Do CRS countries actually share information with each other?

[name]

I'd love to learn how exactly the system works. I know eventually these questions will be pointless. I'm curious about the current system


1. If I report my income as zero for many years as a tax resident of a EU country (lets call it X), I assume that would raise a red flag, right?
2. In this case would X taxman request information from all other CRS countries (including USA) about me, so they can verify I indeed had zero income?
3. Do CRS countries have a central database of domestic bank account information? If X contacts USA, will USA tell X how much money I have there and activity details?
4. When I'm becoming a non-tax resident, does X automatically request information from all CRS countries about me for the past n years? If I made a mistake in my tax filing, I assume they'd send me a tax bill with punishment?
5. If $100.000 enters my bank account in a CRS country every year (working as a contractor), would X automatically become aware of it, even if I don't tell my bank (or to the jurisdiction of the bank) that I live in X?

For reference, a lambo has more value than my net worth and I'm a non-EU non-US citizen.

 

[Martin Everson]

1. If I report my income as zero for many years as a tax resident of a EU country (lets call it X), I assume that would raise a red flag, right?

Not necessarily.

2. In this case would X taxman request information from all other CRS countries (including USA) about me, so they can verify I indeed had zero income?

No.

3. Do CRS countries have a central database of domestic bank account information? If X contacts USA, will USA tell X how much money I have there and activity details?

CRS countries store CRS data they receive from their local banks and FI's etc before forwarding to partner countries tax authority. USA is not part of CRS also.

4. When I'm becoming a non-tax resident, does X automatically request information from all CRS countries about me for the past n years? If I made a mistake in my tax filing, I assume they'd send me a tax bill with punishment?

No.

5. If $100.000 enters my bank account in a CRS country every year (working as a contractor), would X automatically become aware of it, even if I don't tell my bank (or to the jurisdiction of the bank) that I live in X?

No, unless bank is aware of indicia related to X.

 

[name]

@Martin Everson Are you sure?
If that's true, ev*ding taxes would be easy.
Get paid to a bank in the US.
Don't use your US bank from EU (cards, logins, mailing address).
Don't spend too much money.
Don't spend money if you can't show that its coming from your previous tax residency (or just pay taxes on the money you're spending)
If you want to spend a lot more money, move your tax residency to somewhere else and tell the new country that your money in US bank is tax free.

Really? This doesn't make sense to me. How can they be so inefficient?

 

[uplana]

Really? This doesn't make sense to me. How can they be so inefficient?

Sometimes it's not that complicated as it seems to be!

 

[Piano]

Sometimes it's not that complicated as it seems to be!

Are you sure about this ?

 

[Sols]

If that's true, ev*ding taxes would be easy.
Get paid to a bank in the US.
Don't use your US bank from EU (cards, logins, mailing address).
Don't spend too much money.
Don't spend money if you can't show that its coming from your previous tax residency (or just pay taxes on the money you're spending)
If you want to spend a lot more money, move your tax residency to somewhere else and tell the new country that your money in US bank is tax free.

Really? This doesn't make sense to me. How can they be so inefficient?

Look up FATCA. It's true the US hasn't signed up for CRS. That's because they already had FATCA from before which does pretty much the same thing.

There are older reports of US failing to reciprocate exchange of information under FATCA and while it's still not as efficient and reliable as CRS, relying on US non-compliance is increasingly risky. The US is getting better and better at reporting.

 

[KDX]

As others said, while your country may not be aware or even request reports, it would still be stupid to count on this not happening. All it takes 1 report from somewhere and now they know you have some structures/offshore bank accounts.

 

[name]

As others said, while your country may not be aware or even request reports, it would still be stupid to count on this not happening. All it takes 1 report from somewhere and now they know you have some structures/offshore bank accounts.

This sounds like "it takes 1 bullet from somewhere and now you're dead"
Your reply sounds too vague. Can you elaborate with some specifics?

 

[JackAlabama]

This sounds like "it takes 1 bullet from somewhere and now you're dead"
Your reply sounds too vague. Can you elaborate with some specifics?

The strategy "counting on report failures" is not a very solid one from the get go, especially since there are easy tweaks anyone can do to not worry about reporting any more.

 

[name]

Look up FATCA. It's true the US hasn't signed up for CRS. That's because they already had FATCA from before which does pretty much the same thing.

There are older reports of US failing to reciprocate exchange of information under FATCA and while it's still not as efficient and reliable as CRS, relying on US non-compliance is increasingly risky. The US is getting better and better at reporting.

