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Tax authorities will share identities of CRS avoidance scheme users

Thursday, 14 December, 2017

The OECD has released a consultation document on rules requiring tax advisors to disclose arrangements or offshore structures aimed at circumventing international exchange of account information (Automatic Exchange of Information, AEOI), under the Common Reporting Standard (CRS) avoidance.

The proposed 'model rules' will require such intermediaries to disclose the identities of any scheme users, or beneficial owners of structures, to their national tax authority. These can then be circulated to any other tax authority signed up to CRS exchange.

The new rules are linked to a project undertaken by the OECD's centre for tax policy in May this year, when it invited tax authorities to disclose any schemes that they suspected were designed to help taxpayers avoid CRS reporting of their offshore account information. The OECD's purpose was to record all actual or perceived loopholes and analyse them, to develop appropriate counters. At the same time, it announced that jurisdictions subscribing to CRS would also be expected to put in place anti-abuse rules, to prevent any practices intended to circumvent the reporting and due diligence procedures.

Promoters and providers of such schemes are the principal targets of the proposed rules. Anyone 'with a material involvement in the design, marketing or implementation of CRS avoidance arrangements or offshore structures' will be required to disclose information on the scheme to their national tax authority. Information on those schemes – including the identity of any user or beneficial owner – would then be made available to other tax authorities, in accordance with the applicable information exchange agreement. These tax authorities would typically be in the jurisdictions in which the taxpayer is resident for tax purposes, if known.

'Avoidance arrangements' include any arrangement where it is reasonable to conclude that it has been designed, or marketed, or has the effect, of circumventing CRS. 'Offshore structures' means passive offshore vehicles that are held through an 'opaque ownership structure', whose effect is to undermine or exploit weaknesses in the CRS due diligence procedures, by concealing the identity of the beneficial owner. The use of undisclosed nominees is an obvious example. This hallmark would also capture offshore structures that would not ordinarily be expected to be subject to CRS reporting, such as real estate holding structures.

Comments on the rules can be submitted until 15 January, and STEP will be submitting a response in due course.

The first automatic CRS exchanges took place between 49 jurisdictions in September 2017. Overall, 102 jurisdictions have committed to implementing CRS, with 53 taking up exchanges in September 2018.