interests of a group of users of such services (collective interests). Detailed information on the Financial and Capital Market Commission, as well as the procedure for submitting complaints, is available on the Commission’s website: http://www.fktk.lv/en/
Any individual or legal entity may seek protection of their infringed or contested civil rights, or legally protected interests, in court. Therefore, civil disputes or claims arising from the mutual business relations between BlueOrange Bank and clients, any violation, termination, legality, validity, interpretation thereof etc., may be submitted for review to a court in the Republic of Latvia. If specified in an agreement between you and BlueOrange Bank, a claim may also be filed with the court of arbitration of the Association of Commercial Banks of Latvia, in accordance with the articles of association, bylaws, and regulation applicable to the court of arbitration. Detailed information on the Court of Arbitration and on the procedure for reviewing claims, is available on the website of the Court of Arbitration of the Association of Latvian Commercial Banks: http://www.fstiesa.lv/en/court_of_arbitration/
Common Reporting Standard
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.
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:
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:
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);
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-.
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);
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.