How Offshore Jurisdictions Deal with

AEoI/CRS so far?
Offshore jurisdictions and tax havens around the world are hotspots for high net worth individuals
and corporations who want to bend the tax rules - both legally and illegally. However, as we enter the
age of globalization, we’re finding that countries are coming together to stop tax evasion and money
laundering.

One of the ways countries around the world are doing this is by adopting a new set of regulations that
was created just a few short years ago, namely AEoI/CRS - which basically designed to end secrecy, for
better or worse.

In this article, we’ll look at AEoI and CRS, and then, we’ll delve into a few case studies on offshore
jurisdictions and tax havens around the world and how these new regulations have affected them.

Back to basics: What are AEoI and CRS?

The first step in doing something to combat tax evasion was to create a guideline for reporting. This
guideline is known as the Common Reporting Standard, or CRS for short. Through this information
standard, financial information is automatically exchanged between participating countries and
jurisdictions.

Some of the information that is automatically exchanged with the CRS includes the “reportable
person’s” name, address, tax ID number, and birthplace/date. Other information includes the account
number and financial institution’s identifying information, as well as capital gains.

Currently there are a total of 97 countries in agreement, with more expected to join later. The first
reporting happened just last year, with more reporting for the first time in 2018. Before the CRS was
conceived of in 2014, countries in the treaty would have to share information on assets, income, and
other tax information only upon request. This was largely inconvenience and ineffective in terms of
tax evasion. An automatic transfer of information is a much more reliable system on paper.

Some of the countries that are currently involved in CRS include all of the OECD countries and EU
countries. Others include India, Costa Rica, Malaysia, Singapore, Latvia, China, Argentina, and Brazil.
Interestingly enough, the United States isn’t involved, although the country does offer information -
at its own terms.

AEoI/CRS changes offshore jurisdictions' economy dynamics

As we mentioned before, tax evasion was once relatively easy for people and companies investing in
offshore jurisdictions and tax havens. The bitter truth is that countries around the world hemorrhage
money because of tax evasion. Still, not everyone thinks AEoI and CRS are a great idea - including us.

Private sector firms and individuals tend to feel that these new regulations are too invasive.
Moreover, the media somehow fails to explain well about the difference between tax evasion - which
is illegal - and tax avoidance - which is legal. The public tends to believe that all efforts in minimizing
taxes fall under the umbrella term of tax evasion.
All in all, the AEoI/CRS policies and the worldwide push toward transparencies have changed the way
asset holders secure their assets. Not only that, but the changes also impacted offshore jurisdictions'
economy.

Let’s look at offshore jurisdictions and countries around the world to see how these regulations have
affected them.

A CRS Tour Around the World

Countries and tax havens around the world have dealt with CRS differently, and they’re all feeling
different impacts from the regulations. Let's do a very brief update on some top offshore
jurisdictions.

Cayman Islands

The Cayman Islands has had a somewhat rocky rollout, but thanks to a fast streamlining of guidelines,
CRS is now being implemented. Regardless of the compliance, Cayman Islands still holds the
reputation as 'notorious tax haven' - which doesn't sound positive, obviously.

Switzerland

When we look to Switzerland, we can see that the country has undergone massive changes. For
example, the jurisdiction's relationship with India has agreed upon policies that effectively reduced
the amount of “Black Money” in loans and deposits by Indians. On the other hand, India is now able
to get information about the financial account information about its residents investing in other
countries.

The jurisdiction is now focusing on wealth management and fintech (particularly blockchain
technology adoption) to keep the economy running like a well-oiled machine.

Singapore

Singapore, like Switzerland, has disrupted its financial sector due to the changes initiated by
AEoI/CRS. The changes resulted in losing assets under management, particularly from nearby
countries, such as Indonesia. Since then, the jurisdiction focuses on wealth management products
and continues to push its fintech sector.

CRS-wise, data is being shared with Australia for the first time. The CRS is helping both countries fight
tax evasion on a whole new level. The Inland Revenue Authority in Singapore is working diligently to
offer a simple rollout with extensive online guidance, a trend we see in many countries.

Singapore has recently activated the information exchange with 61 countries.

Hong Kong

After some period of hesitations, Hong Kong was finally committed to complying with AEoI/CRS.
However, as with all regulations, there will always be loopholes. For instance, in Hong Kong, there’s
the ORS (Occupational Retirement Scheme). This is classified as a non-reporting financial institution,
which means there’s no CRS compliance.

All in all, the compliance to CRS means that Hong Kong can finally tear down the 'tax haven' label on
it, and rebrand itself as an offshore jurisdiction that offers both solid asset protection and attractive
investment opportunities to asset holders, especially startups.

Puerto Rico

Meanwhile, in Puerto Rico, the focus is still on the post-natural-disaster recovery. Nevertheless, the
financial sector in the jurisdiction is still thriving - thanks to the no AEoI/CRS compliance.

Indeed, as an unincorporated U.S. territory, Puerto Rico enjoys the same 'no AEoI/CRS policies agreed'
statement simply because the U.S. isn’t a participating country. Due to this, Puerto Rico and The U.S.
are increasingly attractive to asset holders and companies - especially non-U.S.-based - for the
purpose of asset protection and tax planning.

United States

The U.S. is set to be the biggest and strongest offshore jurisdictions in the world. It's still behind
Switzerland in term of total assets managed, but due to its non-compliance to AEoI/CRS the number
of individual and organizational clients securing their holdings in U.S.-based jurisdictions like Delaware
and Wyoming will only increase. The U.S. can potentially take over Switzerland as the largest - and
allegedly, the best - tax haven in the world not far ahead in the future.

The Bottom Line on CRS…

Around the world, tax havens and offshore jurisdictions are in compliance with CRS. This collaborative
movement is helping reduce tax evasion. While there are countries who aren’t in compliance, and
there are certainly loopholes to the CRS, the system seems to be a broad stroke in progressing the
fight on money laundering and tax evasion that steals trillions from countries around the globe.

Only time will tell whether CRS' complex implementation is benefiting the global economy or not.
One thing for sure, asset holders will always find ways to avoid taxes legally, while getting top-notch
asset protections from offshore jurisdictions that boast some of the safest financial institutions in the
world.