Offshore Tax with HTJ.tax

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- Updated daily, we help 6, 7 and 8 figure International Entrepreneurs, Expats, Digital Nomads and Investors legally minimize their global tax burden and protect their wealth. - Join Amazon best selling author, Derren Joseph, in exploring the offshore financial world. Visit www.htj.tax

  1. 17H AGO

    ODI and Wealth Management Opportunities

    China’s Outward Direct Investment (ODI) regime channels substantial capital abroad each year. For global wealth managers, trustees, funds, and private banks, this represents significant opportunity—but also heightened regulatory scrutiny. In this episode, we explore how ODI-related capital can be engaged lawfully and transparently, while managing cross-border risk. 🌏 The OpportunityApproved ODI flows, once cleared by authorities such as: National Development and Reform Commission (NDRC)Ministry of Commerce of the People's Republic of China (MOFCOM)State Administration of Foreign Exchange (SAFE) may be deployed internationally for: • Infrastructure and real estate • Private equity and venture capital • Portfolio diversification • Family office structuring • Cross-border corporate expansion Switzerland, Singapore, Luxembourg, and other financial centres are frequent destinations due to regulatory stability and deep capital markets. ⚖️ The Compliance RealityAny cross-border structuring must operate within: • Local capital controls and foreign exchange rules • Anti-money laundering (AML) and KYC standards • Beneficial ownership transparency requirements • The Common Reporting Standard (CRS) • FATCA (where applicable) The global transparency environment—driven by the Organisation for Economic Co-operation and Development—means that attempts to structure purely for secrecy face escalating enforcement risk. 🧠 Where Real Advisory Value LiesRather than focusing on concealment, sophisticated advisory work now centres on: 1️⃣ Structuring for SubstanceEnsuring governance, control, and operational purpose align with regulatory expectations. 2️⃣ Regulatory NavigationCoordinating ODI approvals, SAFE compliance, and foreign jurisdiction requirements. 3️⃣ Risk DiversificationDeploying capital into jurisdictions with legal certainty, strong fiduciary standards, and predictable enforcement. 4️⃣ Asset Protection (Within the Law)Using reputable legal frameworks—such as well-regulated trust jurisdictions—to manage litigation and succession risk while remaining compliant with disclosure obligations. 🌍 Jurisdictional ConsiderationsWealth management hubs such as: SwitzerlandSingaporeLuxembourg compete not on secrecy, but on: • Rule of law • Judicial reliability • Regulatory sophistication • Professional ecosystem depth 🎯 Key TakeawayODI creates meaningful wealth management opportunities—but the era of opacity-driven structuring is over. Sustainable strategies must prioritise: • Transparency • Regulatory alignment • Economic substance • Long-term defensibility Capital mobility today is governed as much by compliance architecture as by financial strategy.

    4 min

  2. 1D AGO

    What Is China’s ODI Initiative?

    China’s Outward Direct Investment (ODI) strategy operates on two parallel tracks: large-scale state-backed projects under the Belt and Road Initiative (BRI) and substantial overseas investment by private Chinese enterprises. While government-led projects dominate headlines, private Chinese companies invest nearly USD 200 billion per year abroad, making ODI a critical pillar of China’s global economic footprint. 🔎 The Strategic Framework1️⃣ The Belt and Road Initiative (BRI)Launched under the leadership of Xi Jinping, the BRI builds conceptually on historic trade networks that once connected China to the West. These routes include: The Silk Road journeys associated with Marco PoloThe travels of Ibn Battuta across Muslim regionsThe maritime expeditions of Ming admiral Zheng He 🛤️ “Belt” and “Road” ExplainedThe “Belt” — Silk Road Economic BeltRefers to overland infrastructure corridors: Rail and road routes through Central AsiaLand connections linking China to EuropeLogistics hubs and industrial corridors The “Road” — 21st Century Maritime Silk RoadRefers to Indo-Pacific sea routes: Southeast AsiaSouth AsiaThe Middle EastAfrica This maritime network already carries more than half of global container traffic, making port infrastructure a strategic focus. 🌍 Scale and ReachSome estimates describe the BRI as one of the largest infrastructure and investment projects in modern history, involving more than 68 countries. Projects include: Deep-water portsRailways and highwaysAirports and bridgesSkyscrapers and logistics zonesEnergy infrastructure (including dams and power stations)Railway tunnels and industrial parks 💼 The Role of Private ODIBeyond state-backed infrastructure, China’s ODI also includes: Manufacturing expansionTechnology investmentsReal estate acquisitionsResource developmentStrategic equity stakes Private enterprise ODI plays a major role in integrating Chinese firms into global...

