Residence/Citizenship by investment schemes

This section will be updated on an ongoing basis.

• What are CBI/RBI schemes?
• How can CBI/RBI schemes be misused to circumvent CRS reporting?
• Which CBI/RBI schemes present a potentially high risk?
• What should Financial Institutions do?

What are CBI/RBI schemes?

"Citizenship by Investment" (CBI) and "Residence by Investment" (RBI) schemes are being offered by a substantial number of jurisdictions and allow foreign individuals to obtain citizenship or temporary or permanent residence rights on the basis of local investments or against a flat fee.

Individuals may be interested in these schemes for a number of legitimate reasons, including the wish to start a new business in the jurisdiction, greater mobility thanks to visa-free travel, better education and job opportunities for children, or the right to live in a country with political stability. At the same time, information released in the marketplace and obtained through the OECD's Common Reporting Standard (CRS) public disclosure facility highlights the abuse of CBI/RBI schemes to circumvent reporting under the CRS.

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How can CBI/RBI schemes be misused to circumvent CRS reporting?

CBI/RBI schemes can be misused to undermine the CRS due diligence procedures. This may lead to inaccurate or incomplete reporting under the CRS, in particular when not all jurisdictions of tax residence are disclosed to the Financial Institution. Such a scenario could arise where an individual does not actually or not only reside in the CBI/RBI jurisdiction, but claims to be resident for tax purposes only in such jurisdiction and provides his Financial Institution with supporting documentation issued under the CBI/RBI scheme, for example a certificate of residence, ID card or passport.

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Which CBI/RBI schemes present a potentially high risk?

Not all RBI/CBI schemes present a high risk of being used to circumvent the CRS. Schemes that are potentially high-risk for these purposes are those that give a taxpayer access to a low personal income tax rate of less than 10% on offshore financial assets and do not require significant physical presence of at least 90 days in the jurisdiction offering the CBI/RBI scheme. This is based on the premise that most individuals seeking to circumvent the CRS via CBI/RBI schemes will wish to avoid income tax on their offshore financial assets in the CBI/RBI jurisdiction and would not be willing to fundamentally change their lifestyle by leaving their original jurisdiction of residence and relocating to the CBI/RBI jurisdiction.

Where CBI/RBI schemes meet both criteria, but the residence documentation provided to successful applicants is clearly identified as issued under the respective CBI/RBI scheme, only such specific residence documentation should be perceived as potentially high-risk in the context of the CRS due diligence procedures, and subject to the additional guidance for Financial Institutions, outlined below. These schemes and the respective residence documentation are listed in the  below table.

Note: The information in the table reflects the current state of the OECD’s analysis of CBI/RBI schemes and will be updated on an ongoing basis.

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What should Financial Institutions do?

Under Section VII of the CRS, a Financial Institution may not rely on a self-certification or Documentary Evidence if the Financial Institution knows or has reason to know that the self-certification or Documentary Evidence is incorrect or unreliable. The same applies with respect to Pre-existing High-Value Accounts, where a relationship manager has actual knowledge that the self-certification or Documentary Evidence is incorrect or unreliable.

In making the determination whether a Financial Institution has reason to know that a self-certification or Documentary Evidence is incorrect or unreliable, it should take into account all relevant information available to the Financial Institution, including the results of the OECD's CBI/RBI risk analysis. As a result, where, taking into account all relevant information, the facts and circumstances would lead the Financial Institution to have doubts as to the tax residency(ies) of an Account Holder or Controlling Person, it should take appropriate measures to ascertain the tax residency(ies) of such persons.

To the extent that the doubt is related to the fact that the Account Holder or Controlling Person is claiming residence in a jurisdiction offering a potentially high-risk CBI/RBI scheme, FIs may consider raising further questions, including:

• Did you obtain residence rights under a CBI/RBI scheme?
• Do you hold residence rights in any other jurisdiction(s)?
• Have you spent more than 90 days in any other jurisdiction(s) during the previous year?
• In which jurisdiction(s) have you filed personal income tax returns during the previous year?

The responses to the above questions should assist Financial Institutions in ascertaining whether the provided self-certification or Documentary Evidence is incorrect or unreliable.

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