Santiago Lapausa, head of tax, economist and partner at Marbella-based law firm JC&A Abogados, fears that CRS will trip up unsuspecting cross border clients, especially if a bank, adviser or broker sends mail to the wrong address.
Even a straightforward error can trigger an investigation because intelligence shared through CRS is treated as verified by the recipient jurisdiction.
In total, there are now over 2,700 bilateral relationships for the automatic exchange of offshore financial account information under CRS in place across the globe.
Under CRS, a financial firm is required to share a client’s details, including address, with relevant jurisdictions.
Even if the address is a rarely used holiday home it would trigger a tax investigation on the assumption the client is a resident and a tax domicile.
For example, a client who is resident in Gibraltar but owns a house in Spain and has a Spanish bank account. If mail from the bank was sent to the Spanish address, the bank could assume it is the client’s primary residence and tell the authorities in Spain.
“A few clients have recently received notifications about tax investigations on Spanish residency, sometimes due to external evidence and ties and others due to information provided by the tax authorities of another country,” Lapausa told International Adviser.
“In the latter, Spain considers the information provided as verified and correct.
“I would recommend clients check their addresses with their banks and brokers, especially anyone with houses in both countries and urgently in the case where correspondence is sent to the holiday home.”
According to Lapausa, the authorities will remain unmoved even in clear cut instances of error without a high standard of evidence, which might not always be available.