offshore banking

raywisdom

i live in el salvador and have several offshore bank accounts in curacao, british virgin islands, antigua and barbuda, ect...... if i decide to move to canada in the distant future, will the canada revenue agency find out about my offshore bank accounts if i didnt notify my banks that i relocated to another part of the world? how would the cra find out about my offshore bank accounts if i didnt tell my banks that i was moving to another country? can someone please tell me. thank you.

dividendhero

You heard of the "Panama Papers"? I'd assume that all offshore centres will eventually spring leaks

bowlhead99

raywisdom wrote: »

i live in el salvador and have several offshore bank accounts in curacao, british virgin islands, antigua and barbuda, ect...... if i decide to move to canada in the distant future, will the canada revenue agency find out about my offshore bank accounts if i didnt notify my banks that i relocated to another part of the world? how would the cra find out about my offshore bank accounts if i didnt tell my banks that i was moving to another country? can someone please tell me. thank you.

Many countries have historically had agreements to share financial information only on request of foreign tax authorities or law enforcement, but since a couple of years ago, over 100 countries are signed up to automatic exchange of information (AEOI) between financial instituions (banks and investment funds and custodians and insurance companies) and tax authorities internationally.

See http://www.oecd.org/tax/automatic-exchange/common-reporting-standard/

So in 2018, banks and other financial institutions in Curacao, BVI, Cayman, Antiuga, Panama etc will all share information with a local government department about the account values and interest paid on accounts held by Canadian residents (and residents of many other participating countries). The government department or tax authority will package that information up and send it over to Canada (or other relevant participating jurisdiction where the customer is resident) in a standard international format known as the "common reporting standard" or "CRS".

You can see a list of participating countries and their timescales here: http://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/crs-by-jurisdiction/crs-by-jurisdiction-2018.htm . It is a set of regulations being brought in over a period of years, so you can switch between the list of countries who first exchange information in 2018 (Canada, Australia, Hong Kong, Antigua, Curacao, Mauritius, Brazil, Switzerland etc) or in 2017 (UK, rest of EU, Cayman, BVI, Channel Islands, Mexico, Argentina, India etc).

BVI is one example of a country which will send data to Canada, see http://www.bvi.gov.vg/aeoi-crs. First exchange will be during 2018, for 2017 financial year data.

So, there are mechanisms in place to send this data automatically and annually. The question is, as you say, how will the bank know that you are resident in Canada, to help them decide to send the data to Canada authorities and not to El Salvador authorities?

Well, one thing they will do is ask you to confirm your tax residence or residences - fill out a self-certification form and sign it under penalty of perjury. This will be enforced from this year for any new accounts that they open. For pre-existing customers who opened the account at a time before the new rules came in, many banks will go back and ask those existing customers to fill out the same form - to save them the risk of looking at the customer files and trying to guess for themselves, and getting it wrong.

As AEOI is quite new, banks have a couple of years to finalise their customer statuses for reporting. When they get the forms from you they will review them against their customer files to ensure they do not have 'reason to know' that the form may be incorrect. And if they do not receive a form at all, they will have to just go with the infomation they hold and make their own judgement.

For example, are there any conflicting indicia of your tax status in the customer master file, such as - if you say you are only resident in El Salvador are there indications you are a Canadian resident such as a correspondence address there? Is there a phone number on file to contact you in Canada and no phone number on file to contact you locally in the BVI? If so you are probably not a local BVI resident but an overseas resident living in Canada. Is there a standing order / standing payment instructions from your brokerage / investment account to make regular payments to a Canadian bank account? Have you given power of attorney to a person with a Canadian address? Those sorts of thing are all covered by the regulations. There are of course guidance notes for dealing with situations where the bank account is held by a passive holding company whose controller appears to be resident in a reportable jurisdiction, based on the information they collected about the customer.

Example of guidance (http://www.bvi.gov.vg/sites/default/files/ITA/bvi_draft_crs_guidance_notes_final_update_1.1_final.pdf)

The banks are supposed to put in place a monitoring programme to identify potential changes of status but if you do not tell them that you have moved, and do not give them any indicia of change of country status (e.g. new addresses and phone numbers) potentially they won't know. They will just start reporting your data to the country that they think is your country of residence. At the moment El Salvador is not one of the countries signed up to the scheme, so they would not send the data there just yet unless El Salvador comes asking, but El Salvador might choose to sign up to the 'automatic' scheme in future.

Governments of countries such as BVI, Cayman, Panama, Antigua etc are under political pressure to have strong regulations and guidance for their local financial institutions to comply with the international agreements. For example in Cayman if the director of a bank or investment fund does not implement proper procedures for CRS he can attract a $50k fine ; a person giving a false self-certification of their status can get a penalty of $20k ($50k if corporate). In Luxembourg the offending financial institution can be fined up to a percentage of the assets that should have been reported and were not, even though the assets belong to the customer and not the bank.

So, although these regulations are only coming in slowly, and some banks will implement the rules more casually and slowly than others to meet their obligations, there are gradually fewer places to 'hide'. Countries whose economies and GDP are based on financial services (like Cayman or BVI) are going to need to comply with international standards in order for financial institutions from other parts of the world to take them seriously and let them have their business.