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  1. Educate

    Educate Member Entrepreneur

    Since most countries are under OECR AEoI Common Reporting Standard regulation or FACTA there is information they send at end of December every year to respective jurisdictions.

    So I am interested which law and paragraph governs WHAT KIND OF INFORMATION has to be sent to respective jurisdictions at end of year?

    Specifically - do they only send account balances or TURNOVER as well?

    Assumptions won't do, there has to be a law and paragraph that explicitly says which information is exchanged.

    Any professional here has this info maybe?
     
    Admin likes this.
  2. Martin Everson

    Martin Everson Offshore Consultant Business Angel

    Read the FATCA and CRS agreements. For example in FATCA it is right there in the Article 2 I gave you in below thread. It is clear as day in black and white what information is exchanged if you even bothered to read any of it. For CRS read the agreements for your OWN country.

    See below thread

    Do I understand that US financial institutions DO NOT report non-us person deposits in them?

    i.e for UK FATCA agreement it states clearly:

    In the case of the United States, with respect to each United Kingdom Reportable Account of each Reporting U.S. Financial Institution: (1) the name, address, and date of birth of any person that is a resident of the United Kingdom and is an Account Holder of the account; (2) the account number (or the functional equivalent in the absence of an account number); (3) the name and identifying number of the Reporting U.S. Financial Institution; (4) the gross amount of interest paid on a Depository Account; (5) the gross amount of U.S. source dividends paid or credited to the account; and (6) the gross amount of other U.S. source income paid or credited to the account, to the extent subject to reporting under chapter 3 or 61 of subtitle A of the U.S. Internal Revenue Code.
     
  3. Martin Everson

    Martin Everson Offshore Consultant Business Angel

    btw I am a international tax specialist so take from that what you want. But good luck ignoring hard facts, all the way down to exact paragraphs and links to official documents I have given you in other threads.
     
  4. Admin

    Admin Forum Moderator The Forum Cleaner

    Thank you very much @Martin Everson for sharing the information with us.

    It sumes it all pretty much up and only confirms that if someone believe that they won't get reported ther are wrong.
     
  5. Educate

    Educate Member Entrepreneur

    Thanks for answers, could you please clarify the question below then?

    I must note that payment processors like PayPal DO REPORT according to CRS and FACTA:
    >>>>>> PayPal Reporting Rules

    Note that they report:

    • your name;
    • your address;
    • your country (or countries) of (deemed) tax residence;
    • your Tax Identification Number(s) issued by your country or countries of tax residence, and, where applicable, your U.S. Tax Identification Number (U.S. TIN);
    • your place and date of birth;
    • your account number (or substitute account number, identifying your funds held);
    • your account balance or value as at 31 December of any year during which the account is held;
    Pay attention to last line. It is clear that PayPal as an EMI is reporting only the account balance and not the turnover. So as long as you have 0$ at end of year or a little sum, the respective authority will see that sum is little and not bother. I believe this logic also applies to Revolut and other EMIs.

    This is the CRS EU directive that PayPal is basing the exchange on:
    EUR-Lex - 32014L0107 - EN - EUR-Lex

    Scroll down to

    SECTION I: GENERAL REPORTING REQUIREMENTS

    Subject to paragraphs C through E, each Reporting Financial Institution must report to the competent authority of its Member State the following information with respect to each Reportable Account of such Reporting Financial Institution:
    1. the name, address, Member State(s) of residence, TIN(s) and date and place of birth (in the case of an individual) of each Reportable Person that is an Account Holder of the account and, in the case of any Entity that is an Account Holder and that, after application of the due diligence procedures consistent with Sections V, VI and VII, is identified as having one or more Controlling Persons that is a Reportable Person, the name, address, Member State(s) and (if any) other jurisdiction(s) of residence and TIN(s) of the Entity and the name, address, Member State(s) of residence, TIN(s) and date and place of birth of each Reportable Person;
    2. the account number (or functional equivalent in the absence of an account number);
    3. the name and identifying number (if any) of the Reporting Financial Institution;
    4. the account balance or value (including, in the case of a Cash Value Insurance Contract or Annuity Contract, the Cash Value or surrender value) as of the end of the relevant calendar year or other appropriate reporting period or, if the account was closed during such year or period, the closure of the account;
    ^^^
    This is the big one. It says balance or value and they also notify if the account was closed.
    So there is no use opening and closing accounts, they will still get reported.