Ok replace USA with another non CRS country. Point still stands. Looks easy if what Martin said is true. Is it really easy like that?

 

[KDX]

This sounds like "it takes 1 bullet from somewhere and now you're dead"
Your reply sounds too vague. Can you elaborate with some specifics?

If your government for some reason gets a report that you have a bank account in whatever offshore country, It wouldn't be crazy to say that they would start looking closer or put you on some list. There's also information sharing on incorporating offshore companies in certain jurisdictions afaik.

 

[name]

The strategy "counting on report failures" is not a very solid one from the get go, especially since there are easy tweaks anyone can do to not worry about reporting any more.

Fair enough. Can you give an example to an easy tweak?

 

[Sols]

Ok replace USA with another non CRS country. Point still stands. Looks easy if what Martin said is true. Is it really easy like that?

As long as you are uninteresting to your local tax authority, yes, you can get away with tax evasion this way. A lot of people buy flashy cars, big houses, invest in businesses, or do other things to draw attention. They are the main ones to get caught.

I'll break it down a bit further:

1. If I report my income as zero for many years as a tax resident of a EU country (lets call it X), I assume that would raise a red flag, right?

It might, especially if you are selected at random or based some criteria for an audit, and you're asked to explain your living situation. If it doesn't match with your income, then you're in trouble.

2. In this case would X taxman request information from all other CRS countries (including USA) about me, so they can verify I indeed had zero income?

The point with CRS is that there is no requesting. The information is there already. For non-CRS countries, they might be able to use the older system which used TIEA (Tax Information Exchange Agreement) treaties to request and receive information. But they can't go on TIEA fishing expeditions, they have to have a specific request based on some form of evidence or reasonable suspicion.

3. Do CRS countries have a central database of domestic bank account information? If X contacts USA, will USA tell X how much money I have there and activity details?

Sort of. Data collected under CRS goes from the banks to the relevant authority, and that authority shares the entirety of that database as it relates to each recipient country.

4. When I'm becoming a non-tax resident, does X automatically request information from all CRS countries about me for the past n years?

No.

If I made a mistake in my tax filing, I assume they'd send me a tax bill with punishment?

They would prosecute you and do whatever applicable law allows them to do, within reason. They might not send tax collectors or revoke your passport for a 1,000 EUR tax bill. But if it's a much larger sum, you might become interesting enough to harass even if you live abroad (especially if you live in a friendly nation).

5. If $100.000 enters my bank account in a CRS country every year (working as a contractor), would X automatically become aware of it, even if I don't tell my bank (or to the jurisdiction of the bank) that I live in X?

Maybe. If they suspect you're lying to them, they can report to multiple jurisdictions

For reference, a lambo has more value than my net worth and I'm a non-EU non-US citizen.

Then most likely, you are not going to be interesting and your scheme will work for now.

*****

However, what's missing here is the banks. While they have no moral issues with tax evaders, they have regulatory issues with them. The bank you hoard the money in might ask you for tax returns that match your income. If you relocate to a tax haven and bring your money there, the new bank there might (also) ask for tax returns that match your income.

If you can't provide tax returns, the bank might refuse or terminate the relationship. Worst case, they even submit an SAR (Suspicious Activity Report) which can trigger law enforcement action. But it's no secret that most jurisdictions have more SARs than they can possibly investigate right now. But SARs don't go away quickly and can be picked up at a later date.

The risk of that depends on what banks you use, where they are, currencies involved, and your overall risk profile.

 

[cyprusbanker]

What about slowly move the money in from a company setup abroad. That would possibly not rise ant flags anywhere.

 

[Sols]

What about slowly move the money in from a company setup abroad. That would possibly not rise ant flags anywhere.

Tax Evasion 101. Every half-decent transaction monitoring tool set up by someone competent is configured to catch and detect that kind of behavior eventually. The trick would be to finish before you trigger the checks (based on time and amount).

 

[name]

Look up FATCA. It's true the US hasn't signed up for CRS. That's because they already had FATCA from before which does pretty much the same thing.

There are older reports of US failing to reciprocate exchange of information under FATCA and while it's still not as efficient and reliable as CRS, relying on US non-compliance is increasingly risky. The US is getting better and better at reporting.

FATCA 11 Years Later – US Still the Tax Haven?
Is the information here true?
TLDR Individual brokerage accounts aren't reported