So I often meet with individuals who argue that they can be tax free. Of course it’s possible but very difficult if someone is from
1. The US – https://www.htj.tax/streamlined/
2. Canada – https://www.mooresrowland.tax/2019/11/becoming-tax-non-resident-in-canada.html
3. Australia (and NZ) – https://www.mooresrowland.tax/2019/11/australia-tax-residence-and-fiscal.html
4. UK – https://www.mooresrowland.tax/2020/01/tax-residence-and-fiscal-domicile-in-uk.html
5. Europe – https://www.mooresrowland.tax/2020/01/the-eu-taxing-non-resident-citizens.html
But while it is possible, there are other rules around banking. Especially CRS and BEPs
1. CRS is based on the principle that an account holder must be tax resident somewhere – https://www.mooresrowland.tax/2019/11/further-measures-on-tax-transparency.html
2. BEPs – https://www.oecd.org/tax/beps/
CRS and BEPS means that countries are in the process of passing local legislation to empower greater transparency, reduce tax evasion and reduce tax avoidance.
In the EU we have the Anti-Money Laundering directives – AMLD 4 & 5
Consistent with CRS and BEPS, it requires financial institutions to enact policies to ensure transparency and reduce evasion / avoidance. Key components include –
1. Financial institutions now are required to file an SAR (Suspicious Activity Report)?
2. Enhanced due diligence procedures and how to understand the source of a client’s funds
Now the problem is that international entrepreneurs without a tax residence is this. Even though their tax free lifestyle may be legally correct, they cannot confirm their “source of funds”. Invoices can be faked. Company audit reports likewise can be faked. For many banks? A tax return is undisputed proof of funding sources. And without this proof? How else can they prove that money is legitimately earned?
Consider this lady in the UK who could not prove her source of funds –