Category: CRS

November 15, 2025November 15, 2025Asset Protection, CRS, Financial Planning, Offshpre Trusts, Succession Planning, Wealth ManagamentExpat Wealth At Work

Are Offshore Trusts Dead After CRS? An Expert’s Surprising Answer

Offshore trusts work as powerful wealth management tools even as global financial transparency increases. Many people think the Common Reporting Standard (CRS) has made them obsolete, but these trusts still serve valid purposes with proper structuring.

The financial world has changed. CRS requires financial institutions, including specific offshore trusts, to report account holder details, settlor information, and beneficiary data to tax authorities. These authorities share this information across borders. Tax rules for offshore trusts have grown more complex. Most structures now face income tax on distributions, capital gains from asset sales, and possible inheritance taxes.

The value of offshore trusts depends on your unique situation. Some trusts don’t need to follow CRS reporting rules. Pension trusts, charitable trusts, and those in non-participating countries like the United States, Cambodia, and Dominica offer better financial privacy.

Expat Wealth At Work explains how CRS has altered offshore trust structures. You’ll learn about important tax implications and situations where these arrangements make sense to meet legitimate wealth management goals.

What is CRS and Why It Changed Offshore Trusts

The Common Reporting Standard (CRS) marks a fundamental change in global financial transparency. This standard specifically targets offshore trusts that had previously evaded scrutiny.

The goal of the Common Reporting Standard

The Organisation for Economic Cooperation and Development (OECD) created CRS in 2014. The standard helps curb tax evasion through automatic exchange of financial information between tax authorities. This global standard draws heavily on the US Foreign Account Tax Compliance Act’s (FATCA) approach to optimising operations and cutting costs for financial institutions.

The CRS differs from FATCA’s bilateral US focus. It created a multilateral framework where participating jurisdictions share information automatically. More than 100 countries have committed to this standard since its first exchanges began in 2017.

How CRS affects financial institutions and trusts

Offshore trusts have felt significant effects. The CRS introduction explicitly highlights trust as a target. Under this framework, trust can be classified in two ways:

As a Financial Institution if its trustee is a professional trustee company or it meets specific investment management criteria
As a Passive Non-Financial Entity if its trustees consist only of individuals or private trustee companies

Both classifications need reporting, though through different mechanisms. Tax authorities now have more control than the reporting person. For the first time ever, domestic tax authorities have visibility over the offshore wealth of their residents.

What information is shared under CRS

Financial institutions must collect and report extensive details:

Personal details of reportable persons: name, address, tax identification number, and date of birth
Account numbers and balances (including at closure)
Financial activity, including distributions made to accounts
Information about controlling persons of entities

“Controlling persons” in trusts include settlors, trustees, protectors (if any), beneficiaries or classes of beneficiaries, and any other natural person with ultimate effective control over the trust. The CRS requires identification of these controlling individuals from the settlement year and beyond.

Offshore trusts must now operate openly. It’s a transparent world. Just deal with it.

Taxation of Offshore Trusts After CRS

The CRS implementation has drastically changed how offshore trusts are taxed. Settlors and beneficiaries now face a more intricate tax situation.

How tax residency impacts trust taxation

The location of trustees determines where a trust resides, rather than the trust’s proper law. A trust must report in each participating jurisdiction if its trustees live in different places. In spite of that, trusts can avoid multiple reports by submitting all required information in the same jurisdiction where they reside.

Non-resident trusts pay UK tax only on UK income. The rules changed from April 2025 on. A settlor’s “long-term resident” (LTR) status will determine inheritance tax exposure instead of ‘domicile’. You qualify as an LTR if you’ve lived in the UK for at least 10 of the previous 20 tax years.

Reporting obligations for beneficiaries and settlors

CRS classifies settlors, trustees, protectors, and beneficiaries as “controlling persons” of a trust. So financial institutions must report their identifying information and account balances in detail.

The previous protections no longer exist for settlors of “settlor-interested trusts“. UK resident settlors will pay tax on foreign income and gains as they arise from April 2025, unless specific exemptions apply. On top of that, beneficiaries must declare distributions on their tax returns. The tax treatment depends on whether distributions match accumulated income or gains.

Common tax consequences: income, capital gains, inheritance

Beneficiaries of non-UK resident trusts pay tax on distributions at their marginal rates. Some jurisdictions offer a temporary repatriation facility. This allows previously untaxed offshore trust income to come in at lower rates—12% during 2025–27 and 15% for 2027–28.

