Avoiding CRS with Tax-Exempt Investment Entities

Many people believe that if the shareholders and directors of a tax-exempt investment entity (Untaxed Investment Entity) reside in the same jurisdiction, there is no need to report to the CRS. For example, as long as the director is a Chinese resident, the BVI investment company is considered a Chinese resident because it is managed in China (due to its director being a Chinese resident). Since both the shareholders and the tax-exempt investment entity are in China, they are in the same jurisdiction, and according to CRS rules, no exchange is required. A tax-exempt investment entity refers to an investment company established in an offshore location, such as a BVI investment company.

This article references the work of CRS expert Mark Morris, whose article titled "A colossal, enormous CRS loophole that does not work, but used like it's going out of fashion" was published on May 12, 2024.

In this article, we will examine whether this viewpoint is correct.