Andorra Passive Residence Class A to avoid CRS does not work



Andorra Passive non fiscal Residence Certificate is useless for CRS


missing Andorra Residence graphic


What is Andorra Category A Passive Residency?
  • Reside at least 90 days a year but less than 181 days(no border record if you depart)
  • Not tax resident therefore no tax on income

How does this residency differ from Andorra Fiscal Residency?
  • Reside in Andorra for at least 181 days a year or elected passive fiscal residence
  • Considered tax resident in Andorra
  • Individual must pay 10% tax on worldwide income
The strategy of an Andorran Passive Residence class A certificate is not a solution for the CRS
  1. It is wrongly believed by Andorran FIs that the Andorra passive residency class A is a solution for the CRS. The reality is that Andorran Passive residency is useless for CRS Due Diligence in determining tax residence of Account Holder or the Controlling Person of a Passive NFE.
  2. Bank is ignoring the CRS anti-avoidance clause of adopting practises to circumvent the CRS. However Ignorantia juris non excusat.
  3. Bank is aware of true fiscal address of client and must ignore the passive residence certificate.
  4. Bank is ignoring AML / KYC procedures to determine address of client.
  5. Due to rampant global residence planning to circumvent the CRS, OECD will likely amend the CRS in 2017 with regard to any previous residence in the past ten years being the 7th indicia of current residence. This indicia can be cured by the provision of a tax clearance certificate or equivalent document.
1. Residency must be based on fiscal residence

An Andorra class A passive residence certificate is not a fiscal residence
The residency test in CRS is based on
  1. Residence certificate, and
  2. Proof of physical address in same jurisdiction of fiscal residence, such as utility bill

  3. It may be possible to submit proof of physical address in Andorra, but the Category A passive residence certificate is insufficient for CRS residency test. A non fiscal passive residence certificate is indicative fiscal residence is elsewhere. The bank should have on its records the fiscal residence.
2. CRS residence address test

Under $1 million

For low-value pre-existing accounts, a residency address test may be carried out, using documentary evidence on record to determine account holder's residency.

A residence test can be carried out if the FI has policies and procedures in place to verify residence address based on documentary evidence. The three requirements that must be met are:
  1. FI has in its records a residence address
  2. Such address is current
  3. Such address is based on documentary evidence
CRS page 60 par(6) Definition of Terms - The term Documentary Evidence includes a certificate of residence issued by an authorised government body (for example, a government or agency thereof, or a municipality) of the jurisdiction in which the payee claims to be a resident.

The first requirement is the physical address needs to be on file. CRS commentary page 112 par (10)

The third requirement is that the current residence address in the Reporting Financial Institution’s records is based on Documentary Evidence. This requirement is satisfied if the Reporting Financial Institution’s policies and procedures ensure that the current residence address in its records is the same address, or in the same jurisdiction, as that on the Documentary Evidence (e.g. identity card, driving license, voting card, or certificate of residence).

The third requirement that address is based on Documentary Evidence, is also met if the Reporting Financial Institution’s policies and procedures ensure that where it has government-issued Documentary Evidence but such Documentary Evidence does not contain a recent residence address or does not contain an address at all, the current residence address in the Reporting Financial Institution’s records is the same address, or in the same jurisdiction, as that on recent documentation issued by an authorised government body or a utility company, or on a declaration of the individual Account Holder under penalty of perjury.

Acceptable documentation issued by an authorised government body includes, for example, formal notifications or assessments by a tax administration. Acceptable documentation issued by utility companies relates to supplies linked to a particular property and includes a bill for water, electricity, telephone (landline only), gas, or oil. A declaration of the individual Account Holder under penalty of perjury is acceptable only if:
  • the Reporting Financial Institution has been required to collect it under domestic law for a number of years
  • it contains the Account Holder’s residence address; and
  • it is dated and signed by the individual Account Holder under penalty of perjury.
In such circumstances, the standards of knowledge applicable to Documentary Evidence would also apply to the documentation relied upon by the Reporting Financial Institution (see paragraphs 2-3 of the Commentary on Section VII). Alternatively, a Reporting Financial Institution can meet the third requirement if its policies and procedures ensure that the jurisdiction in the residence address corresponds to the jurisdiction of issuance of government-issued Documentary Evidence.

If the Financial Institution knows or has reason to know that the Evidence is unreliable, including as a result of a change in circumstances, then that Documentary Evidence cannot be relied upon. Therefore, either the residence address test cannot be used in the first place or, if it is as a result of a change in circumstances, the Financial Institution has until the later of the last day of the reporting period or 90 days to obtain a self-certification and new Documentary Evidence. If this is not obtained then the electronic indicia search must be completed.

Where the indicia search is completed and the only indicia found is a “hold mail” or “in-care-of” address and no other address is found, then special procedures apply (the undocumented account procedures). In the order most appropriate, the Reporting Financial Institution must: complete a paper record search; or obtain Documentary Evidence or a self-certification from the Account Holder. If neither of these procedures successfully establishes the Account Holder’s residence for tax purposes then the Reporting Financial Institution must report the account to the tax authority as an undocumented account.



3. Effective Implementation A jurisdiction must have rules and administrative procedures in place to ensure effective implementation of, and compliance with, the reporting and due diligence procedures set out above including:
  1. Rules to prevent any Financial Institutions, persons or intermediaries from adopting practices intended to circumvent the reporting and due diligence procedures.

Commentary on Section VII concerning Special Due Diligence Requirements

Paragraph A – Reliance on Self-Certification and Documentary Evidence

CRS Page 149 par (3)

A Reporting Financial Institution has reason to know that a self-certification or Documentary Evidence is unreliable or incorrect if its knowledge of relevant facts or statements contained in the self-certification or other documentation, including the knowledge of the relevant relationship managers, if any (see paragraphs 38-42 and 50 of the Commentary on Section III), is such that a reasonably prudent person in the position of the Reporting Financial Institution would question the claim being made.

A Reporting Financial Institution also has reason to know that a selfcertification or Documentary Evidence is unreliable or incorrect if there is information in the documentation or in the Reporting Financial Institution’s account files that conflicts with the person’s claim regarding its status.