    5. in the case of any Custodial Account:
    (a) the total gross amount of interest, the total gross amount of dividends, and the total gross amount of other income generated with respect to the assets held in the account, in each case paid or credited to the account (or with respect to the account) during the calendar year or other appropriate reporting period; and

    (b) the total gross proceeds from the sale or redemption of Financial Assets paid or credited to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Financial Institution acted as a custodian, broker, nominee, or otherwise as an agent for the Account Holder;
    ^^^
    Not totally sure which accounts this applies to? It says Custodial Accounts. The law says: "The term “Custodial Account” means an account (other than an Insurance Contract or Annuity Contract) which holds one or more Financial Assets for the benefit of another person.". So...maybe this would be stuff like Revolut? I'm not totally sure. Anyone?

    6. in the case of any Depository Account, the total gross amount of interest paid or credited to the account during the calendar year or other appropriate reporting period; and
    ^^^
    EMIs and Payment processors like PayPal do not fit the "depository account" definition, do they?

    7. in the case of any account not described in subparagraph A(5) or (6), the total gross amount paid or credited to the Account Holder with respect to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Financial Institution is the obligor or debtor, including the aggregate amount of any redemption payments made to the Account Holder during the calendar year or other appropriate reporting period.
    So if you are not a custodial account, then this gets reported pretty much? So what is this gross amount? Is that the leftover balance at end of 31 of December?


    Putting 2 and 2 together it seems that PayPal does NOT report annual turnover, but reports EVERYTHING else as requested by law. PayPal won't do anything incorrectly, so would it be safe to assume THIS INFO is exactly what other EMIs like PayPal would report? Think Paysera, N26, Revolut, etc... So...the strategy of emptying accounts before the end of year would still work?
     
    auric likes this.
  6. Martin Everson

    Martin Everson Offshore Consultant Business Angel

    So the premise of your question boils down to believing turnover on an account wont be reported by PayPal and this is backed up by reference to their reporting rules document. So in theory lets say for example a person has 400,000 go through their PP account but by December 31st they make sure their balance is zero then this way they hope what is reported is a snapshot on December 31st showing zero and hence defeat CRS and any tax liability in their home country. Lets look further at what PP should be reporting:

    So the below definitions are taken from same document.

    --quote start--
    The term “Financial Account” means an account maintained by a Financial Institution, and includes a Depository Account, a Custodial Account.

    The term “Custodial Account” means an account (other than an Insurance Contract or Annuity Contract) which holds one or more Financial Assets for the benefit of another person.

    --quote end--

    A Depository Account is basically any account that allows money to be deposited and withdrawn. PayPal is a Luxembourg licensed bank and not a PSP and the account it gives customers is NOT a Deposit Account in EU but an e-money account hence has no deposit guarantee (i.e the 100,000 euro protection). See below for their confirmation.

    PayPal

    ---quote start
    Since the service is limited to E-money, which does not qualify as a deposit or an investment under Luxembourg law , you are not protected by the Luxembourg deposit guarantee
    ----quote end

    To confirm, PP is a bank giving electronic money accounts (e-money accounts). The same sort of bank accounts Satabank offers which are also e-money accounts with no deposit protection given as they are not deposit accounts. However, CRS allows for such undefined accounts existing in banks and in section 7 of general reporting requirements. It says the following:


    ---quote start--
    SECTION I

    GENERAL REPORTING REQUIREMENTS
    7.

    in the case of any account not described in subparagraph A(5) or (6), the total gross amount paid or credited to the Account Holder with respect to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Financial Institution is the obligor or debtor, including the aggregate amount of any redemption payments made to the Account Holder during the calendar year or other appropriate reporting period.

