On 16 October 2018 the OECD has published the results of its analysis of over 100 schemes for citizenship by investment and residence by investment (CBI/RBI) offered by jurisdictions that are committed to the common reporting standard (CRS).

These schemes are often referred to as golden passports or golden visas and they can potentially be misused as a means of hiding assets abroad to avoid reporting for tax purposes. The OECD has identified schemes that may potentially pose a high-risk to the integrity of the CRS. Identity Cards, residence permits and other documentation available through CBI/RBI schemes can potentially be misused in order to misrepresent an individual’s jurisdiction of tax residence and to avoid the scrutiny of due diligence procedures under the CRS.

The potentially high-risk CBI/RBI schemes are identified as those schemes that allow access to a low personal tax rate on income from foreign financial assets and do not require an individual to spend a significant amount of time in the jurisdiction offering the scheme.

The OECD has identified that such schemes are currently operated by Antigua and Barbuda, The Bahamas, Bahrain, Barbados, Colombia, Cyprus, Dominica, Grenada, Malaysia, Malta, Mauritius, Monaco, Montserrat, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Seychelles, Turks and Caicos Islands, United Arab Emirates and Vanuatu.

As well as publishing the results of its analysis the OECD has also published guidance for financial institutions to help them to identify and prevent cases of CRS avoidance through the use of these schemes. In cases where there are doubts about the tax residence of a CBI/RBI user the OECD has recommended further questions that a financial institution may discuss with the account holder.

Under the common reporting standard a financial institution may not rely on self-certification or documentary evidence if it knows or has reason to know that this is incorrect or unreliable. This also applies to pre-existing High Value Accounts if the relationship manager knows that the self-certification or documentary evidence is incorrect or unreliable.

If the doubts relate to the fact that the Account Holder or Controlling Person is claiming residence in a jurisdiction that offers a potentially high-risk CBI/RBI scheme the financial institution should consider asking further questions. This could include asking the account holder if residence rights were obtained under a CBI/RBI scheme; if residence rights are held in any other jurisdiction; if more than 90 days have been spent in any other jurisdictions in the previous year; and in which jurisdictions personal income tax returns have been filed during the previous year.

A number of jurisdictions are now committed to spontaneously exchanging information regarding users of CBI/RBI schemes with all original jurisdictions of tax residence. This measure is intended to reduce the attractiveness of CBI/RBI schemes as a means of CRS avoidance. The OECD will continue to work with CRS-committed jurisdictions and with financial institutions to ensure that the guidance remains effective in making sure that foreign income is reported to the actual jurisdiction of residence.