Transforming Trusts into Non-Active Financial Entities to Avoid CRS

According to CRS rules, trusts fall under the category of Professionally Managed Investment Entities (PMIEs). Trust companies are required to exchange information regarding the total value of the trust's assets and overall income and expenditures with the tax authorities in the tax residency of the settlor, beneficiaries, and protector. Some savvy global trust companies and the Big Four accounting firms have found a way to circumvent the PMIE loophole by transforming trusts into Active Non-Financial Entities Type D. Under CRS rules, trust companies are not required to exchange information regarding entities of this type with the relevant tax authorities, successfully achieving a CRS exchange avoidance.

In this article, we will explore whether this loophole truly exists or if these institutions are merely misinterpreting CRS rules and being overly optimistic.

This article references the work of global CRS expert Mark Morris, whose article titled "Trustees exploit a non-sensical CRS clause to exploit a non-existent loophole for thousands of trusts" was published on May 27, 2024.