Who Is An Equity Interest Holder Of A Trust Qualifying As A Reporting FI

Understanding who counts as an equity interest holder is central to how the Common Reporting Standard (CRS) operates for trusts that qualify as Reporting Financial Institutions (FIs). In this episode, we break down the legal definitions, explain why this classification matters, and clarify a common area of confusion around look-through rules.

🔎 The CRS Framework: Why Equity Interest Holders Matter

At the heart of the CRS is the obligation imposed on Reporting Financial Institutions—including certain trusts—to identify their financial accounts and determine whether those accounts are reportable accounts.

This identification process determines who gets reported, to which tax authority, and why.

🧾 What Counts as a “Financial Account”?

Under Section VIII.C.1 of the CRS, a Financial Account includes, in the case of an Investment Entity, any equity or debt interest in the FI.

➡️ For a trust that qualifies as an FI, this means the focus shifts to who holds an equity interest in the trust.

👥 Who Is an Equity Interest Holder in a Trust?

The CRS provides a specific definition:

An Equity Interest in a trust is considered to be held by:

• Any person treated as a settlor

• Any person treated as a beneficiary (of all or part of the trust)

• Any other natural person exercising ultimate effective control over the trust

These persons are treated as account holders for CRS purposes.

🧠 Why This Identification Is Critical

Correctly identifying equity interest holders determines:

• Whether an account is reportable

• Which persons must be assessed as reportable persons

• The scope of the trust’s CRS reporting obligations

Errors at this stage can lead to over-reporting, under-reporting, or misclassification.

🇨🇭 Swiss CRS Guidance as an Example

Early CRS guidance issued by the Swiss Federal Tax Administration closely tracked the CRS itself. It confirmed that, for a trust qualifying as an FI, equity interest holders are limited to:

• The settlor

• The beneficiary

• Any other natural person exercising ultimate effective control

No additional categories were introduced.

🚫 No Look-Through for Reporting FIs

A key clarification often missed in practice:

• Equity interest account holders are not subject to a look-through approach where the account holder is a Reporting FI

• The only exception is where the entity is a non-participating investment entity, which is treated as a Passive NFE

Outside that narrow exception, reporting stops at the FI level.

🎯 Key Takeaway

For trusts that qualify as Reporting Financial Institutions:

• Equity interest holders are settlor(s), beneficiary(ies), and natural persons with ultimate effective control

• These persons are treated as account holders

• No look-through applies when the account holder itself is a Reporting FI

• Proper classification is essential to getting CRS reporting right

Understanding this distinction is critical to avoiding incorrect look-through assumptions and ensuring accurate, defensible CRS compliance.