CRS Is A Vicious Attack on Banking Secrecy – Use These Loopholes to Avoid It
The fact that we need to find CRS loopholes is because of The Common Reporting Standard (CRS). The CRS is the worst attack ever on banking privacy. CRS was the OECD’s answer to the US’s attack on banking privacy, the Foreign Account Tax Compliance Act (FATCA).
CRS obliges banks in over 100 countries to report account details, including balances, to the tax authorities in your country of residence. Fortunately, for those of us who still value privacy it’s full of loopholes.
The problem is that most people are not aware of CRS yet. HMRC, the UK tax authority received 5.67m CRS notifications in 2019. This affects everyone with an overseas bank account. It doesn’t matter if the bank is in a tax haven or not. The chances are your account is affected by it. There is no privacy in the majority of the remaining tax havens. This includes some of the most popular tax havens like Bermuda, Monaco and The BVI. You will not find privacy in any of those locations if your country of residence is a high tax country.
So, what are the best CRS loopholes to avoid CRS reporting in 2021?
Change Your Country of Residence
The best CRS loopholes involve changing your country of residence, at least on paper. If you’re a resident of a tax haven or a territorial tax country it doesn’t matter what information your offshore bank sends to them as you’ll never owe any tax in that jurisdiction
Live in a Voluntary Privacy Country
Voluntary privacy countries are another of the little known CRS loopholes. A country that has opted for voluntary privacy is a participating member of CRS where the banks in that country will send information to foreign tax authorities. However the authorities in that country will not receive any information about their own residents. One voluntary privacy country is The Cayman Islands.
Residents of The Cayman Islands can bank anywhere in the world and the government of The Cayman Islands will not receive any information about their private bank accounts overseas. Non-residents of The Cayman Islands who open bank accounts there however will have their private banking information shared with the government of their country of residence.
That makes countries like The Cayman Islands excellent choices to become a resident but terrible choices for an offshore bank account if you value banking secrecy. There are 31 voluntary secrecy countries where you can establish a paper residency. Residency in any of these countries is one of the best CRS loopholes.
Establish a Trading Company in a Low Corporate Tax Country
The OECD’s demolition of banking secrecy is targeted at overseas savings and investment accounts. It’s not targeted at companies overseas who’re engaged in trading activities. Therefore if you establish an overseas company that has an office and is engaged in business in its country of incorporation that company’s banking information is not reportable under the CRS rules. This is one of our favourite CRS loopholes.
Simply incorporate a new company in a low tax jurisdiction like Ireland. Use local directors to open the bank account and have a local registered office. The right boxes will be ticked on the bank’s systems for it being a local trading company. You can then use that company for whatever purpose you want, safe in the knowledge that its secret banking information won’t be reported to any foreign government under the CRS disclosure rules.
Voluntary Disclosure of Residency
Many overseas banks still depend on voluntary disclosure of tax residency. Particularly when you open the account in person. They will ask which country you’re a resident of for tax purposes and may ask for a tax number. They have no way of verifying this information.
Opening a bank account without a physical visit will involve them asking for information to verify where you live like a utility bill. However when you open the account in person in some jurisdictions this isn’t needed.
In some jurisdictions it’s possible to be creative when asked for your country of tax residency. If the bank accept the country of tax residency that you give them, that’s the country where they’ll send the CRS disclosures.
There are dozens of CRS loopholes, in this article we can only look at a few of them. We have also written about CRS loopholes here. Of course if you want to look in more depth at CRS loopholes and other asset protection measures see our Special Report, Bullet Proof Asset Protection here or hire us to help you protect your assets and minimise your taxes by getting in touch with us here.