    ----quote end---

    So according to the rules the aggregate credits to a PP account should be reported as a PP account is neither account type described in subparagraph 5 or 6. However PP sees it differently and if they say they are not going to report just the below I guess you can believe them.

    "your account balance or value as at 31 December of any year during which the account is held"
     
  7. Martin Everson

    Martin Everson Offshore Consultant Business Angel

    Furthermore, what you suggest is the OECD wasted millions of euros on the AEOI project as the loophole is for clients at banks to just take your money out before December 31st each year and then deposit it back the next day.

    Perhaps PP has a different definition of account value. Perhaps they take account value to mean the amount credited during the year which would make sense as they have stated it separately from account balance.

    "your account balance or value as at 31 December of any year during which the account is held"
     
  8. Educate

    Educate Member Entrepreneur

    I'm not suggesting there is a loophole. There isn't one, because if you take out the money from banks before end of year, you have to have it transferred somewhere. Nobody will take out millions in cash. All the big money will go to another bank, which in turn would then report the funds instead of the first bank. So either way some institution is left with the money. Since pretty much everyone has joined CRS, then any of these institutions will report. Doesn't it make sense?

    Do you assume that account value, keyword, "value" includes the turnover?

    One loophole that I see for EU citizens is to transfer funds to US broker and buy securities with it. Broker would also have 0$ in fiat, but would hold securities. Where is a fault in this plan?
     
  9. Martin Everson

    Martin Everson Offshore Consultant Business Angel

    I stand by what I posted in regards to subparagraph 7 above. I think PP has given wrong information on reporting. If you use PP then ask them directly for a reaction on subparagraph 7. I want to know how they are getting around that and using what seems like subparagraph 6 instead for their reporting.

    In terms of transfer to US broker that would not work either unless you are paid no interest from bonds and no dividends from stocks you hold in your custody account with the broker. FATCA article 2 subparagraph B(1-6) states:

    b) In the case of the United States, with respect to each United Kingdom Reportable Account of each Reporting U.S. Financial Institution:

    (1) the name, address, and date of birth of any person that is a resident of the United Kingdom and is an Account Holder of the account; (2) the account number (or the functional equivalent in the absence of an account number); (3) the name and identifying number of the Reporting U.S. Financial Institution; (4) the gross amount of interest paid on a Depository Account; (5) the gross amount of U.S. source dividends paid or credited to the account; and (6) the gross amount of other U.S. source income paid or credited to the account, to the extent subject to reporting under chapter 3 or 61 of subtitle A of the U.S. Internal Revenue Code.



    The definition of a United Kingdom Reportable account is under Article 1 (CC). Same for all Model 1 FATCA agreements for 99% of countries. However remember custodial accounts are reported also.

    https://www.treasury.gov/resource-c...es/Documents/FATCA-Agreement-UK-9-12-2012.pdf

    cc) The term “United Kingdom Reportable Account” means a Financial Account maintained by a Reporting U.S. Financial Institution if: (i) in the case of a Depository Account, the account is held by an individual resident in the United Kingdom and more than $10 of interest is paid to such account in any given calendar year; or (ii) in the case of a Financial Account other than a Depository Account, the Account Holder is a resident of the United Kingdom, including entities that certify that they are resident in the United Kingdom for tax purposes, with respect to which U.S. source income that is subject to reporting under chapter 3 or chapter 61 of subtitle A of the U.S. Internal Revenue Code is paid or credited.


    For the removal of any doubt a Financial Account includes a Custody Account where you hold shares and bonds. This is defined in Article 1 (s)(2).


    Also EU taxmen such as HMRC in UK has access to all PSP's, PayPal, ebay, card and wire transfers etc. Have a read of this news article. The taxman is not f##king around be warned. You may want to find out news local to you to find out how your government taxman spies on you. As you can see 870,000 potential investigations is a lot to get through but the UK has up to 25 years to pursue you for unpaid taxes so no rush :)

    HMRC spies on what you buy and sell online with eBay and others thanks to new law | This is Money

    Last year, around 870,000 people — including people making small sums online — failed to submit self-assessment returns before the January 31 deadline. The number for 2017 is expected to top a million.

