China first exchanged CRS information on September. Canada, Australia, New Zealand and Singapore have participated in CRS. The reporter investigates discovery, investment naturalization becomes a means to avoid CRS.
The hidden wealth of high-net-worth individuals abroad may be revealed as a number of well-known tax havens fall.
Starting in September, the state administration of taxation will exchange tax information related to financial accounts for the first time with tax authorities of several countries and regions, according to the Common Reporting Standard (CRS). Meanwhile, the new tax law, just passed late last month, introduced anti-tax avoidance provisions for the first time. This means that the allocation of overseas financial assets of China's taxpaying residents will be mastered by China's tax authorities, tax evasion and tax avoidance will surface, and there will be high individual income tax payment.
New World Wealth, a wealth research institute, said China is also a country where the rich are "losing their Wealth" seriously. With British virgin islands, Cayman islands, Liechtenstein, Bermuda, Canada, Australia, New Zealand, Singapore and Switzerland join to CRS, the overseas accounts of the rich may be about to "go naked". But a reporter's investigation found that CRS program loopholes were still being used to avoid taxes, such as investment citizenship.
Investment naturalization is a means to avoid CRS
Starting in September, the state administration of taxation will exchange tax information related to financial accounts for the first time with tax authorities of several countries and regions, according to the Common Reporting Standard (CRS). Meanwhile, the new tax law, just passed late last month, introduced anti-tax avoidance provisions for the first time.
Does CRS still have an updated version of tax avoidance after its global implementation? An investigation by Beijing news reporters found that some people still rely on CRS 'procedural loophole to avoid taxes.
Search for CRS on Baidu and the page is flooded with advertisements for immigration passports. An immigration lawyer, who asked to be identified as “George China”, told the paper that asset tax avoidance could now be achieved by applying for passports in countries that do not participate in the CRS. He recommended Guatemala, which is not currently committed to CRS and has tax benefits on foreign assets: the country's law allows foreign assets to be exempt from taxation if they do not participate in its citizens' elections.
When the reporter asked whether to declare CRS information based not on nationality but on whether it was a Chinese tax resident, the "lawyer" claimed that in the actual review process, financial institutions determined whether the tax residency was based on passport. "How could the bank possibly know that you live in China? Your passport is Guatemala, and the address you provide is also Guatemala, and it's impossible for the bank to verify where you live, and he has no right to do so.
An easy way to obtain a Guatemalan passport is to invest in a naturalization plan, which allows quick naturalization by donating $50,000 to the Guatemalan government. The lawyers said it was similar to other countries' investment plans to buy a home and have low costs.
Relying on such investment naturalization plans to attract foreign investment is a common practice in many countries, which can also be a means to circumvent CRS. The OECD released a report in February proposing several forms of abusive investment residency programs to circumvent the CRS. A growing number of countries offer "RBI, residence by investment" "or" "investment citizenship" "(CBI, citizenship by investment) plans that allow foreign individuals to gain citizenship or temporary/permanent residency in exchange for an increase in local investment or paying fees. Spain and Portugal, for example, both offer home-buying immigration policies and can be naturalized by buying a home in the country for just 500,000 Euros.
The OECD argues that the abuse of these schemes could provide a back door for money launderers and tax evaders. These plans grant a country's citizenship or judicial residency, which typically does not provide tax residency, and CRS's filing is based on tax residency. The tax tribunal requires taxpayers to self-certify all residence for tax purposes. This creates a CRS loophole.
