2017 marks the first year of the Common Reporting Standard (CRS) in China. In the face of an increasingly stringent tax environment, your overseas assets are at risk of exposure. Have you properly addressed CRS and set up your offshore account? If not, you may need a Commonwealth of Dominica passport. Why is this the case? What is the relationship between a Dominica passport, effective CRS compliance, and the opening of offshore accounts?
Below, we provide an overview of knowledge regarding offshore accounts.
I. Definition of an Offshore Account
An offshore account, also known as an OSA (Offshore Account) account, is an account opened by natural persons, legal entities (including Chinese-invested enterprises registered abroad), government agencies, international organizations, and other economic organizations located outside the territory (including Hong Kong, Macau, and Taiwan), as well as overseas support institutions of Chinese-funded financial institutions—excluding overseas representative offices and branches of domestic institutions—at the offshore banking department of a domestic bank that has legally obtained the qualification to operate offshore banking business. The advantages of an offshore account include fewer foreign exchange controls and, from the perspective of capital security, greater safety and less stringent supervision by the State Administration of Foreign Exchange.
In finance, an offshore account refers to a bank account opened by a depositor outside their country of residence. Conversely, a bank located within the country where the depositor resides is called an onshore bank or a domestic bank.
II. Opening an Offshore Account
In the development of offshore accounts, the process of opening an account can be roughly divided into three stages: opening with a passport only; opening with a passport plus permanent address; and opening with a passport, three months of utility bills, and a tax residency declaration.
Opening with a Passport Only
This stage of opening an offshore account is quite dated, dating back to a time when many people did not understand the difference between onshore and offshore accounts. High-net-worth individuals with investment foresight had already completed opening overseas accounts using their own passports and utilized these accounts to complete various investments, reaping significant benefits.
Opening with a Passport + Permanent Address
A turning point for offshore accounts, where simply using a passport was no longer sufficient to meet bank requirements. Financial institutions began requiring clients to provide an address to assist in the account opening process. The requirements for proof of address were relatively broad, such as property deeds or rental agreements, which could serve as proof of address.
Opening with a Passport + Three Months of Utility Bills + Tax Residency Declaration
Today, the documentation requirements for opening an offshore account are becoming increasingly comprehensive and stringent. Not only is proof of identity (passport) required, but also proof of permanent residence such as three months of utility bills, and, more importantly, a personal tax identification number to determine tax residency.
III. With the requirements for opening offshore accounts becoming increasingly stringent, why do so many high-net-worth individuals still want to own one?
This is mainly because offshore accounts offer the following major advantages:
1. Freedom of Capital Allocation: A client's offshore account is equivalent to an account opened at an overseas bank, allowing for the free allocation of funds from the offshore account without being subject to domestic foreign exchange controls.
2. Unrestricted Deposit Interest Rates and Types: Deposit interest rates and types are not subject to domestic regulatory restrictions, offering more favorable rates and flexible access compared to similar deposits in domestic banks. Large deposits, in particular, can be customized according to client needs in terms of interest rates, terms, etc., providing flexibility and convenience.
3. Improved Comprehensive Operational Efficiency of Domestic and Overseas Funds: One can fully utilize the bank's comprehensive service features, which provide both onshore business and overseas banking functions, to reduce comprehensive capital costs, accelerate the turnover of domestic and overseas funds, and improve the efficiency of capital utilization.
4. Domestic Control, Overseas Operation: Offshore accounts can be managed through online banking, instructions, etc.
5. The Chinese government exempts taxes on actual income obtained from offshore accounts.
However, with China and 101 other countries and regions joining the CRS, the era of global taxation has arrived, and the era of tax exemption for offshore accounts will soon be a thing of the past. It is believed that the overseas financial information of many high-net-worth individuals will be disclosed, and various types of income generated overseas will be subject to personal income tax. So, how can high-net-worth individuals respond reasonably?
By obtaining a passport from a country that has not yet joined the CRS and is tax-free globally, such as the Commonwealth of Dominica, one can open an offshore account as a citizen of Dominica and then transfer overseas assets into that offshore account. According to the CRS principle of automatic exchange of financial account information, there is no need to disclose financial account information to China.
How to apply for a Dominica passport? You can do so in the following two ways:
1. Invest (donate) at least $100,000 to the Dominica Government Fund;
2. Citizenship by Real Estate Investment: Invest no less than $200,000 in a government-approved real estate project.
As one of the earliest immigration companies in China to promote the Dominica citizenship program, Worldway Group has a good relationship with the government of Dominica. Prime Minister of Dominica, Mr. Roosevelt Skerrit, has visited China twice to promote the Dominica passport program and visited the Hong Kong and Shanghai offices of Worldway Group respectively. Mr. Vince Henderson, Ambassador and Permanent Representative of Dominica to the United Nations, visited the Shenzhen office of Worldway Group. Dominica dignitaries have successively given high affirmation to the achievements made by Worldway in the field of investment immigration and awarded Worldway the honorary certificate of "Valuable Partner of the Dominica Citizenship by Investment Program."
For more details on the Dominica passport, please call: 400—9626—886.
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