Overseas property
Articles

OECD toughens bank checks for participants of residence and citizenship-by-investment programmes

On 20 November 2018, the OECD published a list of the countries whose residence or citizenship-by-investment programmes it regards as high-risk. The OECD recommends that banks more thoroughly check the clients who obtained citizenship or residence under these programmes and especially the documents verifying the investors’ physical presence in certain countries. This applies not only to new clients but also to those holding at least €1mn in bank accounts.

Which programmes are recognised as high-risk?

The OECD established two main criteria to identify high-risk investment programmes: the low-income tax on financial assets in the issuing country and the absence of investor residence requirements.


Country

Residence or citizenship-by-investment programme regarded as high-risk by the OECD

Antigua and Barbuda

Antigua and Barbuda Citizenship by  Investment

Permanent Residence Certificate

Bahamas

Bahamas Economic Permanent Residency

Bahrain

Bahrain Residence by Investment

Barbados

Special Entry and Residence Permit

Cyprus

Citizenship by Investment: Scheme for Naturalisation of Investors in Cyprus by Exception

Residence by Investment

Dominica

Citizenship by Investment

Grenada

Grenada Citizenship by Investment

Malaysia

Malaysia My Second Home Programme

Malta

Malta Individual Investor Programme

Malta Residence and Visa Programme

Qatar

Residence Visa for Real Estate Owner

Panama

Reforestation Investor Permit

Economic Solvency Permit

Friendly Nations Permit

St. Kitts and Nevis

Citizenship by Investment

Residence by Investment

St. Lucia

Citizenship by Investment Saint Lucia

Seychelles

Type 1 Investor Visa

Turks and Caicos

Permanent Residence Certificate via Undertaking and Investment in a Home

Permanent Residence Certificate via Investment in a Designated Public Sector Project

Permanent Residence Certificate via Investment in a Home or Business

United Arab Emirates

UAE Residence by Investment

Vanuatu

Development Support Programme

Self-Funded Visa

Land-Owner Visa

Investor Visa

What is driving the OECD initiative?

In 2016, the Multilateral Competent Authority Agreement (MCAA - an nternational treaty compelling banks, brokerages, investment bodies and insurance companies in signatory countries to provide local tax authorities with bank account information pertaining to non-residents) was signed. In turn, the local authorities pass on the obtained data to the tax authorities where the account holders are resident. The agreement has over 100 signatory countries: European states, Canada, island countries (the BVI, St. Kitts & Nevis, the Bahamas, etc.), in addition to several Asian nations (e.g., the UAE, and Saudi Arabia).

The OECD believes that residence-for-investment programmes can become a tax loophole. As reported by the organisation, the absence of tax residency control under residence and citizenship-by-investment programmes may lead to violations in reporting under the Common Reporting Standard (CRS).

What types of violations are concerned?

Residence and citizenship-by-investment programmes may be used to conceal the investor's actual tax residency. For instance, when the investor does not actually live in the country, but claims to be a tax resident there and provides the bank with the correspondent documentation: a resident's ID or passport obtained via the programme.

The OECD recommends that banks check the clients claiming to be tax residents of the high-risk jurisdictions specified. This includes clarifying residence or nationality grounds, requesting tax returns for the past few years and proof of the client's address.

Ekaterina Shabalina Ekaterina Shabalina Tranio lawyer

Subscribe not to miss new articles

We will send you a content digest not more than once a week

Subscribe
    By subscribing you accept the User agreement

    Done!

    Tranio’s managers offer advice on buying real estate overseas
    Anna Boyarchukova
    Anna Boyarchukova
    Head of Residential Department
    +44 17 4822 0039
    Send a request
      When you submit a request, you agree to our terms and conditions
      • 0% commission to Tranio
      • Residence permit support
      • Mortgage rates from 1.5%
      Ask a question

      Ask a question

      Send a request
        When you submit a request, you agree to our terms and conditions