Dutch FGR Fund (Fondsen Voor Gemene Rekening)


Who is the Reporting Party for a Dutch FGR fund?

Missing 3 party file

The FGR (Fund for Mutual Account) is not a legal entity. It is created by an agreement between the Manager, the Depositary and investor Participant(s). The agreement obliges the Manager to invest and manage the assets for the joint account of the Participant(s). The legal ownership of the FGR’s assets is held by a separate Depositary.

A FGR is established by agreement between the Manager and the Depositary. Such an agreement typically deals with the name and seat of the FGR, its purposes, the subscription, transferability and redemption of participations and the possible liquidation of the FGR. Furthermore, different agreements can be established with relevant parties such as banks and brokers.

Typical service providers that are involved with a FGR are the following:
  • The Manager (or “beheerder”) of the fund that determines, inter alia, the investment strategy and that has the ultimate control of the fund
  • The Depositary (or “bewaarder”) that is the legal owner of the assets of the FGR and that runs the day‐to‐day operations of the fund, as well as calculating and determining the net asset value and processing subscriptions and redemption
  • The bank for the initial transfer of the assets and the payment of fees
  • The custodian / broker for the effective investments
  • The auditor for auditing the accounting data
  • The administrator for the administration, registrar and transfer agency services

The FGR is responsible for reporting on its reportable investor Participants

Contractual Dutch FGRs are treated under FATCA as legal arrangements. For the Common Reporting Standard, the FGR meets the activities to be categorised an Investment Entity. As such, the FGR is a reporting Financial Institution with reporting obligations.
Missing 3 fgr participants file

The FGR's Participants are the Financial Accounts of the FGR
For CRS purposes, the FGR's Financial Accounts are defined equity and debt interest in the fund. Equity Interest in the FGR is held by the investor Participants in the fund. The FGR must report on its Financial Accounts held by reportable Account Holders.

FGR prospectus generally for example denotes:

  1. The Fund is considered to be a reporting financial institution under the CRS and the Fund will be required to disclose to the competent tax authority certain confidential information in relation to the Participant, including but not limited to the Participant's name, address, tax identification number and certain information relating to the Participant's investment.

  2. The competent tax authority will be required to automatically exchange information as outlined above with the Participating Jurisdiction Authorities.

There is no de minimis threshold of equity interest to be a Financial Account
Do not confuse controlling persons (25% shares) of NFEs with Equity Interest in funds. Every single Participant in the FGR is considered as the Account Holder having a Financial Account. If the fund does not report on those Account Holders, then the fund is guilty of circumventing the reporting requirements and subject to sanctions in the CRS.

Collective Investments do not qualify for Active holding NFE
The CRS specifically highlights that Collective Investments are Investment Entities. See Question 2, page 9 of the OECD FAQ on CRS :

A holding company will also meet the definition of Financial Institution, specifically, Investment Entity, if it functions as or hold itself out as an investment fund, private equity fund, venture capital fund, and similar investment vehicles if investors participate (either through debt or equity) in investment schemes through the holding company. See Commentary to Section VIII, paragraph 20.

What are the reporting obligations of the Depositary?

Missing fgr depositary file

The Depositary is not the beneficial owner of the FGR
A Depositary (bewaarder) that holds the legal ownership of an investment portfolio of an investment fund (beleggingsfonds) for and on behalf of the investors within the meaning of the Financial Supervision Act (Wet op het financieel toezicht) is not considered to be the Account Holder or a Financial Institution, provided that the investment fund itself is treated as the account holder.

The Depositary, usually a Dutch STAK Foundation, holds the assets in its own name as the legal beneficial owner. However, the depository rights to the STAK is the FGR because the economic benefits of the STAK belong to the FGR. These economic rights of the STAK are given to the FGR by means of contractual depository certificates. This is exlained here.

For FATCA purposes, a FGR is a passive NFE. However for CRS a FGR is an Investment Entity because its assets are managed by another Financial Institution (the manager) and it earns most of its income from Financial Assets. The depository rights of the STAK are for the FGR fund. Therefore the STAK will not report on the FGR because a Financial Institution (Investment Entity) is a non-reportable person. Therefore the STAK has no CRS reporting obligations. All the CRS reporting obligations is done by the FGR.

Why does the Depositary not report on the FGR fund or look-through the fund?
The Depository is an Investment Entity. However the Account Holder (equity interest) of the Depositary is the FGR fund. There are five types of non reportable persons, namely (i) Regularly traded entities, (ii) Government entities, (ii) International organisations, (iv) Central banks, and (v) Financial Institutions. As the FGR is a Financial Institution it is a non reportable person. Therefore the Depositary does not have any obligations to report on the FGR. The reason why Financial Institutions are non reportable persons are because the Financial Institution will report on their Account Holders. This is to prevent duplicate reporting.

What are the reporting obligations of the Investment Manager?

Missing 3 fgr manager file

The investment manager has the reporting obligations for the fund The investment manager of the FGR has the reponsibility to report for the FGR. The reporting will be done on the investor Participants of the FGR. The managers may appoint a third party, not necessarily in the same jurisdiction, to report on their behalf. However, the managers retain the legal obligations of the reporting. Althought the FGR is not a taxed entity, it is resident for CRS urposes where the investment managers are resident. The FGR will not report on Participants that are resident in the same jurisdiction as the managers.

No reporting on themelves
The Investment Manager is an Investment Entity. CRS Commentary page 175 Par(60) states that any Equity or Debt Interest in an Investment Entity is considered a Financial Account. However, Equity and Debt interests in an Entity that is an Investment Entity solely because it is an investment advisor, or an investment manager, are not Financial Accounts. Therefore the investment manager of the FGR does not report on its own shareholders.

Who reports if there is a chain of Financial Intitutions distributing or holding the investor Participation units?

Missing fgr fi file

The Financial Institution closest to the ultimate investor will report. If the trust is a NFE (or any other NFE entity holds the units), the FGR will have to report on the controlling persons of the NFE.

What if a nominee, on behalf of someone else, is a Participant?

Missing nominee file
Click on the cartoon for an explanation of who is responsible for reporting when a nominee is used