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Legal Residence vs Tax Residence for a bank

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Meta

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Dec 15, 2020
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#1
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Imagine a person holding a few residence permits (including high tax high reputation country, for example Germany) and being tax resident in one country (tax-free, bad reputation, say, Bahamas). He can produce proof of address for all the countries (say, renting a few places and traveling between them).

He wants to open a bank account.

What should he say to the bank when asked about address / residence? There are three options:
1) "I live in Bahamas". All clear but banks may be not so happy with this residence.
2) "I live in Germany", no mention of Bahamas. Not exactly true, may cause problems if the bank wants to see German tax declaration. The bank sends data (CRS) to Germany, where the tax authority may decide to investigate. Banks are benevolent to those living in low-risk Germany, easier to open accounts.
3) "Well, I'm not sure, I have multiple residence permits, let's put my German address and note that I'm tax resident of Bahamas". It's the most correct way I believe, but what does it entail? Banks are happy to treat you as resident of low risk country? Banks treat you as resident of high-risk Bahamas? Banks are confused, suspect tax evasion, don't try to understand and refuse to open an account?

What counts for a bank: legal residency or tax residency?

I envision to be in a similar situation soon and would appreciate any input. Cheers.
 
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#2
My understanding is that a bank is interested in the tax residence for CRS reporting.

But in practice, this is not clear indeed, because they usually ask for a physical address (which will coincide with the tax residence for 99 % of the people, though). Sometimes they ask for a TIN.
 
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#3
Meta said:
Imagine a person holding a few residence permits (including high tax high reputation country, for example Germany) and being tax resident in one country (tax-free, bad reputation, say, Bahamas). He can produce proof of address for all the countries (say, renting a few places and traveling between them).

He wants to open a bank account.

What should he say to the bank when asked about address / residence? There are three options:
1) "I live in Bahamas". All clear but banks may be not so happy with this residence.
2) "I live in Germany", no mention of Bahamas. Not exactly true, may cause problems if the bank wants to see German tax declaration. The bank sends data (CRS) to Germany, where the tax authority may decide to investigate. Banks are benevolent to those living in low-risk Germany, easier to open accounts.
3) "Well, I'm not sure, I have multiple residence permits, let's put my German address and note that I'm tax resident of Bahamas". It's the most correct way I believe, but what does it entail? Banks are happy to treat you as resident of low risk country? Banks treat you as resident of high-risk Bahamas? Banks are confused, suspect tax evasion, don't try to understand and refuse to open an account?

What counts for a bank: legal residency or tax residency?

I envision to be in a similar situation soon and would appreciate any input. Cheers.
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Germany is a bad example since youre on the hook there if you have an address and an account.
 
#4
JackAlabama said:
Germany is a bad example since youre on the hook there if you have an address and an account.
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Not really. Have been doing this once too. Nothing happened.

As a general rule, I recommend using acceptable countries with no tax on interest. It otherwise a country where you hold a tax id and address but where you are no longer registered. Germany may not be the smartest choice though. But even they get enough CRS and other reports about dead and departed people that they normally won't bother much when amounts are small and it he clear they are not entitled the tax.

Any normal bank will ask for the tax id of you citizenship country and any country you give them either and address or a phone number.

If you are clean in Germany in terms of no tax owed either due to not be registered there are due to a DTA or due to no income from the account that is taxable in Germany, you just use the German details only.

If you are paying taxes in Germany it are supposed to, better skip that part unless we are talking about a deposit of 5000 EUR only.

For any reasonable amount, it quickly pays off to invest in a tax id and mail forwarding address in Australia or somewhere. And a visa if needed. For nonsense like collecting bank accounts with no money in it, you can use Germany as they won't care.
 
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#5
daniels27 said:
For any reasonable amount, it quickly pays off to invest in a tax id and mail forwarding address in Australia or somewhere. And a visa if needed. For nonsense like collecting bank accounts with no money in it, you can use Germany as they won't care.
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Why Australia? Would it not be best to use a country with territorial taxation because there the tax authorities should be least likely to care about CRS reports of somebody allegedly living in their country and holding millions abroad as this is not taxable, so pursuing any inconsistencies would just be a waste of their time?
 
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#6
A2934 said:
Why Australia? Would it not be best to use a country with territorial taxation because there the tax authorities should be least likely to care about CRS reports of somebody allegedly living in their country and holding millions abroad as this is not taxable, so pursuing any inconsistencies would just be a waste of their time?
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Australia because it is free and easy to get and a reputable country. If you have time and money for the visa, Hong Kong would be preferred.
 
#9
daniels27 said:
Yes, you need to apply for one of their visas. They have different requirements, for some a degree from a top 100 university is enough. Then, you go there and get a HKID card.
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thats great. I did not know they relaxed it. But yeah the world after 2020 is not the same as before.
 
#10
Thanks everybody for the answers. Still, anybody with the first hands experience maybe? What happens if you give to a bank one address (Germany) and fill CRS form saying you are tax resident of Bahamas?
 
#11
Meta said:
Thanks everybody for the answers. Still, anybody with the first hands experience maybe? What happens if you give to a bank one address (Germany) and fill CRS form saying you are tax resident of Bahamas?
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Yes. I can answer that. The bank may ask for a tax id in Germany.

Giving a bank a US phone number will make you having to fill out a W-8 BEN form with a chance of 50%

Having Dutch citizenship will make the bank ask you for a Dutch tax id with a chance of about 33%.

Having a US address on a Bank of America account as non-resident will trigger you to fill out a form explaining the use of the US address. There is an option saying that the post in you own country is slow or unreliable, which you can choose.

The list goes on. After all it is really up to the bank how to handle this. But they may file a CRS report to Germany and ask you to provide details.

If the account is with a German bank, they will get the Steuernummer (tax id) from the government directly. You can expect the same to happen for all EU or even EEA in the near future.
 
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#13
lagloriacubana said:
Sorry about replying to an old thread but did you mean Dutch citizenship as a blanked statement for banks asking your citizenship country’s tax ID or specifically because Dutch taxman is quite sophisticated?
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Not sure why I wrote Dutch. I think OP or somebody else had "from Netherlands" or something in his profile. There is no difference between Dutch to any other citizenship, they banks will ask for a local tax id with a chance of about 33%. (For the US it would be 100% if they even take you. For North Korea and the like, they most likely will be happy to open the door for you.)
 
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#14
Meta said:
Thanks everybody for the answers. Still, anybody with the first hands experience maybe? What happens if you give to a bank one address (Germany) and fill CRS form saying you are tax resident of Bahamas?
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CRS is a completely separate regulation, outside of tax and immigration laws.
Based on CRS banks might even report you when you don't have legal or tax residence anywhere. This is because you can still have residence for CRS purposes. This can also work in your favor in some cases.
 
#18
drolive0 said:
My understanding is that a bank is interested in the tax residence for CRS reporting.

But in practice, this is not clear indeed, because they usually ask for a physical address (which will coincide with the tax residence for 99 % of the people, though). Sometimes they ask for a TIN.
Click to expand...
they kept asking me for the TIN until I gave it to them, after that they reopened my account.
 
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