a) Annual filing of data to automatic report in compliance to the OECD Common Reporting Standard is a minimum cost annually of $600.00 per account and they have 2.5 Trillion under management, so you can just imagine the reporting costs; $600 times how many clients?
b) The new Common Reporting Standard has rules on data reporting but no rules on data management; which means Morgan Stanley clients are angry that their investment account has no data management, no privacy, no confidentiality, so they are leaving Morgan Stanley.
Conclusion: Our program solves both problems.
Answer: FATCA finally got people’s attention because the client could suffer a 30% withholding charge if not compliant. However, the Common Reporting Standard is FATCA on Steroids because the client, the intermediary, the bank, the custodian and/or anyone that touches that money can be criminally charged for money laundering if not compliant to data collection rules! 30% Withholding was a concern to the client’s money BUT Criminal Charges to all of those who touched the money means that from the Wealth Managers, we are now receiving a red carpet treatment along with brass horns blaring!
Publicly there is so much confusion over the fundamental question of regulatory reporting and tax compliance overseas. Where you have a company effectively connected to an Indonesian Person (for example) you definitely have a reporting obligation when you are a director or when you effectively command and/or control an overseas company. Whether or not that leads to a further reporting or further inquiry, whether it is under the tax code or AEoI, or what have you, is really beside the point because there are three issues:
- Establishing a foreign company does not determine foreign residency
- Where the company is controlled determines the foreign residency
- Determining residency depends on who is the owner with the command and control
Let’s say you need a foreign company to collect commission, receive your contract buyout and to collect any payments in order to get paid gross rather than suffering current tax. Then what you’ll need is a Tax Department Certificate to the effect that your foreign company has residency in that foreign country for Double Taxation Treaty purposes.
In Hong Kong, not like most foreign jurisdictions, it is possible to bolt together an exempt from reporting at the individual tax compliant level, with the tax deductible employer contribution level. An ”Exempt Beneficiary” is the crucial criteria required to obtain a deferral of income benefit for the member of this compliant scheme.
It is a foreign occupational pension scheme that is Hong Kong government regulated, registered and recognized that is acknowledged in the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS). This (recommended) pension is recognized in the O.E.C.D. Common Reporting Standard and Intergovernmental Agreements (IGA) globally as exempt from reporting at the financial institution level. This structure is also exempt from the Automatic Exchange of Financial Information (AEoI).
The Money Flow
The money flow must go from the Hong Kong sponsor to the Anti Money Laundering (AML) Licensed and recognized U.S. registered Trustee Account that is Automatic Exchange of Information (AEoI) tax rules compliant and exempt; non-reporting Foreign Financial Institution (FFI) and excluded account. You stay a director of the Foreign Company alongside the Exempt Hong Kong ORSO Trustee as co- director.
The correct first step is paramount because, for example, if you have a foreign company owned by a BVI, Panama or Cayman Island company, then what you have is a disguise that backfires on you because you are saying where the company is controlled from, and therefore the foreign company is only a device for tax evasion.
Occupational retirement law is not a tax haven, insurance product, company or a personal trust. Get the Offshore Capital Structure whitepaper.