Article
Source: Estate Planning
Article
09.01.16
Two recent international developments have raised concerns among professionals in the international tax and estate planning communities about the continued viability of using many of the traditional off-shore “tax haven” or structured product jurisdictions such as the British Virgin Islands, the Cayman Islands, Ireland, the Isle of Man, Jersey, Liechtenstein, Luxembourg, the Netherlands, and Panama for trusts and family or private-interest foundations. These concerns have caused international practitioners and their clients to consider moving trust assets to the U.S. and the use of trusts formed in the U.S. that are governed by protective state laws with U.S. resident trustees.
New transparency The Panama Papers disclosures (i.e., leaked documents associated with the Panamanian law firm of Mossack Fonseca containing detailed information about hundreds of thousands of offshore entities) have created great concern in the ultra-wealthy foreign community that its long-treasured confidentiality will be compromised. Furthermore, many jurisdictions, including the tax havens listed above, have adopted or are on the verge of adopting an international system that will provide for the automatic sharing between participating jurisdictions of the identity and residence of the financial account holder, account detail, and reporting entity, as well as the account’s balance and value and its income, sale, and redemption proceeds. The exchange of information will begin for many jurisdictions next year, although the information that is required to be reported in 2017 is from 2016 so the jurisdictions in the earliest phase should have already started to gather the required information. This global cooperation and sharing of information system is known as the Common Reporting Standard (CRS), and it creates an information standard for the automatic information exchange (or AIE) between jurisdictions that are participating members in the program. In March 2014, the “Early Adopter Group” issued a statement declaring their support for the adoption of the CRS in their respective jurisdictions. Then in May 2014, a declaration on AIE in tax matters was first approved at the meeting of the Organization for Economic Co-operation and Development (OECD) Council at the Ministerial Level, making the CRS the first ever world-wide system of automatic information exchange.
Read more: U.S. Gains Favor as Trust Jurisdiction for Nonresidents.