| Since the implementation of the Common Reporting Standard(CRS)of Organization for Economic Cooperation and Development,international tax transparency has been significantly improved.All countries can better supervise the overseas assets of their tax residents.However,the loopholes of CRS emerges as well.Specifically,first,some special and composite offshore trust structure have been developed from the basic trust structure,and CRS did not respond directly to the compliance status of these structures.These structures consists of private trust companies,purpose trust,multiform foundation or company limited by guarantee.In addition,CRS still has some other loopholes when identifying the trust structure,which includes establishing irrevocable trust,setting up discretionary beneficiary,active non-financial institutional trust and create non-CRS participating country trusts,etc.These loopholes can be amended in two steps.First,updating the CRS implementation manual and related commentary.For example,the scope of trust rights holders should be expanded,and the debtor of the trust and the tenant of trust property should also be interpreted as the interests holder of trust.According to the corresponding identification,the relevant subjects should be regarded as such once it does not qualify as arms-length transaction.Second,further clarity on irrevocable trust.The amount to be reported for the settlor should be all of the trust property.Third,it should also be clarified that the shareholding trust should not be identified as a positive non-financial institution and private trust company should be treat as financial institution to prevent these structure from being used to avoid CRS.Finally,the most important thing is to further promote the establishment of mandatory disclosure rules worldwide.Mandatory disclosure rules require taxpayers and related tax intermediary,such as law firms to actively disclose relevant information when conducting tax planning activities.The implementation of the mandatory disclosure rules can cause taxpayers and intermediary to stop or deteriorate from avoiding CRS in the first place.If the taxpayer knows the planning arrangement must be disclosed to the tax authority,then the taxpayer may carefully consider whether to use the plan that contains elements of avoiding CRS. |
