Identifying the type of your entity can sometimes be difficult, but don’t worry! We have compiled a simple and easy guide for you to follow, that will help you understand the differences between companies’ classifications, so you should be able to find yours easily.
What is the Common Reporting Standard (CRS)?
CRS was introduced by The Organisation for Economic Co-operation and Development (OECD) to stop companies from evading tax and hiding their finances in foreign accounts.
Your entity’s classification depends on its nature of business. It can be either a Financial Institution or non-financial entity, that are also divided into several categories.
Filling in the FINOM form
Depending on the country, our form has different options. If you are based in France, please read this article.
For Germany, you need to select one of the following options:
Reporting Financial Institution
Non-Reporting Financial Institution
Active Non-Financial Entity
Other Active Non-Financial Entity
Passive Non-Financial Entity
Passive Non-Financial Entity (type B investment)
We will go through each option to help you identify an appropriate entity type.
Financial Institution (FI)
A Financial Institution (FI) is a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange. Financial Institutions encompass a broad range of business operations within the financial services sector including banks, trust companies, insurance companies, brokerage firms, and investment dealers.
FIs are split into two categories: Reporting Financial Institutions (RFI) and Non-Reporting Financial Institutions (NRFI).
Choose a Reporting Financial Institution option in the form if your entity is:
Custodial institution: holds securities of their customers for the purpose of safekeeping, guards them and prevents them from being lost or stolen, for example assets or cash. Custodial institutions can keep them in either physical or digital form.
Depository institution: legally accepts money deposits from their customers, for example mortgage bank
Investment entity: does investing or provides investment managing service to third parties, such as investors.
Specified insurance company: any 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
Non-Reporting Financial Institution (NRFI) is different, choose this option if your entity is:
Government Entity, International Organisation or central bank, other than with respect to a payment that is derived from an obligation held in connection with a commercial financial activity of a type engaged in by a Specified Insurance Company, Custodial Institution, or Depository Institution established by a treaty or other instrument governed by international law
Broad participation retirement fund: provides retirement, disability, or death benefits, or any combination of the previously mentioned services
Narrow participation retirement fund: fund established to provide retirement, disability, or death benefits to beneficiaries who are current or former employees
Pension fund of a government entity
Any other low risk entity: possess a low risk of tax evasion. To find whether your company is considered a low risk entity please check the Official Journal of the European Union (OJ)
Exempt collective investment vehicle: regulated as a collective investment vehicle (for example mutual funds, ETFs), where the interests are held by or through individuals or entities that are NOT Reportable Persons.
Trust: trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trust is still a NRFI even if its trustee is a RFI and reports all the required information.
Qualified credit card issuer
Non-Financial Entity (NFE)
The CRS refers to Non-Financial Entities by their acronym, NFEs. It is essentially any entity that is not a Financial Institution. NFEs are then split into Passive NFEs or Active NFEs.
Active NFE refers to an entity with trading activities, whether state-owned or private. It’s an entity that operates an active trade or business with less than 50% passive income (gross) or has less than 50% assets that produce passive income, such as dividends and interest.
Choose an Active NFE option in the form if your entity is:
Active business: manufacturers, wholesalers, retailers, restaurants and bars, hotels, construction companies, health and social work
Central Banks: must satisfy Active NFE condition
NFEs in the process of liquidation
Non-profit company: must satisfy Active NFE condition
Choose the Other Active NFE option in the form if your entity is:
Publicly traded entities: corporations with its securities listed on stock exchange
Governmental Entities: must satisfy Active NFE condition (not applicable for France)
International Organisations: must satisfy Active NFE condition
Note: depending on the facts, a government entity, international organisation and central bank can be categorised as with a Non-Reporting Financial Institution or an Active NFE.
Passive NFE is an entity that is not considered an Active NFE. It is an entity where more than 50% of its income is said to be "passive" (dividends, rent, interest, capital gains, etc.) or when more than 50% of its assets generate passive income.
Choose Passive NFE option in the form if your entity is:
Family-owned property company
Investment fund (considered a passive NFE only when more than 50% of its income is passive)
Asset management company (considered a passive NFE only when more than 50% of its income is passive)
Passive NFEs that are Type B Investment Entities
Type B investment Entities are the special entities that are not considered a Financial Institution but conduct monetary operations in participating states.
They must satisfy two conditions:
The Gross Income test requires that the entity’s income must be primarily attributable (more than 50%) to investing in Financial Assets.
The Investment Entity must be ‘managed by’ a Custodial Institution, Depository Institution, Specified Insurance Company or a Type A Investment Entity. The ‘managed by’ test requires that the managing entity invest, administer or manage Financial Assets on behalf of other persons.
Choose Passive NFE (Type B Investment Entity) in the form if your company satisfies the outlined conditions.
Note: If you are still unsure of the entity type of your business, but you have a regular business that does not manage finances (except its own), does not manage other companies and does not belong to the government or foreign organisations, stick to Passive Non-Financial Entity.