Converting Passive NFE to Active NFE

Incorrect reporting on Active NFE

Hong Kong ORSOs and Gibraltar QNUPS blown out of the water

Mandatory Disclosure Rules and Addressing abuse of residence by Investment

 The OECD has always said the CRS is a living document, subject to refinement and improvement as inefficiencies are discovered to be used.

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USA to introduce beneficial owner register accessible on request by authorities on behalf of foreign countries.OECD to tackle UAE assisting its entities and incorporators of free trade zone companies to be synthetic tax resident Singapore guidance that its investment entity trusts should report a zero value for irrevocable settlors is a dream for tax evaders The OECD FAQ kills off irrevocable insurance wrapper loophole but remains silent on the pre-existing insurance effectively prohibited from being sold loophole.

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An entity which single-owner or entity owned by a small group of family members will be not be reporting as owner and entity both tax resident in same jurisdiction

There is confusion on how to determine tax residency of an untaxed Financial Institution versus tax residency of account holder entity.

Tax advisors have, unfortunately, convinced some clients to establish a one-person fund , listed on exchanges in say, Curacao, Malta, Cyprus, Jersey, etc. However, this is reportable because the practioner misunderstood listed with regularly traded. A flaw in the definition of an Active NFE permits easy conversion of a Passive NFE into an Active NFE

The FATCA model 1A reciprocal exchange of information does not mention that the USA will not provide the promised information on a reciprocal basis if Congress does not deem the receiving country as being appropriate to receive information. What will happen to wealth managers who simply told clients to move accounts to USA, but wealth manager maintains the portfolio management mandate. Why practioners are ignorant if they advocate placing intangible assets in a Passive Entity so that it passes the asset test to qualify as an Active NFE and hence no reporting on Controlling Persons. Which jurisdictions cannot or will not join CRS due to insurmountable political issues.

A parent company holding subsidiaries that do business or trade may qualify as an investment entity if its  purpose is to  acquire or fund companies and then hold interests in those companies as capital assets for investment purposes. Should a trust holding subsidiaries that do business or trade qualify to be an Active NFE, considering a holding company is different to a trust. What TIN should account holder provide to bank for an untaxed Active NFE? Why did the OECD update the FAQ to clarify that a reporting FI must look through non-reportable FIs holding a Passive NFE Is the asset test for an Active NFE prorated over the year or intended purpose of the assets.

EU Code of Conduct Group (business taxation) assesses every country in the world if it is an uncooperative tax haven. The criteria for being grey listed is failure of two out of three of the following criteria (i) commit to tax transparency, (ii) fair tax competition and (ii) disallow booking of untaxed profits without real economic activity. Why unit-linked disability and unit-linked surety bonds are reportable financial accounts despite claim to the contrary of the insurers. Domestic law low-risk excluded accounts are complex and difficult to attain. The single dumbest loophole in the CRS is the exclusion from review and reporting if a pre-existing individual owns an insurance wrapper whose jurisdiction did not allow the policy to be bought from the insurer’s jurisdiction.

FIs incorrectly categorizing entity as an Active NFE. No annual validation of Active NFE status. Incorrect carve out of Active NFE from Investment entity. Embed investments in Active NFE. Equity interest owned by manager. Over the counter derivatives Surety bonds Non-cash value insurance such as welfare, disability Irrevocable insurance Residence by investment Non-participating jurisdiction FIs Nil report settlors of irrevocable investment entity trust

1. Listing mistaken as regularly traded Prohibited preexisting insurance Trustee based sham retirement plans.

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By far the most popular way to avoid automatic exchange of information is the USA due to no reciprocal FATCA with China. Taiwan is also a popular non-participating jurisdiction to hide assets.

Other ways to evade tax and CRS reporting is the use of untaxed Active NFEs, listing companies on small exchanges such as Curacao, investment entities not reporting on equity interest if both the management and ownership are located in China, false residence by means of investment, hiding portfolios in sham Hong Kong retirement savings or using prohibited insurance wrappers, irrevocable insurance, and ignoring MDR to hold properties.

1. Recategorize investment entity to an Active NFE if it does the activities of holding company
2. Reporting a Non-Financial Entity (Active or Passive) account holder to place of incorporation without checking on tax residence
3. Active NFE type [A]
4. Report NFE account to wrong jurisdiction
5. Nil report for settlors of Irrevocable investment entity trusts
6. Listed entities are non-reportable persons
Ignoring FAQ
a) Cash is not a financial asset
b) Reporting on protector of investment entity trust
c) Sham Trustee pensions
d) Non-cash value insurance
e) Accepting wrong tax residence

What is categorization of an ICO?
Is Microfinance business an Active NFE if it earns mostly interest?
If an investment entity holds subsidiaries that engage in business or trades, can it be an Active NFE?
Is it always possible to look-through FIs holding Passive NFEs? What about non-participating FIs such as Custodians?
Must trustee report on protectors of investment entity trusts if FAQ is not obligatory? Must bank report on protectors of NFE trusts if no control?
What is reported or not reported if jurisdiction aligns beneficiaries of NFE trusts with investment entity trusts?
Can discretionary management agreement on one dollar make the entity an investment entity?
Which countries will likely never join AEoI
What is habitual residence in determining tax residence? Determining tax residency of entities and controlling persons?
Why do the FIs wrongly equate listed on large stock market as regularly traded?

• Tax residencies of tax transparent entities

• What is reported or not reported if jurisdiction aligns beneficiaries of NFE trusts with investment entity

• Wound up investment entity, who reports

• Fake high-volume trading to make listed entity a regularly traded

• What is difference between a non-reportable person and an Active NFE that are central banks, Government entities international organisations, regularly traded entities

• Can you fake an Active NFE charity?

• Active NFE reorganization other than emerging from bankruptcy

Coming soon

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