Retail Banking and Wealth Management – India
Under the CRS, an Active Entity (typically a business that is a trading entity) is known as an Active Non-Financial Entity (NFE). You must meet any of the following criteria to be an Active NFE:
- less than 50% of the NFE’s gross income for the preceding calendar year or other appropriate reporting period is passive income and less than 50% of the assets held by the NFE during the preceding calendar year or other appropriate reporting period are assets that produce or are held for the production of passive income;
- the stock of the NFE is regularly traded on an established securities market or the NFE is a Related Entity of an Entity the stock of which is regularly traded on an established securities market;
- the NFE is a Governmental Entity, an International Organisation, a Central Bank, or an Entity wholly owned by one or more of the foregoing;
- substantially all of the activities of the NFE 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 (FI), except that an Entity does not qualify for this status if the Entity functions (or holds itself out) as an investment fund, such as a private equity fund, venture capital fund, leveraged buyout 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;
- the NFE 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 FI, provided that the NFE does not qualify for this exception after the date that is 24 months after the date of the initial organisation of the NFE;
- the NFE was not an FI 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 an FI;
- the NFE primarily engages in financing and hedging transactions with, or for, Related Entities that are not FIs, 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 an FI; or
- the NFE meets all of the following requirements:
- it is established and operated in its country or jurisdiction of residence exclusively for religious, charitable, scientific, artistic, cultural, athletic, or educational purposes; or it is established and operated in its country or 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 country or jurisdiction of residence;
- it has no shareholders or members who have a proprietary or beneficial interest in its income or assets;
- the applicable laws of the NFE’s country or jurisdiction of residence or the NFE’s formation documents do not permit any income or assets of the NFE 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 NFE’s charitable activities, or as payment of reasonable compensation for services rendered, or as payment representing the fair market value of property which the NFE has purchased; and
- the applicable laws of the NFE’s country or jurisdiction of residence or the NFE’s formation documents require that, upon the NFE’s liquidation or dissolution, all of its assets be distributed to a Governmental Entity or other non-profit organisation, or escheat to the government of the NFE’s country or jurisdiction of residence or any political subdivision thereof.
The Automatic Exchange of Information (AEOI) is a response by national governments to combat tax evasion more widely and effectively. It refers to the process of tax authorities in CRS-participating countries or jurisdictions automatically exchanging data on tax residents with other participating countries or jurisdictions.
“Controlling Person” means the natural person who exercises control over an entity and includes a beneficial owner as determined under sub-rule (3) of rule 9 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005.
In determining the beneficial owner, the procedure specified in the following circular as amended from time to time shall be applied, namely:
- DBOD.AML.BC. No.71/14.01.001/2012-13, issued on the 18th January, 2013 by the Reserve Bank of India; or
- CIR/MIRSD/2/2013, issued on the 24th January, 2013 by the Securities and Exchange Board of India; or
- IRDA/SDD/GDL/CIR/019/02/2013, issued on the 4th February, 2013 by the Insurance Regulatory and Development Authority.
In the case of a trust, the controlling person means the settlor, the trustees, the protector (if any), the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate effective control over the trust, and in the case of a legal arrangement other than a trust, the said expression means the person in equivalent or similar position.
The Common Reporting Standard (CRS) is a worldwide reporting and information-gathering requirement for financial institutions, to help fight against tax evasion and protect the integrity of tax systems.
Under the CRS, we are required to determine where you should be paying tax (often referred to as where you are ‘tax resident’) and give national tax authorities information on those customers that are tax resident/paying taxes outside the country or jurisdiction where they bank. This information may then be shared between different countries' or jurisdictions' tax authorities.
This is defined under the CRS as a legal person or a legal arrangement, such as a corporation, organisation, partnership, trust or foundation. An entity will therefore include any customer that holds a business account, product or service with HSBC except Sole Traders, who are treated as Individuals under the CRS.
Foreign Account Tax Compliance Act (FATCA) is the name of the legislation introduced by the United States government, to help counter US tax evasion by encouraging better reporting of information. More information on FATCA is available on the FATCA page of this site.
A customer that holds a personal account or product with HSBC. Under the CRS, this also includes Sole Traders.
The Organisation for Economic Co-operation and Development (OECD) is a group of 34 member countries or jurisdictions plus the European Commission and Brazil, China, India, Indonesia and South Africa as permanent guests.
