FATCA, on the other hand, is a norm formulated by the United States. The United States has not joined the signatory countries of CRS and played its own game, but it is also a bill for global tax recovery.
In the past, the world's richest people would pursue the registration of companies in BVI and make many tax arrangements. But no matter where you register a company, you must open a bank account as long as it involves the inflow and outflow of funds.
Generally speaking, BVI's offshore bank accounts will be located in Hong Kong and Switzerland (there is no bank account service in Cayman). Offshore accounts provide great flexibility and application space for non-residents, such as not being subject to foreign exchange control, relatively free fund allocation, and tax exemption for deposit interest ...
After the implementation of CRS, all these good things in the past may no longer exist.
At present, the traditional Tax Haven in Cayman, Cecil and Belize has promised to implement CRS. Once the CRS regulations are on the road, as long as there are signatory countries, new account opening procedures must be implemented.
For example, since 20 17. 1. 1, China has started to implement new account opening procedures. Local banks in Hong Kong have also implemented corresponding CRS measures, requiring that accounts opened after 20 17. 1. 1 should fill in an entity CRS self-certification form.
Of course, you can choose not to fill it in, but then you will not be able to open a bank account!
The most critical field in the CRS self-certification form is your entity type, because this determines the way you declare:
CRS divides companies into financial institutions and non-financial institutions, and non-financial institutions are divided into positive non-financial entities and negative non-financial entities.
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(1) There are four main types of financial institutions: depository institutions, custodian institutions, specific insurance companies and investment institutions.
(2) "Active non-financial entity" is generally defined as: less than 50% of the total income generated by active transactions or businesses operated by the entity is passive income (dividends and interest), or less than 50% of the assets held by the entity generates passive income. General manufacturing, wholesalers, retail and so on all fall into this category. The opening bank of this kind of institution only needs to disclose the information of the institution to the government where the tax is registered.
(3) "Passive non-financial entity" refers to an entity, organization or company whose main source of income is passive income or passive assets (the general public's cognition is "shell company").
Why should we distinguish between "active non-financial entities" and "passive non-financial entities"? The reason is that although the passive non-financial entity is registered as a corporate legal person, it is actually not engaged in the business activities of the entity, and it is more likely that individual shareholders set up another company in order to avoid personal tax. For this type of legal entity, CRS requires tracing back to the information of the actual controller behind it, because the purpose of CRS policy is to eliminate the secrecy of offshore companies and disclose the information of the actual controller to the government of the country where its tax residents are located.
In other words, if you are a "passive non-financial entity", the bank must penetrate your BVI company, and finally identify who is the actual controller behind it, and exchange relevant information about the person in charge with the state.
If you are a tax resident of China, but you move all your information such as property deposits to overseas accounts, although there is no tax burden under the original BVI, the government of China can recover taxes from you as long as the BVI government exchanges your information with the government of China.
Suppose you register a company in Cayman and open a deposit account with Bank B in Hong Kong. Bank B will identify the financial accounts opened by non-local tax residents and enterprises (because you are a Cayman company and belong to non-local tax residents and enterprises) through due diligence. And submit the information of the holder's name, date of birth (if it is an individual account), tax residence, tax number (TIN), address, account number, year-end balance or value of the account, income of the relevant year, including interest and dividends, and income from the sale of financial assets, etc. to the Hong Kong Inland Revenue Department on a regular basis, and then the Hong Kong Inland Revenue Department will exchange information with the tax agency of the tax residence declared by the account holder (Cayman's Inland Revenue Department) to achieve the goal.
The condition of FATCA in the United States is that in order to deal with countries or financial institutions that "do not participate, accept or recognize" FATCA, the United States government will unconditionally levy 30% withholding income tax on some income obtained by these financial institutions from the United States as a punishment.
Compared with CRS, the implementation of CRS is not so strict. CRS is implemented through local legislation in various countries, which gives countries great legislative flexibility. However, OECD has also come up with a package, which requires all financial institutions in participating countries to classify all "managed investment entities" located in non-CRS participating countries as passive non-financial entities, which means that the actual controller of the investment entity needs to be identified, which is the so-called "penetration" principle.
However, both FATCA and CRS have an exemption provision, that is, financial institutions can choose to conduct due diligence on financial accounts whose balance or value does not exceed a certain threshold, so there is no need to declare such accounts.
Under FATCA, due diligence can be exempted if the balance of the institutional account does not exceed $250,000 on the base date. And thereafter, the balance of the account at the end of each year shall not exceed1000000 USD, and the declaration may be exempted.
Under CRS, due diligence can be exempted if the balance of the institutional account does not exceed $250,000 on the base date. And the balance of the account at the end of each year thereafter shall not exceed $250,000, and it may also be exempted from reporting.
One way is to split the funds in your bank account into several banks, so as not to enter the first list of high-net-worth customers who have been due diligence.
If you are really super-rich, you have many properties overseas. Because real estate does not belong to the category of financial accounts, it does not need to be included in the declaration. In addition to real estate, the investment in antiques, red wine, jewelry and other collectibles will not be affected by CRS.
Of the above three ways, the second one is safer. Basically, the third approach doesn't work. Because even if you get the status of tax resident in a small country, if you work and live in country A for a long time, then you are still a tax resident (or a double tax resident) in country A. If the account holder deliberately conceals his identity as a double tax resident, it will bear the adverse legal consequences according to the laws of the place where the financial institution where the account is opened.
In addition, the OECD is not a fuel-efficient lamp. The OECD has listed several anti-circumvention measures in its regulations. If it is deemed to have circumvention actions (including manipulating the year-end balance, temporarily transferring funds to the tax-exempt account, and then returning after the benchmark date ...), this structural arrangement is invalid, and everything must return to the principle of "substance is more important than form".