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Legal "non-disclosure" overseas retirement planning

Contributed by Invest Offshore
18 October, 2017

There are some cash flow planning opportunities for foreign persons (Non-U.S. Persons) who maintain for the purpose of retirement the custodian of their ORS Hong Kong Government regulated, registered and Foreign Act Tax Compliance Act (FATCA) recognized foreign retirement plan in the USA.

The advent of CRS has created additional U.S. planning opportunities for international families.

The U.S. has not signed on to be a participant in Common Reporting Standard (CRS) therefore a US Custodian is exempt from CRS requirements and also avoids the possibility of sovereign risk in countries who are CRS participants. Because the U.S. is generally a non-blacklisted jurisdiction, global families are increasingly choosing U.S. trust situs for their retirement plan to escape CRS requirements and avoid the possibility of sovereign risk in their home countries. U.D. Dollar transfers cross-borders come under the domain of FATCA.

You want to save for retirement, then you construct an ORS402(b) retirement plan that is recognized tax compliant and exempt from FATCA and CRS and by so doing you are exempt from capital controls. What has to be exchanged? Each country will annually automatically exchange this information with the other countries that have joined the CRS:

  • Name, address, TIN, date and place of birth of each reportable person
  • Account number
  • Name and identifying number of reporting financial institution
  • Account balance or value as of end of relevant calendar or, if account was closed during such year or period, closure of account

So what's the difference between CRS and FATCA? Despite the overlap between FATCA and CRS, there remain important differences between the two regimes and financial institutions will need to have in place adequate procedures to deal with them. In particular,

  • there are different thresholds for reporting under FATCA and CRS;
  • FATCA bases reporting on "citizenship" and "residency"; under CRS reporting is based on "tax residency";
  • FATCA and CRS follow different approaches to reportability by "controlling persons" of Passive Non-Financial Entities;
  • FATCA and CRS require different due diligence procedures in different jurisdictions.

The net result is that different reporting regimes may apply depending on

  1. the location of the asset,
  2. the citizenship or residency of the account holder and
  3. the location of the financial institution.

CRS reporting has no minimum financial account thresholds for reporting and that means CRS requires financial institutions to identify all customers' residency Although some observers call CRS "a global extension of FATCA," and sometimes referred to as GATCA, the systems have key differences. Unlike FATCA – which requires financial institutions to look only for U.S. reportable accounts – CRS requires financial institutions to identify all customers' residency. Under FATCA, financial institutions must report significantly higher volumes of information. CRS penalty The proposed CRS penalty appears to be a strict liability penalty, since intent is not part of the test in determining whether the penalty applies. Defenses to the penalty would therefore generally be limited to factual mistake (i.e. the assessed taxpayer was not in fact non-compliant) or due diligence.


Look before you leap because under money laundering laws, FATCA or CRS, the reality is that those engaged in tax evasion have nowhere left to hide. With financial institutions under one obligation or another to report the identity of their account holders, the authorities are going to find out about assets to ensure taxes are properly levied. Under the circumstances, those with secreted assets should seek advice.

With the automatic exchange of information between jurisdictions your secret is unlikely to remain secret for very much longer so seek advice.

The Foreign Account Tax Compliance Act (FATCA) was enacted to combat tax evasion by U.S. Persons using foreign accounts or entities. FATCA encompasses all dealings in U.S. Dollars, whether involving a U.S. Person or non-U.S. Person, forcing all financial institutions globally to disclose every U.S. Dollar transaction, including details of the parties and counter-parties to 3rd and 4th hand. Net result:

Only entities that are FATCA compliant can deal in U.S. Dollars Those impacted by FATCA requirements include every U.S. individual with a foreign account, every entity with U.S. beneficial owners or beneficiaries, and every non-U.S. Person dealing in U.S. Dollars. To comply, the documentary evidence issued by the U.S. Internal Revenue Service (IRS) must contain sufficient information to support your FATCA status.


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