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.
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.