The OECD has published a list of 21 countries which it says offer residence and citizenship by investment (CBI/RBI) options, or so-called ‘golden passport’ schemes, that can be used to hide assets held abroad from reporting under the common reporting standard (CRS)
It includes Malta, Cyprus and Monaco, as well as Montserrat, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Seychelles, Turks and Caicos Islands, Antigua and Barbuda, the Bahamas, Bahrain, Barbados, Colombia, Dominica, Grenada, Malaysia, United Arab Emirates, Mauritius and Vanuatu.
The list is a result of analysis of over 100 CBI/RBI schemes offered by CRS-committed jurisdictions, identifying those schemes that potentially pose a high-risk to the integrity of CRS, by providing access to a low personal tax rate on income from foreign financial assets without requiring an individual to spend a significant amount of time in the jurisdiction offering the scheme.
In particular, the OECD says identity cards, residence permits and other documentation obtained through CBI/RBI schemes can potentially be abused to misrepresent an individual’s jurisdiction(s) of tax residence and to endanger the proper operation of the CRS due diligence procedures.
The OECD has published practical guidance to enable financial institutions to identify and prevent cases of CRS avoidance through the use of such schemes. In particular, where there are doubts regarding the tax residence(s) of a CBI/RBI user, the OECD has recommended further questions that a financial institution may raise with the account holder.
Going forward, the OECD says it will work with CRS-committed jurisdictions, as well as financial institutions, to ensure that the guidance and other OECD measures remain effective in ensuring that foreign income is reported to the actual jurisdiction of residence.
Report by Pat Sweet