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CRS automatic data exchange 2020

Two ways to legally bypass CRS automatic data exchange

2020-01-08
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The Common Reporting Standart (CRS) is an international agreement between hundreds of countries to voluntarily exchange tax data. The automatic exchange of information under the CRS standard, in fact, involves a violation of the presumption of innocence and confidentiality of personal data. Participating countries share information about accounts of individuals and entities opened on their territory, suspecting their owners of tax evasion.

For what purpose was the CRS standard created?

The initiative to create this standard appeared in 2014, at the G20 summit, where it received a good response and was put into effect the same year. The information involved in the exchange between participating countries includes personal data of business owners (beneficiaries), information on their income, capital, property and bank account movements.

The main objective of the CRS was to identify and reduce the number of unscrupulous entrepreneurs who evade taxes in their country of residence. However, the good goal, as it is often the case, has changed in the course of the project’s implementation.

Rescrupulous taxpayers are increasingly experiencing "side effects" of CRS in the form of double taxation and the need to spend a huge amount of time and nerves to prove that there are no offenses on their part. Despite the fact that the project is international, it is designed from the position of "presumption of guilt" - every person who falls under its sanctions is knowingly considered to be a tax evader and can only be rehabilitated if he or she proves their innocence.

Data on legal entities included in mandatory automatic exchange

  • Corporate bank account statement;
  • Information on profit and loss;
  • Financial statements for the selected period.

If the company is registered in one of the CRS member countries, the data is transferred to all jurisdictions whose citizens are the beneficial owners holding more than 10% of the company's shares or authorized capital.

How to legally avoid participation in the CRS

  • The first way is obvious - to register a business or open a bank account in the country that is not a participant of the automatic data exchange of taxpayers. This list includes some administrative units of the USA, UK, Dominican Republic, Taiwan, etc. Its disadvantage is that there are fewer such jurisdictions every year, and their financial and banking systems are not always suitable for successful business activities.
  • Another way around CRS is more sophisticated and includes changing the beneficiary’s citizenship.

One can become a resident of a country that does not participate in automatic data exchange, then the jurisdiction in which the business is registered or the bank account is opened will simply have nowhere to transfer information. Or, there is also a possibility to move to a CRS member country, whose legislation does not provide for payment of taxes on income received abroad. In other words, it is possible to become a citizen of a "legal offshore".

IT-OFFSHORE lawyers will help you make the right choice. We have extensive experience in financial consulting and business support abroad.

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