    3 min

  3. 2D AGO

    Hong Kong vs Switzerland: Look-Through Rules for Trust Equity Interests

    This episode explores how different jurisdictions interpret the CRS look-through rules for trusts that qualify as Reporting Financial Institutions (FI-trusts)—and why the divergence between Hong Kong and Switzerland matters. At the centre of the debate is a simple but technical question: When an equity interest in an FI-trust is held by an entity, must the trust always look through that entity—even if it is itself a Financial Institution?📘 The CRS & Implementation Handbook BaselineUnder the CRS Implementation Handbook issued by the Organisation for Economic Co-operation and Development: • Equity interests in an FI-trust are held by: – The settlor – The beneficiary – Any other natural person exercising ultimate effective control (which at a minimum includes the trustee) • A discretionary beneficiary is treated as an account holder only in years when a distribution is made. • Where a settlor, beneficiary, or controlling person is an entity, that entity must be looked through to identify its ultimate natural controlling persons. This is where interpretation begins to diverge. 🇭🇰 Hong Kong’s ApproachThe position of the Inland Revenue Department (IRD) is that: • The term “entity” in this context • Does not include persons excluded from the definition of a reportable person Under the CRS: • Financial Institutions are non-reportable persons • Therefore, they are not subject to look-through In other words, in Hong Kong’s interpretation: An FI acting as settlor, trustee, or beneficiary is not looked through.This preserves the structural distinction between: • Reporting FIs • Passive NFEs 🇨🇭 Switzerland’s ApproachSwiss revised guidance has taken a broader interpretation, treating: • “Entity” as including Financial Institutions • Requiring FI-trusts to look through entity equity holders • Identifying and reporting the controlling persons behind those entities This effectively removes the traditional “FI blocker” principle.

    6 min

  4. 3D AGO

    OECD CRS FAQ On Equity Interest Of A Financial Institution Held By A Financial Institution

    This episode looks at an often-cited but rarely analysed source: the OECD CRS FAQ on General Reporting Requirements, specifically Page 2, Question 7, dealing with the look-through requirement. The key issue: Does the FAQ require look-through where an equity interest in a Financial Institution is held by another Financial Institution? 📘 What the OECD CRS FAQ SaysThe FAQ issued by the Organisation for Economic Co-operation and Development addresses when a reporting Financial Institution must apply a look-through approach. In Page 2, Question 7, the FAQ refers to situations where an “entity” holds an account and discusses when controlling persons must be identified. Notably: • The FAQ uses the generic term “entity” • It does not explicitly state that this includes Financial Institutions • It does not override the CRS definition of non-reportable entities 🧱 The Structural ContextUnder the CRS framework: • Financial Institutions are generally non-reportable persons • Due diligence applies only to Reportable Accounts • Accounts held by non-reportable entities are not subject to look-through The FAQ does not amend these structural definitions—it provides interpretative clarification. ⚖️ The Interpretative QuestionThe debate arises from how the word “entity” in the FAQ should be read: Interpretation A: “Entity” includes all entities, including Financial Institutions → look-through applies universally. Interpretation B: “Entity” must be read consistently with the CRS structure → look-through applies only where the entity is a Reportable Person (e.g., Passive NFE), not where it is a Reporting FI. The FAQ does not expressly state that Financial Institutions lose their non-reportable status for equity interest purposes. 🎯 Why This MattersIf the term “entity” in the FAQ were interpreted to automatically include Financial Institutions: • The FI “blocker” principle would weaken • Duplicate reporting risks could arise • The “closest FI” allocation model could be disrupted If interpreted consistently with the CRS definitions: • Financial Institutions remain non-reportable persons • Look-through applies to Passive NFEs • Reporting responsibility remains structurally allocated 🔑 Key TakeawayThe OECD CRS FAQ on General Reporting Requirements refers broadly to an “entity” but does not explicitly extend look-through to Financial Institution entities. Whether that silence implies inclusion or exclusion remains the crux of the interpretative debate. For trustees and compliance professionals, the critical lesson is: CRS interpretation must align FAQ guidance with the core structural definitions of the Standard itself.

