Passive non-financial entity

Under the CRS, an entity that is not a financial institution and mainly earns passive income such as interest, dividends or rent.

In practice

Many holding and asset-holding companies of a family are passive entities under the CRS. For them, banks report not only the account but also the controlling persons with their tax residences. In practice, the family office should record the CRS classification of each company and complete the self-certifications for the banks consistently. Otherwise, different classifications at different banks lead to queries and, in the worst case, to incorrect reports.

Distinctions and common mistakes

A holding company can be an active or a passive entity depending on its activity; what matters is its income and assets, not its name. A typical mistake is to classify family foundations as passive automatically, although they may qualify as investment entities and therefore as financial institutions.

Related terms

Controlling person (CRS)

Under the CRS, the natural person who controls a passive non-financial entity – for trusts and foundations in particular the settlor or founder, the governing bodies, the protector and the beneficiaries.

Common Reporting Standard

The OECD's global standard for the automatic exchange of information on financial accounts.

Mentioned in these guides

• CRS classification of family structures, step by stepFinancial institution, active or passive NFE? How holdings, foundations and trusts are classified for AEOI/CRS – with a decision path and an example.