Question What are the tax implications of AEOI CRS when you are a beneficiary?

[tradingworldwide321]

Hello everyone.

I hope you are doing very well.

As I Have been learning a lot there's a question that comes to my mind.

Let's imagine you are the UBO of foundations and trust entities and hire staff to manage it for you like manager, director and secretary. However you have corporate permanent establishment in the country where the foundation and trust are registered. Example: Your Panama Foundation has Corporate Permanent Establishment there. Your Seychelles Foundation has Corporate Permanent Establishment there etc.

We know Panama and Seychelles participates in AEOI CRS, we also know you are the UBO for banks and you are tax resident in a corrupted country where participates in AEOI CRS as well.
This country where you live has worldwide taxation.

You, as the UBO, don't withdraw any funds from any of these entities but you get a salary and any of these entities are not tax residents in the UBO's tax residency.

So this is the thing,
What are the tax obligations that may arise to you as the UBO?

My understanding is this: if the entities doesn't have PE and if you don't withdraw funds then, you should not be able to pay taxes for any gains that this entities may have. However, the tax authority where you, the UBO, are tax resident will know that you are a beneficiary of these entities but don't pay nothing.

I would like to know about your opinions about this situation.

Thank you

 

[Martin Everson]

What are the tax obligations that may arise to you as the UBO?

Depends on your country of residence as UBO. Also Trusts have beneficiaries. You need to clarify what the relationship of the UBO is to the trust or even foundation.

My understanding is this: if the entities doesn't have PE and if you don't withdraw funds then, you should not be able to pay taxes for any gains that this entities may have.

Not true

However, the tax authority where you, the UBO, are tax resident will know that you are a beneficiary of these entities but don't pay nothing.

Yes

I would like to know about your opinions about this situation.

Don't waste your time depending on your country of residence. For example in some countries foreign trust income held within the trust and not distributed is theoretically apportioned to each beneficiary. Hence you are taxed at beneficiary level whether the trust distributes its internal profits or not to the beneficiaries.

For certain countries offshore trusts make sense i.e setting one up before moving to South Africa where offshore trusts are recognized and not taxed etc.

Basically you need to explain your specific situation, your relationship to trust or foundation. UBO is too generic a term i.e are you a trust beneficiary, trust protector, settlor etc etc.