    2 min

  5. 4D AGO

    CRS Commentary on Financial Institutions Holding Equity Interests

    This episode examines a pivotal provision in the CRS Commentary—paragraph 178 (Section VIII, C(4))—and its implications for trusts that qualify as Reporting Financial Institutions (FI-trusts). The key issue: When equity interests in an FI are held through a Custodial Institution, who reports? 📘 The CRS Commentary (p. 178, C(4) – Equity Interest)Under the Commentary issued by the Organisation for Economic Co-operation and Development, paragraph 69 clarifies that: In the case of a trust that is a Financial Institution, an “Equity Interest” is considered to be held by any person treated as a settlor or beneficiary of all or a portion of the trust, or by any other natural person exercising ultimate effective control over the trust.This defines who holds an equity interest in an FI-trust. Paragraph 70 then adds a critical allocation rule: Where Equity Interests are held through a Custodial Institution, the Custodial Institution is responsible for reporting, not the Investment Entity.🧱 The Reporting Allocation PrincipleThe Commentary provides a concrete example: • Reportable Person A holds shares in Investment Fund L • A holds those shares in custody with Custodian Y • Fund L is an Investment Entity (an FI) • Custodian Y is a Custodial Institution (an FI) Under the CRS: • Fund L treats Custodian Y as its account holder • Because Y is a Financial Institution, it is not a Reportable Person • Therefore, L does not report Instead: • Custodian Y reports the shares it holds for A • Reporting responsibility rests with the FI closest to the Reportable Person This illustrates the “closest FI” principle and prevents duplication. ⚖️ The Interpretative TensionThe Commentary appears explicit: • If equity interests are held through a Custodial Institution • The Custodial Institution reports • The upstream FI does not look through Critics argue that requiring FI-trusts to look through **all entities—including non-reportable entities such as Custodial Institutions—**conflicts with: • Paragraph 70 of the Commentary • The non-reportable status of Financial Institutions • The structural allocation of reporting responsibility Supporters may argue that broader transparency objectives justify expanded look-through in certain contexts. 🎯 Why This MattersThis debate is not theoretical. It affects: • Whether FI-trusts must look through FI equity holders • Whether Financial Institution status functions as a reporting “blocker” • The risk of duplicate or redundant reporting • Consistency between CRS text and administrative interpretation At its core, the Commentary example reinforces a structural rule: When an equity interest is held through a Custodial Institution, reporting responsibility rests with that Custodial Institution—not the upstream FI.Understanding this allocation principle is critical for trustees, compliance officers, and cross-border advisors navigating divergent national interpretations.