Non-resident trusts don’t pay capital gains tax except when they sell UK property or land. The inheritance tax rules now target offshore trust assets of long-term resident settlors. Charges might apply when funding trusts, at 10-year anniversaries, or during capital distributions.

Are Offshore Trusts Still Worth It Today?

Offshore trusts still give you major advantages in wealth management beyond tax benefits. Many high-net-worth individuals use these structures for legitimate purposes that CRS hasn’t affected.

Asset protection and succession planning benefits

A well-laid-out offshore trust shields you from creditors, lawsuits, and political instability. These trusts create effective legal barriers against unfounded claims, which helps families with international business interests or high-liability professions. They also let you structure inheritance across generations, preserve wealth wherever tax changes occur, and avoid probate delays.

What remains in the balance between transparency and privacy?

CRS may have reduced secrecy, but many offshore jurisdictions still maintain reasonable confidentiality. The Isle of Man doesn’t publicly register trust details, which protects you from unwanted external scrutiny. These trusts are a fantastic way to consolidate assets under a single structure, making reporting to relevant authorities more consistent under CRS.

When offshore trusts still make sense

You’ll find offshore trusts especially valuable when you have international assets, non-domiciled status, or cross-border business interests. The reduced secrecy hasn’t changed the fact that asset protection, estate planning, and cross-border wealth management remain compelling reasons to use offshore trusts – as long as they follow international reporting standards.

Asian wealthy families, often first-generation entrepreneurs with children educated internationally, still rely on offshore trusts to secure their succession plans.

Trust Structures and Jurisdictions That Still Work

CRS adoption worldwide hasn’t diminished the value of certain trust structures and jurisdictions that work for legitimate wealth protection strategies.

Trusts in non-CRS jurisdictions

Some countries stay outside the automatic information exchange framework. The United States is a major financial centre that hasn’t adopted CRS, which creates opportunities for privacy-focused structures. Countries like Cambodia and Dominica also operate outside the CRS network and serve as alternative locations to establish trusts.

Exempt trust types: pension, charitable, public

CRS regulations don’t apply to several types of trusts. Registered pension schemes under Part 4 of the Finance Act 2004 qualify as non-reporting financial institutions. The rules classify immediate needs annuities under Section 725 of the Income Tax Act 2005 as excluded accounts. Charitable trusts can get exemptions when they meet specific regulatory requirements. Incorporated charities face a lesser reporting burden compared to charitable trusts.

Choosing the right jurisdiction post-CRS

The right jurisdiction depends on multiple factors. The Cook Islands and Nevis protect assets through firewall provisions and short statutes of limitation on fraudulent conveyance claims. Singapore’s stable legal system provides a strong financial infrastructure. The best jurisdiction strikes a balance – it should protect assets well enough while maintaining credibility with major financial institutions.

Non-reporting vs reporting offshore funds

Tax authorities don’t receive reports from non-reporting offshore funds, so investors pay taxes only on distributed income. Reporting funds must disclose all income, whether distributed or not. The tax implications vary substantially: non-reporting fund gains count as “offshore income gains” with income tax rates up to 45%. Reporting funds allows capital gains tax treatment with a maximum rate of 20%.

Final Thoughts

The Common Reporting Standard has altered the map of offshore trusts, yet claims of their extinction are nowhere near accurate. Of course, we can no longer use these structures to hide taxes. Tax authorities worldwide now share complete information about trusts, settlors, and beneficiaries. Transparency has become the new norm.

In spite of that, offshore trusts continue to protect wealth and help with succession planning. These vehicles deserve serious thought because they shield assets from creditors, enable structured inheritance across generations, and help manage international assets. The core team must implement them properly – offshore trusts should comply with reporting requirements rather than try to dodge them.

Pension trusts and charitable structures still enjoy exemptions under CRS. On top of that, places like the United States, Cambodia, and Dominica offer more privacy since they haven’t joined the automatic exchange framework. Your unique situation will determine if offshore trusts fit your wealth management strategy.

Reach out to us today to learn about which offshore trust structure might best match your legitimate financial planning needs.

