Since the State Taxation Administration released the "Administrative Measures for Due Diligence of Tax Information Collection for Non-Resident Financial Accounts (Draft for Comment)" on October 4, 2016, the Common Reporting Standard (CRS) has suddenly entered the public eye. This stone cast into the water has caused quite a stir, raising concerns among high-net-worth clients.
Subsequently, in 2016, the Central Bank issued the strictest foreign exchange control policy in history. Starting July 1, 2017, the "Administrative Measures for Large-Value and Suspicious Transaction Reporting by Financial Institutions" was implemented, not only tightening controls on offshore remittances but also adjusting the reporting standards for large-value cash transactions for individual citizens.
Now the boots have finally landed! On May 19, six ministries including the Ministry of Finance jointly released the "Administrative Measures for Due Diligence of Tax Information Collection for Non-Resident Financial Accounts" (hereinafter referred to as the "Measures"). Effective July 1, financial institutions within China will conduct due diligence on deposit accounts, custodial accounts, equity or debt interests in investment institutions, and insurance or annuity contracts with cash value. Regardless of the amount, these accounts must undergo due diligence to identify whether the account holder is a non-resident.
The "Measures" require financial institutions to complete due diligence on existing individual high-net-worth accounts (with an aggregate balance exceeding $1 million as of June 30, 2017) by the end of 2017; and to complete due diligence on existing individual low-net-worth accounts (with an aggregate balance of less than $1 million) by the end of 2018. For existing low-net-worth individual accounts, if the aggregate balance exceeds $1 million at the end of any calendar year after June 30, 2017, the financial institution shall complete due diligence on the account by December 31 of the following year in accordance with prescribed procedures. In other words, if you are a Chinese tax resident with an overseas account balance exceeding $1 million, your information will be exchanged with domestic tax authorities.
The formulation and issuance of the "Measures" are based on China's participation in the CRS agreement in December 2015, where China committed to becoming one of the second batch of countries (regions) to implement the CRS. With the strong support of the G20, a total of 101 countries worldwide, including China, have now joined the CRS.
According to the timeline committed by China to the G20 for implementing the "Standard," the first external information exchange will take place in September 2018. This means that after September 2018, China can exchange financial account tax information with any of the 100 countries and regions mentioned above. This signifies that while the "exposure" of tax information for China's high-net-worth individuals is not happening immediately, it is not far off.
With foreign exchange control and the CRS approaching, how should high-net-worth individuals respond?
Obtaining a versatile Commonwealth passport, such as a Dominica passport, allows you to open overseas financial accounts as a Dominica citizen. By placing your overseas assets and wealth information under the name of your Dominica citizenship account—and given that the Dominica government maintains a policy of confidentiality regarding its citizens' information—you can avoid the risks of asset and wealth data exposure. This ensures both asset security and personal data protection, which can be considered a reasonable way to address the CRS at the source, perfectly achieving the preservation and appreciation of your assets.
Currently, through WorldWay for Dominica investment migration, you only need to invest from $100,000 to quickly apply for a Dominica passport for your whole family across four generations. WorldWay clients have previously set an industry record with approvals in just 10 working days. Following the recent letter from the Prime Minister of Dominica to WorldWay, in which he emphasized simplifying the application process and accelerating approval speeds for WorldWay clients, it means that from now on, it will be even simpler, more convenient, and faster for investors to apply for Dominica citizenship by investment through WorldWay.
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