Further measures on Tax Transparency
Like many tax professionals, it is not uncommon to meet clients who honestly believe that they can beat the system. They use layering, nominees and even “other” passports and believe that this may grant them privacy.
FATCA and CRS are real. They provide a framework for banks to automatically share account holder information with other governments. But not only do they compel banks, but they also apply to service providers including Trustees and Corporate Service Providers (such as those that offer incorporations).
Read more here. I’ve included some of the articles we have previously written on FATCA / CRS and the services that our consultants provide –
But to be completely honest, certain structures do mitigate FATCA and CRS reporting. That’s where some other acronyms come in. Let’s talk about MDR and DAC6.
Further measures on tax transparency
(a) Mandatory disclosure rules (“MDR”) for CRS avoidance arrangements and opaque offshore structures
Do note that our team offers FATCA / CRS consulting services –
Service Providers should also carefully consider the implications of the CRS and the MDR, and seek advice from appropriate advisors in the relevant jurisdictions on the implications for themselves and/or their clients.
Given the exposure to penalties and possibly even criminal prosecution in home jurisdictions, it is advisable that families and individuals who have established or are users or beneficiaries of offshore trust and/or company structures should evaluate the tax and legal implications or their structures, preparing for the scrutiny that is expected to arise or has already arisen in respect of themselves as individuals, entities and controlling persons of certain entity accounts on an annual basis.
In essence, trusts remain as a useful instrument for reasons including asset protection, succession planning and confidentiality, but in particular settlors and beneficiaries of trust structures should seek advice while establishing offshore trusts and any underlying holding companies so as to be clear on the information that is likely to be made available to the tax authorities of the jurisdiction(s) where they are resident, review whether their tax matters are in order, and resolve issues in case there are any issues to be resolved.
Likewise for offshore structures that no doubt continue to offer advantages that retain their usefulness, but again, the need for a proper review and analysis of the use of offshore structures in the new global environment of tax transparency and fiscal responsibility cannot be over-emphasized.