    4 min

  6. 5D AGO

    CRS Treatment of Financial Institutions as Equity Interest Holders

    This episode examines a core structural rule of the Common Reporting Standard (CRS): Financial Institutions are non-reportable persons and must not be looked through for due diligence purposes. We analyse the relevant CRS provisions and explore why this principle is central to the reporting framework. 🔎 The CRS Due Diligence ArchitectureUnder the CRS issued by the Organisation for Economic Co-operation and Development, reporting obligations are carefully tiered. Only Reportable Accounts are subject to due diligence. This distinction is fundamental. 📘 CRS Textual BasisCRS, p. 38 – Pre-Existing Entity AccountsThe Standard states: Only reportable accounts are subject to due diligence.It further clarifies that accounts held by non-reportable entities—including: • Financial Institutions (e.g., custodial institutions) • Central banks • Government entities • International organisations • Regularly traded corporations —are not subject to due-diligence procedures. CRS, p. 41 – New Entity Accounts (Section VI)Section VI requires a determination of whether an entity account is a reportable account. Where the account holder is a non-reportable entity, including a Financial Institution: ➡️ The entity must not be looked through. The due diligence obligation ends at that level. 🧱 The Structural PrincipleThe CRS is built on an allocation model: • Financial Institutions report • They are generally not reported on (in their capacity as FIs) • Look-through applies to Passive NFEs—not to Reporting FIs This prevents: • Duplicate reporting • Administrative inefficiency • Confusion over responsibility ⚖️ The Interpretative QuestionAgainst this background, debate arises where guidance suggests that FI-trusts should look through entity equity holders—even where those entities qualify as Financial Institutions. The textual question becomes: If the CRS explicitly states that non-reportable entities must not be subject to look-through, can administrative interpretation require otherwise? Critics argue this creates tension with: • The no-look-through rule for non-reportable entities • The structural allocation of reporting responsibility • The prohibition against duplicative reporting Supporters argue the approach enhances transparency. 🎯 Why This MattersThis is not a narrow drafting issue—it affects: • How FI-trusts classify equity interest holders • Whether FI status acts as a reporting “blocker” • The integrity of the CRS due diligence hierarchy At stake is a foundational principle: Non-reportable entities, including Financial Institutions, are not subject to look-through under CRS due diligence rules.Understanding this architecture is essential for trustees, compliance officers, and advisors operating across jurisdictions with divergent interpretations.

    3 min

  7. 6D AGO

    Where Switzerland Misinterpreted the CRS Implementation Handbook

    This episode examines a narrow but consequential interpretative issue: Did Switzerland extend the CRS look-through rules for FI-trusts beyond what the OECD Implementation Handbook actually provides? The debate centers on Chapter 6.3 of the CRS Implementation Handbook, specifically paragraphs 254–256 (pp. 109–110), dealing with trusts that qualify as Reporting Financial Institutions. 🔎 The Text of the HandbookParagraph 254 – Identifying Reportable AccountsThe Handbook states: The debt and equity interests of a trust constitute Reportable Accounts where they are held by a Reportable Person.It then clarifies that the CRS defines the following entities as non-reportable persons: • Financial Institutions • Regularly traded entities • Central banks • International organisations • Government entities This establishes the starting point: If the equity interest is held by a Financial Institution, it is not a Reportable Person. Paragraph 256 – Applying the Due Diligence RulesThe Handbook further states: Where an equity interest is held by an Entity, the equity interest holder is instead identified as the Controlling Persons of that Entity.It then explains that a trust must apply a look-through approach to a settlor, trustee, protector, or beneficiary that is an Entity to identify the relevant Controlling Persons—corresponding to AML/KYC beneficial ownership principles. ⚖️ The Interpretative Fault LineThe controversy arises from how the term “Entity” is read in paragraph 256. The critical observation: Nowhere—explicitly or implicitly—does paragraph 256 state that “Entity” includes non-reportable entities such as Financial Institutions. Paragraph 254 has already distinguished: • Reportable Persons • Non-reportable entities (including FIs) The textual argument advanced by critics is therefore: If paragraph 254 establishes that Financial Institutions are non-reportable persons, and paragraph 256 refers to “Entities” without overriding that distinction, then the look-through rule logically applies only where the entity is a Reportable Person (e.g., Passive NFE), not where it is a Reporting FI. 🇨🇭 The Swiss PositionSwiss revised guidance interpreted paragraph 256 as requiring FI-trusts to: • Look through entity equity holders • Identify and report controlling persons —even where the entity is itself a Financial Institution. Critics argue that this effectively: • Treats FI equity interest holders similarly to Passive NFEs • Removes the structural “FI blocker” principle • Expands reporting beyond the CRS text Supporters argue the approach aligns with transparency objectives and AML alignment. 🎯 Why This MattersThe dispute is not about transparency—it is about architectural coherence. If Financial Institutions are non-reportable persons by design, then requiring look-through of FI equity interests may: • Create duplicate reporting • Disrupt the “closest FI” allocation principle • Blur the boundary between FI and Passive NFE treatment The question is whether the Implementation Handbook clarified the Standard—or extended it. 🔑 Key TakeawayParagraphs 254–256 of the CRS Implementation Handbook distinguish clearly between: • Reportable Persons • Non-reportable entities (including Financial Institutions) The debate turns on whether “Entity” in paragraph 256 implicitly overrides that distinction—or must be read consistently with it. For trustees and advisors,