    Money Mail understands that HMRC has five major data analysis centres across Britain. According to its website, it has been hiring 'data analysts' and 'intelligence analysts' on salaries between £27,000 and £38,000.

    Insiders say these officials can obtain detailed files on you, which include information on where you holiday and even how much cash you got for selling that old dining table on eBay.


    They claim some of this comes from social media sites such as Facebook and business network LinkedIn.
     
  10. Educate

    Educate Member Entrepreneur

    Regarding the dividends - so what you are saying is that IF you buy non-dividend paying stock like Berkshire Hathaway and just hold that stock in US broker then the sum of this stock won't get reported? So this might actually work?
     
  11. Martin Everson

    Martin Everson Offshore Consultant Business Angel

    Yes it theory it might work but in reality it won't. EU governments have access to all Paypal data. See article I posted in my previous link.

    You see due to terrorism in Europe EU countries compile massive secret databases on their citizens. They need to know not for tax purposes but security purposes all countries you visit. Where you spend and receive money from and who you liase with in social media, meta data from apps such as whatsapp, card spending, phone records etc etc etc. They can tap into these databases and build a financial lifestyle picture on yourself.

    So they already know all your PayPal details and transactions as they have full access. You would just be wasting your time moving the assets to a broker as the digital trail remains. You would just be moving your situation from basic tax evasion to a more serious case of money laundering.
     
  12. Educate

    Educate Member Entrepreneur

    No, look here. You make transfers to stock brokers in US and don't keep fiat there, but buy Berkshire Hathaway for the entire of your sum. So now you hold only Berkshire Hathaway stock. It doesn't pay you dividends, so as long as you sell there is no profit on stock only appreciation.

    So now when end of year reporting comes, you holding the stock and in the specific amount does not get reported, right?

    Well, if this is true, then it is all a matter of time and best idea is to renounce citizenship, so no tax gov can take you? And if they would do this, wouldn't have of population be taken for a ride?
     
  13. Martin Everson

    Martin Everson Offshore Consultant Business Angel

    The government already knows all your PayPal transactions. It's game over before you moved the money from PayPal. What are you talking about now? So they have all your PayPal transactions and you then want to move the money to a brokerage account in US. How does that make sense.

    HMRC spies on what you buy and sell online with eBay and others thanks to new law | This is Money

    They can also see customers' online shopping and sales receipts with payment firms such as PayPal and Worldpay.

    Under new laws, these websites can now be forced to hand over millions of customers' details whenever the taxman asks.

    Officials don't need any evidence that you have done something wrong to see your data, nor need they ask your permission or inform you that they're snooping.

    HMRC can feed this information into a sophisticated new computer system that flags up anyone who appears to be evading tax.
     
  14. Educate

    Educate Member Entrepreneur

    I'm not from UK. In small countries like Serbia do you really think government has this info?

    Again, wouldn't solution be to get a passport in tax free country then?
     
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  15. Martin Everson

    Martin Everson Offshore Consultant Business Angel

    Serbia I very much doubt it...lol. Germany, France, UK or any other Western European country 100%. The solution is to move to a tax free country or territorial tax country in Europe. Passport does not matter it has no benefit in CRS which is all about residency not nationality.

    The following countries in Europe or close by have territorial tax programs (i.e you don't pay tax on foreign earning as resident non-domicile in that country):

    France
    Netherlands
    UK
    Ireland
    Malta
    Italy
    Portugal
    Switzerland
    Georgia

    Tax free countries in Europe:

    Monaco

    This is NOT a complete list by any mean. However it does let you know that there are options out there. I have not yet investigated Eastern Europe for tax beneficial program but will do. Basically you have plenty of choices according to you budget of where to live in Europe and not pay taxes on foreign earnings. Be tax compliant!
     
    blueweb likes this.
  16. Martin Everson

    Martin Everson Offshore Consultant Business Angel

    I forgot Gibraltar also has territorial tax program also.
     
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  17. blueweb

    blueweb Corporate Services Mentor Group Business Angel

    great thread a wealth of good information. Thanks guys ;)