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Looking for a rough year period when Governments started disputing offshore corporate tax for their directors.
Example - In Year 20xx UK etc started determining that a director of a offshore corporation in which the director resided in x country (different country) became applicable tax in x country and/or UK bypassing say seychelles 0% tax policy.
It's a little tricky to pinpoint as the laws have been in place for years and simply morphed over time.
What we've seen in the last few years, and in the coming yeas, is in many ways just enforcement catching up and laws being updates for international standards.
I'd say the rapid change kicked off around 10—12 years ago when FATF-GAFI started to really stir the pot in the fight against money laundering and OECD model TIEAs were beginning to come into effect (most were signed 2010–2012). The TIEAs and OECD model DTAAs (Double Taxation Avoidance Agreements) helped create an international standard on tax residence, and ultimately lead to CRS/AEOI. FATCA was introduced in 2010 and is also a factor in the rest of the world moving that direction.
It takes time for things to really manifest. We're seeing the results of what started those 10-12 years ago.
Effective control and management, which is one of the most basic concepts of determining tax residence, has existed for even longer. But before meaningful exchange of information, it was nigh on impossible to prove that an offshore company was being run by someone resident in a high tax country. It took a lot of resources to look into each case, and there was no guarantee of success in the end. So while it was illegal to evade taxes that way, it was very hard to go after people. TIEAs changed that and eventually lead to CRS/AEOI. OECD laid the foundation.
Banks also didn't have nearly the same obligations to determine beneficial ownership. They didn't have to (or at least didn't bother to) check who was behind the nominees. FATF-GAFI changed that.
Since 2018 this all started driven by OECD's BEPS Action 5. Most Caribbean countries have already been forced to introduce economic substance laws and have this in place. Offshore jurisdictions now automatically share information on companies with no Economic Substance since March 2021 with beneficial owners resident country.
Those 12 countries are:
Anguilla, Bahamas, Bahrain, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, Turks and Caicos Islands, United Arab Emirates
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31/03/2021 – Twelve no or only nominal tax jurisdictions began their first tax information exchanges today under the Forum on Harmful Tax Practice’s (FHTP) global standard on substantial activities. The standard ensures that mobile business income can no longer be parked in a low tax jurisdiction without the core business functions being carried out from that jurisdiction and that the countries where the parent entities and beneficial owners are tax resident get access through regular exchanges of information.
These new annual exchanges cover information on the identity, activities and ownership chain of entities established in no or only nominal tax jurisdictions that are either non-compliant with substance requirements or engage in intellectual property or other high-risk activities.
"Today’s first exchanges of information on the previously unknown operations of entities in low tax jurisdictions, are good news for tax administrations around the world, as they will now have regular access to information on the activities and income of entities in low tax jurisdictions that are held or controlled by their taxpayers," said Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration.
The exchanges will enable receiving tax administrations to carry out risk assessments and to apply their controlled-foreign company, transfer pricing and other anti-base erosion and profit shifting provisions.
The FHTP is monitoring both the legal and practical implementation of the standard by no or only nominal tax jurisdiction through a rigorous, annual peer review process under Action 5 of the OECD/G20 Inclusive Framework on BEPS. The next annual results will be released in December 2021.