    4 min

  8. FEB 14

    The Core CRS / FATCA Principle: No Look-Through of Financial Institutions

    The Core CRS / FATCA Principle: No Look-Through of Financial Institutions At the heart of both CRS and FATCA lies a fundamental architectural rule: Financial Institutions (FIs) are not treated as reportable persons. This is not accidental—it is structural. In this episode, we unpack why the system is designed this way and why requiring look-through of Financial Institutions can undermine the logic of the framework. 🔎 The Structural Logic of CRS & FATCAUnder the Common Reporting Standard issued by the Organisation for Economic Co-operation and Development and under FATCA: • Financial Institutions are Reporting Entities • They are generally not Reportable Persons • The system is designed to avoid duplicate and redundant reporting The objective is administrative efficiency and clarity of responsibility. 🏗️ Why No Look-Through of Financial Institutions?If a Financial Institution were required to look through another FI: • The upstream FI would report • The downstream FI would also report • The same underlying individual could be reported twice This would create: • Duplication • Administrative inefficiency • Increased risk of inconsistent reporting • Systemic complexity To prevent this, the OECD framework allocates reporting to the FI closest to the reportable person—the institution best positioned to know its account holder. 📌 The “Closest FI” PrincipleThe OECD has repeatedly emphasized that reporting responsibility should rest with the Financial Institution that: • Maintains the account • Has direct access to the account holder • Conducts due diligence This ensures reporting is: • Centralized • Accurate • Non-duplicative ⚖️ The Controversy in PracticeWhen an FI-trust is required to look through FI equity interests, as seen in certain interpretative approaches, the result may be: • Reporting by the FI-trust • Reporting by the institutional FI • Potential duplication of the same underlying individuals Critics argue that this outcome conflicts with the core CRS principle against redundant reporting. Supporters may argue that such look-through enhances transparency—but it arguably shifts the architecture from allocation of responsibility to expansion of responsibility. 🎯 Key TakeawayThe CRS and FATCA systems are built on a simple but powerful structural rule: Financial Institutions report — they are not reported on (in their capacity as FIs).Requiring look-through of Financial Institutions risks: • Blurring that structural boundary • Creating duplication • Departing from the “closest FI” reporting principle Understanding this architecture is essential for trustees, compliance officers, and advisors navigating evolving interpretations of CRS and FATCA.

    4 min
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- Updated daily, we help 6, 7 and 8 figure International Entrepreneurs, Expats, Digital Nomads and Investors legally minimize their global tax burden and protect their wealth. - Join Amazon best selling author, Derren Joseph, in exploring the offshore financial world. Visit www.htj.tax

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  • Creator
    htjtax
  • Years Active
    2022 - 2026
  • Episodes
    999
  • Rating
    Clean
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    © Copyright 2020 All rights reserved.
  • Show Website
    Offshore Tax with HTJ.tax