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OECD Releases Panama CRS Avoidance Update

by Ulrika Lomas, Lowtax.net, Brussels
03 December, 2018

The OECD has added to its guidance for financial institutions on ensuring that citizenship by investment and residency by investment schemes are not used to circumvent the new international tax information reporting standard, the Common Reporting Standard (CRS).

The CRS provides for the automatic exchange between participating states of the financial account information of taxpayers resident overseas annually with their home state.

The OECD reported that it has been working closely with Panama over the last weeks to ensure that any risks created by its RBI programs are effectively addressed. The OECD said: "As a result of that work, we are pleased to provide further clarity in relation to Panama's Reforestation Investor Permit, Economic Solvency Permit, and Friendly Nations Permit programmes. Importantly, under each of these programs, Panama ensures that residence documentation provided to successful applicants is identified as issued under the relevant programme."

As a result of the discussions, the OECD has updated the "guidance for financial institutions on CBI/RBI schemes" document to clarify that only those taxpayers who have obtained residency through the aforementioned RBI schemes should be considered potentially high risk. The OECD's updated guidance provides information for financial institutions on how to determine whether this is the case. The OECD has said that only those persons whose residency documentation specifies that residency has been obtained through an RBI scheme should be considered as higher risk for CRS avoidance purposes and if necessary should be subject to the enhanced due diligence procedures set out in its guidance, to ensure that the documentation is not misused by account holders for the purpose of circumventing the CRS.

It clarified that, "in other cases, Panama-issued residency documentation is not by itself to be treated as being potentially high-risk from the perspective of the CRS due diligence procedures."

The OECD said its guidance will be updated on an ongoing basis where other jurisdictions adopt effective mitigating measures.

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