Bahamas Recognizes USA as a CRS Participating Jurisdiction?
This loophole was already covered by Tax Justice Network in 2016
Switzerland, Luxembourg, Cayman and Panama tried this trick in 2016, but the backed down when the loophole was revealed.
“The United States of America will be removed from the Participating Jurisdictions list established by the amended Grand-Ducal regulation from 15 March 2016 as the United States of America do not fulfill the criteria of a Participating Jurisdiction within the meaning of the law of 18 December 2015 with regard to CRS.
This approach is in line that of other Member States of the European Union and of the Global Forum.”
So what is this all about?
Well, under the CRS, it is not just banks and insurance companies that have to report the relevant banking information; it is also Investment Entities – which means trusts, foundations, and certain kinds of companies. Let’s take the example of a U.S.-based investment entity, beneficially owned by a wealthy Spanish taxpayer, which maintains accounts with a Luxembourg insurance company or a Swiss bank.
The CRS rules state that if the investment entity is in a non-participating jurisdiction (that is, not participating in the CRS), then the Swiss or Luxembourg financial institution is required to look-through the entity and identify its true beneficial owner(s). That Spanish taxpayer will have those accounts reported to the Spanish tax authorities under automatic exchange of information.
But if now, by the stroke of a pen, Luxembourg and Switzerland have decreed (however erroneously) that the United States is a participating jurisdiction, then that requirement to “look through” the US-based investment entity to its controlling person is waived. So those Spanish assets will remain secret to the Spanish tax authorities.
|3.||This explains why it is wrong to recognise USA as a Participating Jurisdiction of the CRS.||
OECD CRS Implementation Handbook page 20 par(31)
Jurisdiction could treat all jurisdictions that have publicly and at government level committed to adopt the CRS by 2018 (“Committed Jurisdictions”)2 as Participating Jurisdictions for a transition period. A possible further limitation would be to reserve this treatment to Committed Jurisdictions that have signed the Multilateral Competent Authority Agreement or an equivalent exchange instrument. This effectively presumes commitments will be delivered upon. A jurisdiction adopting this approach should make a statement that its list of Participating Jurisdictions will be re-assessed and updated no later than 1 July 2017, based on whether the listed Participating Jurisdictions have actually delivered on their commitment vis-à-vis the jurisdiction. A removal of a jurisdiction from the list of Participating Jurisdictions would then trigger an obligation on Reporting Financial Institutions to apply the ....