What to expect the real estate market from the millenial generation?
The generation of millennials, or generation Y (people born in 1981-2000) is at the peak of its economic and social activity, and real estate market players will have to take…

Continue reading →

Russian “Haynets” are adapting to new orders: the results of a joint survey of Tranio and Adam Smith Conferences
For the first time in history, more than 50% of wealthy Russians began to notify Russian tax authorities of their accounts in foreign banks and controlled foreign companies. This assessment…

Continue reading →

Russian “Haynets” are adapting to new orders: the results of a joint survey of Tranio and Adam Smith Conferences
For the first time in history, more than 50% of wealthy Russians began to notify Russian tax authorities of their accounts in foreign banks and controlled foreign companies. This assessment…

Continue reading →

OECD tightens banking checks for investment citizenship and residence permit participants

On November 20, the Organization of Economic Cooperation and Development (OECD) published a list of countries whose investment citizenship or residency programs it considers risky. The OECD recommends that banks carefully check clients who received a passport or residence permit under these programs, in particular, documents confirming the physical presence of investors in a particular country. This applies not only to new customers, but also to owners of particularly large accounts, which hold amounts from 1 million euros.

What programs are considered risky?
The OECD identified two main criteria by which it defined investment programs as risky: a low income tax on financial assets in the country that issued citizenship or a residence permit, and the absence of requirements for the investor to reside in its territory.

Country Residence permit or citizenship program for investment, which is on the list of risk in the opinion of the OECD
Antigua and Barbuda

What is the OECD initiative connected with?
In 2016, an agreement on the automatic exchange of financial information (Multilateral Competent Authority Agreement, MCAA) was concluded – an international agreement binding banks, brokers, investment structures and insurance companies of countries that signed the agreement to send information on non-resident accounts to local tax authorities. Those, in turn, transfer the collected data to the tax authorities of those countries whose residents are account holders. More than 100 countries have joined the agreement: states of territorial Europe, Canada, island states (BVI, Saint Kitts and Nevis, Bahamas, etc.), some Asian countries (for example, the United Arab Emirates and Saudi Arabia).

OECD believes that investment residence permit programs can become a loophole for those trying to escape from taxes. As stated in the report of the organization, since the programs of investment residence permits and citizenship do not control the issue of tax residency, this can lead to violations in the reporting in the framework of the Common Reporting Standard (CRS).

What violations are we talking about?
Investment citizenship and residence permit schemes can be used to conceal the real tax residence of the investor. For example, when the investor does not actually live in the country, but declares that she is her tax resident, and provides the bank with the appropriate documentation: a resident card or a passport received as part of the program.

The OECD recommended that bank employees check more carefully those who claim to be tax residents in designated risk jurisdictions. In particular, banks will find out the grounds for obtaining citizenship or a residence permit, the right to reside in other countries, may request tax returns for the past few years or ask to confirm the reality of the client’s residential address.

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