THE OECD has stated that the latest revelations from the "Daphne Project" on the Maltese residence and citizenship by investment schemes underline the crucial importance of the OECD's work to ensure that the integrity of the OECD/G20 Common Reporting Standard (CRS) is preserved and that any circumvention is detected and addressed.

Over the last months, the OECD has been taking a set of actions to ensure that all taxpayers maintaining financial assets abroad are effectively reported under the CRS, including by:

++ issuing new model disclosure rules that require lawyers, accountants, financial advisors, banks and other service providers to inform tax authorities of any schemes they put in place for their clients to avoid reporting under the CRS. The adoption of such model mandatory disclosure rules will have a deterrent effect on the promotion of CBI/RBI schemes for circumventing the CRS and provide tax authorities with intelligence on the misuse of such schemes as CRS avoidance arrangements. The EU Member States have already agreed to implement these rules as part of a wider directive on mandatory disclosures;

++ reaching out to individual jurisdictions, including Malta, to make them aware of the risk of abuse of their CBI/RBI schemes and offer assistance in adopting mitigating measures; and
establishing a list of high risk schemes in order to further raise awareness amongst stakeholders of the potential of such schemes to undermine the CRS due diligence and reporting requirements.

In addition, on February 19, 2018, the OECD issued a consultation document, outlining potential situations where the misuse of CBI/RBI schemes poses a high risk to accurate CRS reporting and seeking public input both to obtain evidence on the misuse of CBI/RBI schemes and on effective ways for preventing such abuse.

The substantial amount of input received in response to the consultation further underlines the importance of the OECD's actions in this field. It also contains a wide range of proposals for further addressing the misuse of RBI/CBI schemes, including: 1) comprehensive due diligence checks to be carried out as part of the RBI/CBI application process, 2) the spontaneous exchange of information about individuals that have obtained residence/citizenship through such a CBI/RBI scheme with their original jurisdiction(s) of tax residence; and 3) strengthened CRS due diligence procedures on financial institutions with respect to high risk accounts.

The OECD will take the next step in addressing the issue, when experts from OECD and G20 countries meet in Paris in May to further elaborate actions to be taken to effectively address the misuse of CBI/RBI schemes.