Trusts Under the Common Reporting Standard - CRS

Trusts Under the Common Reporting Standard - CRS


In recent years, there has been a global movement towards greater tax transparency between countries with the aim of reducing tax evasion. The automatic exchange of information in relation to tax residents between different jurisdictions has come into being as a direct result. The most recent, and most drastic development on this front is the OECD’s creation of the Standard of Automatic Exchange of Financial Account Information in Tax Matters, generally referred to in its abbreviated form of the Common Reporting Standard (CRS).

The latter has already started being applied from 2016 imposing reporting obligations and exchange of information standards, thus changing extensively the status-quo of international tax planning.

Trusts are flagged at the very outset in the introduction to the CRS in order to prohibit any individuals from using them as a shield against reporting requirements.

Defining Trust:

A trust is a fiduciary relationship and can deem to be an entity, however without the distinct feature of companies-having a separate legal personality. The trust arrangement commences when a person (Settlor/Grantor) transfers specific property to the trustee, with the intention that it be applied for the benefit of the Beneficiaries. A trustee holds the legal title to the trust property and has a duty to administer and deal with the latter in the interests of the beneficiaries according to the terms determined by the Settlor. These terms may be expressly indicated in a written Trust Deed or may even be given orally.

The terms of a Trust may be very specific or flexible – leaving broad discretion to the trustee. Thus, many types of trusts exist and tailor-made solutions can be given to any case.

The main roles in a Trust play: the settlor, the trustee and at least one beneficiary. A protector may also be appointed in connection with a trust. This, nonetheless, is not a compulsory requirement for a trust. This person is entrusted with the power to enforce and monitor the trustee’s actions, such as overseeing investment decisions or authorising a payment to a beneficiary. 

When determining the reporting obligations applicable to a trust, therefore, a crucial first step would be to establish whether the trust is:

a)    a Reporting Financial Institution, and

b)    a NFE that maintains a Financial Account with a Reporting Financial Institution

The distinction between those two will be analysed in more detail below depending on what assets are in the trust and who ‘manages’ the trust.

Part A- Classification of aTrust:

Considering Trust as a FI:

A two-tier test applies in order to determine whether a Trust is a FI:

a)    The majority (more than 50%) of its gross income is primarily attributable to investing, reinvesting, or trading in Financial Assets; and

b)    It is managed by another Entity that is a FI (i.e. if it has a professional corporate trustee; which as its primary business, invests, administers or manages the assets for trusts or other customers)

Once the Trust has been classified as a FI, the next step is to determine whether it is a Reporting or Non-Reporting FI. In case of the former, the entity is subject to due diligence and reporting requirements and in case of the latter, no due diligence or reporting is required.

Trust as Reportable-FI:

If the entity fulfils the above-mention test, the trust or its trustee will have an obligation to report to its local tax authority in respect of the trust’s reportable accounts.

Moreover, a Trust that is FI will be a Reporting one if it is resident in a Participating Jurisdiction. It is really important to note that a Trust will be considered to be resident where the trustee(s) is resident. If there is more than one trustee, the trust will be a Reporting FI in all Participating Jurisdictions in which a trustee is resident. The solution to this is by obtaining a relief by having all trustees demonstrating with concrete evidence that all necessary reporting by the Trust is taking place in a specific country.

 Trust as Non-Reportable-FI:

The Trust will be considered as a non-reporting FI to the extent that its Trustee is a FI and the Trustee undertakes to fulfil and Trust’s reporting and due diligence obligations on behalf of the Trust.

If this is not the case, then the Trust will need to perform on its own its due diligence and reporting obligations.

Also, a Trust may be a Non-Reporting FI such as a Broad Participation Retirement Fund or Narrow Participation Retirement Fund.

Non-Reporting FIs are specifically excluded from reporting obligations because they pose a low risk of tax evasion.

 Trust as Passive Non-Financial-Entity (Passive NFE):

If the trustee is not a professional corporate trustee, the trust may not be an FI. It would therefore be classified as an NFE, and be either Active or Passive.

The CRS contains a closed list of categories of Active NFEs as well as some tests and criteria. If a trust, which is an NFE, does not fall into one of these specific categories, then it is considered as a Passive NFE. One can find more details regarding this in our recent article on CRS.

Any Investment Entity that is not resident into any signatory of the CRS is also considered as a Passive NFE. However, any controlling person resident in a country that has signed up to the CRS will be subject to reporting under CRS in relation to a trust in a non-CRS country.  

Passive NFE classification implies reporting the Controlling Persons.

 Trust as Active Non-Financial-Entity (Active NFE):

This is really difficult to be proven, with limited instances so far, as it has to be shown that the Trust actively trades.

Active NFEs are not subject to reporting and due diligence procedures. However, if they have any accounts with other entities that have such obligation, then the will be subject as well. 


Part B- Financial Accounts:

After establishing as to whether a company falls within the definition of a Reporting FI, accounts should be examined if fall under the definition of ‘Financial Accounts’.  Emphasis must be given also to the below points:

-        Pre-existing Entity Accounts: may be exempted provided that their value or balance as at 31st of December 2015, does not exceed the USD 250.000 (in aggregated) threshold.

-        New Accounts: No threshold in respect of new accounts is available.

-        New Accounts opened after the 31st of December 2015 by a pre-existing client can be considered as Pre-existing Accounts.

