Just how much of an obstacle is AEOI/CRS?

[CanadaOffshore93]

Hey all

I'd like to start a discussion on the true effectiveness of AEOI/CRS.

While at first blush the CRS seems like its a total roadblock to stashing assets offshore, I think the reality is quite different. Per my research, there seems to be many ways one can avoid CRS reporting (i.e., proxy residency, U.S non-participation and other non-participating jurisdictions, real estate not covered, active vs passive NFES, and trusts as self-reporting FFIs).

Did the CRS really change anything? Is it really just a smokescreen that one must just find a way around? Has it damaged the offshore industry (if it was effective, one would expect it to have done so).

What does everyone think?

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Sorry if this topic has been covered in other threads. I thought it would be helpful to ask this question in one thread as it seems a lot of people are asking questions about the CRS, but not getting straight to the point -- can you get around it, and how feasible is it to do so?

 

[wellington]

Don't believe people are trying to get around it (evade), well perhaps the crypto bros...

People are instead finding legal methods to structure their setups, so as to be reported without issue, whilst also reducing their tax requirements (within the law).

CRS itself isn't and issue as far as I see it.

 

[Martin Everson]

What does everyone think?

Anyone with real money and CRS concerns just relocated abroad to a tax free country. Case closed.

This certainly happened with the Swiss bankers I talked too. Client movement in 2014 was quite substantial one told me.

 

[CanadaOffshore93]

Anyone with real money and CRS concerns just relocated abroad to a tax free country. Case closed.

This certainly happened with the Swiss bankers I talked too. Client movement in 2014 was quite substantial one told me.

Even outside of changing residency/proxy residency, it seems that the CRS has its flaws.

The most interesting thing I've read about concerns trust structures as self-reportable entities. I was reading that many of these entities just misinform authorities of their ultimate beneficial ownership and get away with it, as they report themselves and banks do not have a responsibility to report their info. This makes me curious about such disguised entities generally. I can't see why one cannot simply disguise an entity to such an extent that it passes as a resident corporation (for example) and therefore is not reportable.

 

[GrumpyMess]

Anyone with real money and CRS concerns just relocated abroad to a tax free country. Case closed.

Are there any left beside of UAE? I highly doubt.

Even outside of changing residency/proxy residency, it seems that the CRS has its flaws.

The most interesting thing I've read about concerns trust structures as self-reportable entities. I was reading that many of these entities just misinform authorities of their ultimate beneficial ownership and get away with it, as they report themselves and banks do not have a responsibility to report their info. This makes me curious about such disguised entities generally. I can't see why one cannot simply disguise an entity to such an extent that it passes as a resident corporation (for example) and therefore is not reportable.

Unfortunately, there is no reliable solution for that. You can't be sure that one day the bank don't report you to the country from which you wanted to hide.

 

[CanadaOffshore93]

I still fail to see how any system of AEOI can be comprehensive enough to counter disguised entities.

I am still studying and learning about this subject matter, but something tells me that the CRS is ineffective when confronted with sufficient complexity.

If the bank is presented with a corporation owned by another corporation resident in an offshore jurisdiction that is then owned via a trust in a second offshore jurisdiction (lets keep in mind we can a lot more complex than this). What is the bank going to do? Refuse the corporation as a customer? Must the bank determine the UBO of every customer it deals with as per the CRS?

 

[wellington]

If the bank is presented with a corporation owned by another corporation resident in an offshore jurisdiction that is then owned via a trust in a second offshore jurisdiction (lets keep in mind we can a lot more complex than this). What is the bank going to do? Refuse the corporation as a customer? Must the bank determine the UBO of every customer it deals with as per the CRS?

UBO is only useful if the company doesn't have substance, i.e a legitimate organisation with employees, clients, goods/services is a corporation, and its UBO(s) is irrelevant.

A Shell corp or pass through corp is where UBO's become important.

IMO.

 

[CanadaOffshore93]

UBO is only useful if the company doesn't have substance, i.e a legitimate organisation with employees, clients, goods/services is a corporation, and its UBO(s) is irrelevant.

A Shell corp or pass through corp is where UBO's become important.

IMO.

Sorry for that. I should have made clear I am referring to shell corporations.

When asked the corporation can just say that it is owned by the other corporation, which is then owned by the trust, etc.

My question still stands: what is the bank going to do if presented with sufficient complexity whereby it cannot determine UBO?

 

[wellington]

Sorry for that. I should have made clear I am referring to shell corporations.

When asked the corporation can just say that it is owned by the other corporation, which is then owned by the trust, etc.

My question still stands: what is the bank going to do if presented with sufficient complexity whereby it cannot determine UBO?

In most cases they have risk levels and they’d be concerned it was a money laundering vehicle and refuse service

Or tax evasion vehicle…

 

[chaltron]

Generally most banks asks you to present a self-reporting CRS form, where you indicate the country of residence or where it has the permanent establishment and the tax ID.

In almost all cases banks also have CRS indicia policies that establishes to where they should report even if there is a complex structure. It's not uncommon either that banks do over-reporting to multiple cuntries, like to your place of birth even if you do not currently reside there.

