Previous residencies will be an indicia


CRS amendment will include previous residencies as an indicia
1. Moving residency won't escape the CRS because the CRS will be amended in 2017 to include any previous residencies within the last ten years as an indicia of current multiple residences.
2. Scenario A
Physically emigrate

Client has Swiss bank account. Client physically emigrates to a jurisdiction that has no personal income tax or does not tax income earned remaining outside the jurisdiction. E.g. client moves from Spain to Portugal due to immigrant program of a ten year tax exemption on income remaining outside of Portugal.
An indicia search will be an electronic search, paper search and relationship manager interrogation of previous residences.

Although client's current residency test demonstrates the client is currently resident in Portugal, an indicia search by the Financial institution maintaining the account will reveal client's previous residency within the last ten years was Spain. The CRS will oblige Financial Institutions to deem that the client is dual resident in both Spain and Portgual because the client lived in Spain within the previous ten years.

The client will have an opportunity to cure the indicia that he is not resident in Spain by providing a tax clearance certificate or an equivalent document demonstrating that he has no longer has tax liability in Spain. If he cannot provide such docment, e.g. Spain takes a few years to provide such document, then the client's info will be reported by the Swiss bank to both Spain and Portugal.

3. Scenario B
Synthetic tax residency

Client lives in France. Client has Swiss bank account. Client obtains a residency permit from Bahamas because he invests in a Bahamas fund.
It must be noted that most, if not all, synthetic residences obtained via an economic program, are legal residencies, not tax residencies. It's the tax residency of the Account Holder that determines CRS reporting, not the legal residencies. So most economic residencies will not help avoid CRS reporting.

An indicia search will be an electronic search, paper search and relationship manager interrogation of previous residences.

Although client's current residency test demonstrates the client is currently resident in Bahamas due to the synthetic residence certificate, an indicia search by the Financial Institution maintaining the account will discover the client's previous residency within the last ten years was France. The CRS will oblige Financial Institutions to deem that the client is dual resident in both France and Bahamas because client lived in France within the previous ten years.

The client will have an opportunity to cure the indicia that he is not resident in Spain by providing a tax clearance certificate or an equivalent document demonstrating that he no longer has any tax liability in France. If he cannot provide such document, e.g. France takes a few years to provide such document, then the client's info will be reported by the Swiss bank to both France and Bahamas.
4. Scenario C
Gift to family

Client lives in Brazil. Client has Swiss bank account. Client gifts his assets to his daughter living in Uruguay, which due to its territorial tax principle, will not tax the income on the Swiss bank accounts.
An indicia search will be an electronic search, paper search and relationship manager interrogation of previous residences.

Although the daughter's current residency test demonstrates she is currently resident in Uruguay, an indicia search by the Financial Institution maintaining the account may reveal client's previous residency within the last ten years was Brazil. The CRS will then oblige Financial Institutions to deem that the client is dual resident in both Uruguay and Brazil because client lived in Brazil within the previous ten years.

The client will have an opportunity to cure the indicia that she is not resident in Brazil by providing a tax clearance certificate or an equivalent document demonstrating that she has no longer has any tax liability in Brazil. If she cannot provide such document, e.g. Brazil takes a few years to provide such document, then the client's info will be reported by the Swiss bank to both Uruguay and Brazil.

5. Brief on the OECD amendment to the CRS on changes in previous residence as an indicia of current residence status.