Offshore trusts have adapted rather than disappeared after CRS. The focus has moved from hiding assets to following rules, from avoiding taxes to protecting money. These vehicles remain powerful tools for sophisticated wealth managers who structure them properly with expert guidance – though tax authorities now see everything clearly.

October 17, 2025Compliance, CRS, Crypto, Financial Regulation, Tax Planning, Wealth ManagementExpat Wealth At Work

How to Spot Hidden CRS Compliance Risks Banks Won’t Share

The global financial system has an intriguing paradox. While 180 countries have signed the OECD multilateral competent authority agreement for information exchange, the CRS system still has major loopholes. These gaps led to the largest tax evasion case in US history, where William Brockman managed to avoid $2.7 billion in taxes.

The Common Reporting Standard (CRS) has gained widespread acceptance, yet 70-80 countries remain outside this financial information exchange framework. Serbia, Montenegro, and the Philippines are among these non-participating nations. Regulatory bodies keep adapting their methods, as shown by the establishment of the Crypto Asset Reporting Framework in 2021–2022, to improve digital currency transparency. Your financial compliance strategy needs to account for legal ways to handle CRS reporting challenges.

Expat Wealth At Work will help you understand the hidden compliance risks that banks rarely mention. You’ll see how CRS stands apart from other reporting frameworks and learn about legitimate structures that help you direct these complex regulations legally. The information will also cover emerging risks that financial institutions often miss, so your wealth management strategy stays both compliant and effective.

How CRS Differs from FATCA and Why It Matters

FATCA targets only US citizens, while the Common Reporting Standard (CRS) focuses on tax residency. Financial institutions often miss this key difference, which creates several compliance gaps.

CRS based on tax residency, whereas FATCA based on citizenship

These two reporting frameworks have a fundamental difference in their core approach. FATCA targets US individuals wherever they live through citizenship-based taxation. CRS applies to anyone who has tax residency outside their account jurisdiction. This basic difference means CRS affects millions of accounts worldwide, while FATCA covers just thousands.

FATCA lets banks skip reporting accounts under EUR 47,710.51. CRS has no such minimum limits, which means banks must report almost all foreign investments. This makes CRS’s reporting scope much wider.

Why banks treat CRS obligations differently

CRS compliance needs extra care from banks because it involves over 100 countries. This makes it more complex than FATCA’s simple two-way agreements with the US. Banks need to do deeper checks under CRS and must collect complete self-certifications from account holders and controlling individuals.

FATCA imposes a substantial penalty of 30% withholding tax on banks that fail to comply. CRS penalties change by country and don’t have one standard withholding rule. Banks prioritise these obligations based on their enforcement differences.

CARF and the crypto reporting evolution

The OECD has created the Crypto Asset Reporting Framework (CARF) to tackle gaps in crypto-asset transparency. CARF works with CRS 2.0 to avoid double reporting and helps tax authorities track cross-border crypto transactions.

CARF differs from CRS by focusing on individual transactions. Crypto service providers must record detailed information about crypto asset types, values, and transaction details. CARF covers stablecoins, NFTs, and tokenised securities. This compilation shows how reporting standards keep changing to close tax reporting loopholes worldwide.

These differences help us spot real gaps in these reporting frameworks.

The Shell Bank Loophole and Why Banks Don’t Flag It

Banks rarely talk about one of the biggest CRS loopholes: the shell bank exemption. This gap lets certain entities bypass reporting requirements through a legal classification strategy.

How investment entities self-certify as financial institutions

The implementation of CRS includes a notable feature that allows investment entities to self-certify as financial institutions. Private investment structures like family offices and personal holding companies can label themselves as financial institutions instead of passive non-financial entities. This classification breaks the reporting chain because financial institutions don’t usually count as reportable account holders under CRS.

Why banks avoid reporting on other financial institutions

The CRS rules don’t require financial institutions to report on each other. These institutions should handle their reporting obligations in theory. The reality looks different because some jurisdictions can’t enforce the rules well, which creates non-reporting zones. Banks stay quiet about this issue since they don’t want to seem like they’re promoting tax avoidance structures.

The William Brockman case and $2.7B tax evasion

The William Brockman case stands out as the largest individual tax evasion case in US history. Brockman used a complex network of offshore entities that called themselves financial institutions to hide $2.7 billion from tax authorities. His structure included entities in Bermuda and Nevis that vanished from the reporting radar by self-certifying as financial institutions.