While trusts could be useful for asset protection, depending where you live they could have different tax treatment. Generally the reportable person is the trustee, but in this case you most likely as a setllor will actually lose control and administration of your assets.

 

[CanadaOffshore93]

Generally most banks asks you to present a self-reporting CRS form, where you indicate the country of residence or where it has the permanent establishment and the tax ID.

In almost all cases banks also have CRS indicia policies that establishes to where they should report even if there is a complex structure. It's not uncommon either that banks do over-reporting to multiple cuntries, like to your place of birth even if you do not currently reside there.

While trusts could be useful for asset protection, depending where you live they could have different tax treatment. Generally the reportable person is the trustee, but in this case you most likely as a setllor will actually lose control and administration of your assets.

Thanks for this!

 

[wellington]

Just to point out in-case it hasn't been observed already (as you appear to be doing a research piece).

This forum or rather my observations to-date, doesn't encourage tax evasion and/or money laundering.

In-fact many times when 'noobs' arrive and start asking questions that obviously appear to be with intention, the community openly expose their line of thinking and/or tell them to act within the law and report or don't dig bigger holes.

- Seen that on two occasions.

This forum is more about legal tax structuring.

 

[CanadaOffshore93]

Just to point out in-case it hasn't been observed already (as you appear to be doing a research piece).

This forum or rather my observations to-date, doesn't encourage tax evasion and/or money laundering.

In-fact many times when 'noobs' arrive and start asking questions that obviously appear to be with intention, the community openly expose their line of thinking and/or tell them to act within the law and report or don't dig bigger holes.

- Seen that on two occasions.

This forum is more about legal tax structuring.

Would just like to clarify. I am not doing a 'research piece.'

I am just trying to learn more about the offshore world for my own benefit and potentially the benefit of others. Thank you.

 

[Sols]

The gist of it is that, at the core, CRS/AEOI is based on beneficial ownership. You will end up reported — unless you cease to be a beneficial owner.

That is how trusts, foundations, and similar arrangements can be set up. By surrendering ownership or control of an asset to someone or something else, the settlor or original owner no longer is a beneficial owner. Where it gets tricky is how to return the assets or profits from the assets to the settlor/original owner without in that process effectively making the person a beneficial owner.

There are several legal ways to accomplish this, which are highly customised based on each client's situation.

Most have simply accepted CRS/AEOI as a fact now and either paid up their taxes or relocated to one of many tax havens or low-tax jurisdictions that are happy to take them in.

 

[Martin Everson]

Are there any left beside of UAE? I highly doubt.

They exist here in Caribbean I live in one.

I can't see why one cannot simply disguise an entity to such an extent that it passes as a resident corporation (for example) and therefore is not reportable.

So your thinking of committing fraud?

 

[CanadaOffshore93]

They exist here in Caribbean I live in one.



So your thinking of committing fraud?

I am not thinking of committing fraud. I am simply exploring ways that one can get around the CRS.

Is there really such a difference between proxy residency and a sufficiently disguised entity? One is lying is both instances.

The gist of it is that, at the core, CRS/AEOI is based on beneficial ownership. You will end up reported — unless you cease to be a beneficial owner.

That is how trusts, foundations, and similar arrangements can be set up. By surrendering ownership or control of an asset to someone or something else, the settlor or original owner no longer is a beneficial owner. Where it gets tricky is how to return the assets or profits from the assets to the settlor/original owner without in that process effectively making the person a beneficial owner.

There are several legal ways to accomplish this, which are highly customised based on each client's situation.

Most have simply accepted CRS/AEOI as a fact now and either paid up their taxes or relocated to one of many tax havens or low-tax jurisdictions that are happy to take them in.

Very, very interesting. Thanks for this!

So are you saying that trusts can be set up such that beneficial ownership is surrendered but yet somehow the settlor is able to retain some control and benefit of the assets? This seems paradoxical to me, yet I would not be surprised if this really is the case.

I am no expert on the CRS, but I do know that some trusts are exempt.

 

[Martin Everson]

I am not thinking of committing fraud.

Glad to hear this

 

[JackAlabama]

Are there any left beside of UAE? I highly doubt.


Unfortunately, there is no reliable solution for that. You can't be sure that one day the bank don't report you to the country from which you wanted to hide.

Yes, there are many. It largely depends on your personal taste and budget.
Also territorial tax places, non-dom regimes and places offering special tax deals/long tax breaks what not need to be counted and this increases the choice massively.

 

[GrumpyMess]

If a person lives in a country A, has a bank account in a country B and after some time gets a residency in a country B, will the bank from that country try to make some further investigations to determine an additional residency, or it just marks the person as resident and the case is closed?

However this raises another question, will the taxman from the country B ask for the source of funds in the bank.

Yes, there are many. It largely depends on your personal taste and budget.
Also territorial tax places, non-dom regimes and places offering special tax deals/long tax breaks what not need to be counted and this increases the choice massively.

In Europe the choice is quite limited. All these discussions end up with a relocation to a shitty place like Malta or Cyprus non dom. Some Eastern Europe countries can provide a ~10% tax rate, but there are their own caveats.