 What type of accounts gets Reported?:

The term “Financial Account” means an account maintained by a Financial Institution, and includes:

a) in the case of an Investment Entity, any equity or debt interest in the Financial Institution. Notwithstanding the foregoing, the term “Financial Account” does not include any equity or debt interest in an Entity that is an Investment Entity solely because it (i) renders investment advice to, and acts on behalf of, or (ii) manages portfolios for, and acts on behalf of, a customer for the purpose of investing, managing, or administering Financial Assets deposited in the name of the customer with a Financial Institution other than such Entity;

b) in the case of a Financial Institution not described in subparagraph (a), any equity or debt interest in the Financial Institution, if the class of interests was established with a purpose of avoiding reporting; and

c) any Cash Value Insurance Contract and any Annuity Contract issued or maintained by a Financial Institution, other than a noninvestment-linked, non-transferable immediate life annuity that is issued to an individual and monetises a pension or disability benefit provided under an account that is an Excluded Account.

Under the CRS ‘an Equity Interest is considered to be held by any person treated as settlor or beneficiary of all or a portion of the trust, or any other natural person exercising ultimate effective control over the trust’.

Reportable Accounts/Persons?:

The term “Reportable account” is defined as an account held by one or more Reportable Persons or by a Passive Non-Financial Entity with one or more Controlling Persons that is a Reportable Person. Establishing this requires two tests. The first test is in relation to the Account Holder and the second is in relation to Controlling Persons of certain Entity Account Holders.

The term “Reportable Person” means a Reportable Jurisdiction Person other than:

(i) a corporation the stock of which is regularly traded on one or more established securities markets;

(ii) any corporation that is a Related Entity of a corporation described in clause (i);

(iii) a Governmental Entity; (iv) an International Organisation; (v) a Central Bank; or

(vi) a Financial Institution.

“Reportable Jurisdiction Person” means an individual or Entity that is resident in a Reportable Jurisdiction under the tax laws of such jurisdiction, or an estate of a decedent that was a resident of a Reportable Jurisdiction. For this purpose, an Entity such as a partnership, limited liability partnership or similar legal arrangement that has no residence for tax purposes shall be treated as resident in the jurisdiction in which its place of effective management is situated.

According to the CRS commentary, Beneficiaries who are purely discretionary beneficiaries (i.e. have no vested interests in the trust) should only be considered to be Account Holders in relation to a particular reporting period if there has been a distribution to them during that reporting period.

It is important to note that a person who is a beneficiary and as well as a settlor of a Trust that is a FI, would be treated as having two accounts with that trust. These will need to be assessed and reported separately.

Any person who has made a loan to a trust is also an Account Holder, holding a ‘debt interest’.


Two tests to determine a Reportable Account-Test 1:  


Two tests to determine a Reportable Account-Test 2: 















Who gets reported:

Generally, a ‘Controlling Person’ is defined as the natural person who exercise control over an Entity and especially in the case of a Trust such definition covers: the settlor(s), the trustee(s), the protector(s) if applicable, the beneficiary(ies) or class(es) of beneficiaries, and any other natural person(s) exercising ultimate effective control over the trust. In summary, everyone that is engaged with the Trust.

It is really important to note that the settlor(s), the trustee(s), the protector(s) if applicable, the beneficiary(ies) are always treated as Controlling persons regardless of whether or not any of them exercises control over the trust. 

Where the Settlor or beneficiaries are themselves Entities, the Reporting FI must Identify the natural person(s) exercising control of that Entity. Although the natural person may be exercising unltimate control through a chain of ownership, only the ultimate natural controlling person(s) would be treated as a Controlling Person, and not the intermediary Entities in the chain of ownership.

The threshold of 25% does not apply to Trusts at all and the term Controlling Person applies only where the trust is considered as Passive NFE. If the Trust is considered as FI, different reporting requirements are necessary.

What gets reported:

Under CRS started in Cyprus from the 31st of December 2016 and each reporting year, the following will be reported:

  • Name
  • Address
  • TIN
  • Date of Birth
  • Account Number
  • The name and ID number
  • GIIN of reporting FI
  • Account balance or value
  • Gross Payments paid or credited during the year
  • Jurisdiction of residence
  • Place of birth (applicable only to new accounts)

 More details of what is reported:

It is therefore clear that the reporting obligations applicable in the case of a trust that qualifies as a FI differ from the disclosure that a trust that is a Passive NFE might be required to make to an FI with which it holds an account.

The below tables will assist you as to what is reported in regards to each involved individual:

Trust as a FI

Account Holder:

Account Balance or Value:

Gross Payments:


Total value of all trust property

Value of payments made to the settlor in reporting period (if any)

Beneficiary: Mandatory

Total Value of all trust property

Value of distributions made to the beneficiary in reporting period

Beneficiary: Discretionary (in a year in which a distribution is received)


Value of distributions made to the beneficiary in reporting period

Any other person exercising ultimate effective control

Total value of all trust property

Value of distributions made to such person in reporting period (if any)

Debt Interest Holder

Principal amount of the debt

Value of payments made in reporting period

Any of the above, if account was closed

The fact of closure


Trust as a Passive NFE:

Account Holder:

Account Balance or Value:

Gross Payments:


Total account balance or value

Gross payments made or credited as per Section I.A of the CRS


Total account balance or value

Gross payments made or credited as per Section I.A of the CRS

Beneficiary: Mandatory

Total account balance or value

Gross payments made or credited as per Section I.A of the CRS

Beneficiary: Discretionary (in a year in which a distribution is received-if optional)


Gross payments made or credited as per Section I.A of the CRS

Protector (if any)

Total account balance or value

Gross payments made or credited as per Section I.A of the CRS

Any of the above, if account was closed

The fact of closure



Timing of Reporting:

The authorised credit institutions and other financial institutions in Cyprus are required to collect information and submit it to the relevant tax authorities, that will in turn forward annually the information on an automatic basis to the tax authorities of the countries of tax residence of each account holder, provided the account holders are tax residents of countries that implement CRS.


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