“Passive non-financial entity” means:
- any non-financial entity which is not an active non-financial entity; or
- an investment entity 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 mentioned in sub-clause (A) of the investment entity definition mentioned below; or
- a withholding foreign partnership or withholding foreign trust.
“Investment Entity” means any entity:
- that primarily conducts as a business one or more of the following activities or operations for or on behalf of a customer, namely:
- trading in money market instruments (cheques, bills, certificates of deposit, derivatives, etc.); foreign exchange; exchange, interest rate and index instruments; transferable securities; or commodity futures trading; or
- individual and collective portfolio management; or
- otherwise investing, administering, or managing financial assets or money on behalf of other persons; or
- 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 mentioned in sub-clause (A) of this clause.
- substantially all of the activities of the 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 Provided that an entity shall not qualify for this status if it functions as an investment fund, such as a private equity fund, venture capital fund, leveraged buyout 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; or
- the 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 entity shall not qualify for this exception after the date that is twenty four months after the date of the initial organisation of the entity; or
- the entity was not a financial institution in the past five years, and is in the process of liquidating its assets or is reorganising with intent to continue or recommence operations in a business other than that of a financial institution; or
- the entity primarily engages in financing and hedging transactions with, or for, related entities which are not financial institutions, and does not provide financing or hedging services to any entity which 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
- income equivalent to interest;
- rents and royalties (other than rents and royalties derived in the active conduct of a business conducted, at least in part, by employees of the non-financial entity);
- the excess of gains over losses from the sale or exchange of financial assets which gives rise to the passive income;
- the excess of gains over losses from transactions (including futures, forwards, options, and similar transactions) in any financial assets;
- the excess of foreign currency gains over foreign currency losses;
- net income from swaps; or
- amounts received under cash value insurance contracts:
Explanation 1: An entity is treated as primarily conducting as a business one or more of the activities described in sub-clause (A) of this clause, or an entity’s gross income is primarily attributable to investing, reinvesting, or trading in financial assets for purposes of sub-clause (B) of this clause, if the entity’s gross income attributable to the relevant activities equals or exceeds fifty per cent. of the gross income of the entity during the shorter of the three-year period ending on 31st March of the year preceding the year in which the determination is made or the period during which the entity has been in existence.
Explanation 2: The term “investment entity” shall not include an entity that is an active non-financial entity merely because it meets any of the criteria below:
“Passive income” includes income by way of:
Provided that passive income will not include, in the case of a non-financial entity that regularly acts as a dealer in financial assets, any income from any transaction entered into in the ordinary course of such dealer’s business as such a dealer.
An Entity is a “Related Entity” of another Entity if either Entity controls the other Entity, or the two Entities are under common control. For this purpose control includes direct or indirect ownership of more than 50 per cent of the vote and value in an Entity.
A completed self-certification form may be used to confirm your tax residency status under the CRS. There are three types of HSBC self-certification form: Individuals, Entities and Controlling Persons. For some types of Entity, as well as collecting the Entity self-certification, we may also need to collect a self-certification from the Controlling Persons. This is explained on the Entities and Controlling Persons self-certification forms.
In the absence of a natural person(s) that exercises control of the Entity through ownership interests, the Senior Managing Official can be identified as the Controlling Person(s) of the Entity.
The Senior Managing Official of a company is the person who exercises control over the management of the entity.
A sole trader - also known as a sole proprietorship or simply proprietorship - is a type of business entity which is owned and run by one individual and where there is no legal distinction between the owner and the business.
Your tax residency is the country or jurisdiction where you are resident/registered for tax purposes. Each country or jurisdiction has its own rules for defining tax residence. For more information on tax residence, please consult your tax advisor or the OECD AEOI portal.
“Taxpayer Identification Number” means a number assigned to a person in the country or jurisdiction in which he or she is resident for tax purposes and includes a functional equivalent in case no such number is assigned.
Some countries or jurisdictions do not issue a TIN, but rely on another issued number such as social security/insurance numbers or company registration numbers for businesses.
Page last updated January 2019
- CRS Self-Certification for use by Individuals: Download PDF: Link opens in a new window
- CRS Self-Certification for use by Entities: Download PDF: Link opens in a new window
- CRS Self-Certification for use by Controlling Persons: Download PDF: Link opens in a new window
- Frequently asked questions
- Glossary of useful CRS terms