Why this loophole still exists under CRS

This loophole stays open because of jurisdictional limitations. The OECD knows about this gap, but fixing it needs all participating countries to work together. Financial centres with limited resources can’t thoroughly check these self-certifications. Smart structures keep exploiting this weakness, and people who want to avoid CRS reporting can create legally compliant yet hidden structures.

Structures Banks Won’t Warn You About

Financial institutions rarely discuss several sophisticated structures that serve as legitimate CRS loopholes with their clients. These arrangements employ specific jurisdictional advantages to minimise reporting obligations within legal boundaries.

SPV custodian institutions and look-through exemptions

Special Purpose Vehicles (SPVs) that function as custodian institutions create a major reporting gap. The SPV’s role as a pure custodial asset holder can qualify it for look-through exemptions under CRS. This setup separates beneficial ownership from formal asset control and creates a lawful barrier to automatic information exchange.

UK non-resident trust with Svalbard trustee

A powerful structure combines a UK non-resident trust with a Svalbard-based trustee. This Norwegian territory stays outside both the EU and CRS reporting frameworks while maintaining links to a respected European jurisdiction. The arrangement creates a legitimate reporting gap because of Svalbard’s unique jurisdictional status.

Why UK company and Svalbard trust avoids CRS look-through

A UK company owned by a Svalbard-based trust creates a reporting dead end. The UK entity benefits from the country’s resilient legal system. The automatic reporting stops at the UK company level since Svalbard has no CRS implementation requirements. This procedure creates a fully legal structure that naturally blocks information flow.

How to avoid CRS using legal structuring (not evasion)

Legal CRS avoidance requires understanding the difference between legitimate planning and illegal evasion. We focused on employing existing jurisdictional differences and exemptions within the CRS framework itself. Evasion, in contrast, involves providing false information or hiding reportable facts.

Emerging CRS Risks Most Banks Overlook

Financial institutions overlook several emerging risks beyond the 10-year-old CRS loopholes. Banks and clients need constant alertness to tackle these evolving challenges.

Mandatory Disclosure Rules (MDR) and their global failure

MDR regulations aim to expose CRS avoidance arrangements but have not achieved their implementation goals. Many jurisdictions find it difficult to apply these rules in practice. Promoters, supporters, and users of tax schemes must follow reporting obligations. Countries have adopted these rules differently, which has created major reporting gaps.

Crypto asset reporting under CARF vs CRS

The Crypto-Asset Reporting Framework (CARF) adds to CRS by tracking transactions instead of just account balances. CARF monitors crypto-to-fiat exchanges, crypto-to-crypto swaps, and peer-to-peer transfers above set limits. At the same time, organisations can qualify as financial institutions under CRS and as relevant cryptoasset service providers under CARF.

Real estate ownership and upcoming OECD changes

Undeclared assets often hide in cross-border real estate investments that would normally need CRS reporting. Research indicates that people often fail to report their foreign property holdings. The OECD has started developing a system to automatically exchange available information about immovable property.

Audit triggers for investment entities with no reportable persons

Investment entities face strict audit reviews when they report no reportable individuals. To pass regulatory reviews, financial institutions should keep complete documentation that supports their entity classifications.

Conclusion

The CRS implementation still creates major compliance challenges even though 180 countries have adopted it worldwide. Expat Wealth At Work explains the key differences between CRS and FATCA, especially when tax residency, not citizenship, guides reporting obligations. Smart financial planners can legally direct their way through these gaps.

Investment entities that self-certify as financial institutions create one of the largest and least discussed loopholes in the CRS framework. The William Brockman case shows how this gap led to the largest individual tax evasion scheme in US history. This case highlights the implications of exploiting these regulatory blind spots.

Banks rarely talk about legitimate structures like SPV custodian arrangements and mutually beneficial alliances between UK companies and Svalbard-based trusts. These setups help avoid CRS legally without stepping into illegal evasion.

You should watch out for new risks that even financial institutions miss. The weak implementation of Mandatory Disclosure Rules, new crypto asset reporting under CARF, and changes to real estate ownership reporting need attention from regulators.

This knowledge of hidden compliance risks helps you create legal wealth management strategies that fit regulatory frameworks while improving your financial position. The information gives you the ability to make smart choices about legitimate reporting exemptions in the global financial system instead of trying illegal evasion tactics.