Citizenship and Residency by Investment Schemes: Potential to Avoid the Common Reporting Standard for Automatic Exchange of Information

17 Pages Posted: 23 Mar 2018

See all articles by Andres Knobel

Andres Knobel

Tax Justice Network

Frederik Heitmüller

Independent; Leiden University; Tax Justice Network

Date Written: March 12, 2018

Abstract

Countries are offering citizenship and residency for investment schemes in an attempt to raise revenues or attract rich individuals. While there may be legitimate reasons for acquiring such residency or citizenship certificates (e.g. visa-free traveling, studying or working in a different country), these schemes can also be exploited by individuals trying to escape legitimate prosecutions for crimes, to engage in money laundering or to violate international sanctions. Also importantly, to avoid reporting under automatic exchange of information for tax purposes. The Common Reporting Standard (CRS) for automatic exchange of information requires financial institutions to determine the account holder’s residency in order to share their information with the relevant jurisdiction’s authority. If the account holder acquires citizenship or residency certificates, not to genuinely move to a different country but only to trick their bank and have them believe that they reside there, their relevant banking information will not be sent to the correct jurisdiction, or may not even be collected at all. This paper describes the different factors that reduce or increase risks of citizenship and residency certificates from being used to avoid the CRS, and proposals on how to address this issue. Annex I contains an updated list of all the jurisdictions offering these schemes, classified by their level of risk.

Suggested Citation

Knobel, Andres and Heitmüller, Frederik and Heitmüller, Frederik, Citizenship and Residency by Investment Schemes: Potential to Avoid the Common Reporting Standard for Automatic Exchange of Information (March 12, 2018). Available at SSRN: https://ssrn.com/abstract=3144444 or http://dx.doi.org/10.2139/ssrn.3144444

Andres Knobel (Contact Author)

Tax Justice Network ( email )

Argentina

Frederik Heitmüller

Leiden University ( email )

Postbus 9500
Leiden, Zuid Holland 2300 RA
Netherlands

Independent ( email )

Tax Justice Network ( email )

Israel

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