Residence/Citizenship by  investment schemes update


Residence/Citizenship by investment schemes update

25 October 2018

Operational Tax News

CRS avoidance through Residence and Citizenship investment schemes

The Organization for Economic Cooperation and Development (“OECD”) issued an analysis of over 100 Residence and Citizenship by Investment (“RBI/CBI”) schemes offered by jurisdictions that participate or intend to participate to the Common Reporting Standard (“CRS”), with the aim of:

  1. Highlighting the schemes that may be considered as presenting a high-risk to the integrity of CRS and
  2. Providing recommendations on how to deal with account holders resident in those jurisdictions. 

The RBI/CBI schemes (so-called “golden passports” and “golden visas”) are characterized by the provision of access to residency or citizenship in exchange for specified investments and via a clear delineated process.

More specifically, the OECD identified that high-risk schemes are currently operated by the following countries: Antigua and Barbuda, Bahamas, Bahrain, Barbados, Colombia, Cyprus, Dominica, Grenada, Malaysia, Malta, Mauritius, Monaco, Montserrat, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Seychelles, Turks and Caicos Islands, United Arab Emirates and Vanuatu.

As stated above, one of the OECD’s objectives is to provide financial institutions with the right tools to identify account holders that may misuse RBI/CBI schemes to circumvent the CRS. In that respect, the OECD states that “in making the determination whether a Financial Institution has reason to know that a self-certification or Documentary Evidence is incorrect or unreliable, it should take into account all relevant information available to the Financial Institution, including the results of the OECD's CBI/RBI risk analysis. As a result, where, taking into account all relevant information, the facts and circumstances would lead the Financial Institution to have doubts as to the tax residency(ies) of an Account Holder or Controlling Person, it should take appropriate measures to ascertain the tax residency(ies) of such persons.

To the extent that the doubt is related to the fact that the Account Holder or Controlling Person is claiming residence in a jurisdiction offering a potentially high-risk CBI/RBI scheme, FIs may consider raising further questions, including:

  • Did you obtain residence rights under a CBI/RBI scheme?
  • Do you hold residence rights in any other jurisdiction(s)?
  • Have you spent more than 90 days in any other jurisdiction(s) during the previous year?
  • In which jurisdiction(s) have you filed personal income tax returns during the previous year?

The responses to the above questions should assist Financial Institutions in ascertaining whether the provided self-certification or Documentary Evidence is incorrect or unreliable.

Together with the results of the analysis, the OECD also published practical guidance (see Frequently Asked Questions section) that will enable financial institutions to identify and prevent cases of CRS avoidance using such schemes.

If you have any questions regarding the above, please do not hesitate to contact us.

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