Non-Financial Foreign Entity (NFFE)

Banks must sort entity customers into types. A foreign company outside the financial sector is an NFFE, and its status depends on what it earns. An active NFFE gets most of its income from real business such as selling goods or services, or holds assets for such business, and is mostly left alone. Listed companies and government bodies also qualify as active. A passive NFFE earns mainly investment income, such as dividends, interest and rent, or is a shell holding assets. For these, the bank must identify the controlling persons and report any who are US persons, or in CRS, any who live in a reportable country. Under CRS the equivalent terms are active and passive non-financial entity. The classification is normally made through a signed declaration. Passive entities are the usual way to hold assets without naming the owner, so that label triggers a look-through to the people behind them.

A company that builds software and earns most of its income from customer contracts opens an account. It declares itself an active NFFE and the bank files its form. A second company, set up only to hold shares and rental property, is passive, so the bank collects details and tax residence for its two owners.