Digital Banks and the Automatic Exchange of Information (CRS)

When designing international tax strategies and corporate structures I oftentimes recommend setting up a bank account with a so-called ‘Digital Bank’ or ‘Fintech’.

The reason I recommend setting up an account with a Digital Bank is simply because it is a tool where you can hold your money without having to comply with the usual Bank regulations.

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WHY YOU SHOULD HAVE AN ACCOUNT WITH A DIGITAL BANK

For people who are perpetual travellers / Digital Nomads or simply constantly moving around without having yet successfully established a new tax residency other than their old home country’s tax residency, having a Digital Bank account is extremely beneficial.

This is true because with every other ‘traditional’ bank that a Digital Nomad will set up a bank account with they will most likely have to reveal their tax residency and their Tax Identification Number. If they don’t yet have a tax residency within a low tax jurisdiction, or a territorial tax country, than the tax residency, or the Tax Identification Number that they are left with and currently hold is most likely going to be the one from their old home country.

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COMMON REPORTING STANDARD (CRS)

If that ‘traditional’ bank that you are opening up an account with is part of a country that is a signatory of the Common Reporting Standard (CRS) than chances are that the bank will have to notify the tax authorities of your tax residency country about your new overseas bank account.

(If you don’t know what the CRS is then I recommend you check out this blog post first.)

Note that over 100 countries are signatories to the CRS.

This situation is less than ideal if you are trying to get a new tax residency somewhere but haven’t been able to do so yet. This leaves you in the unfortunate position of most probably falling back into your old tax residency country’s system.

This situation is not a problem when you have got tax residency somewhere where you actually residing and paying properly taxes. I’m talking more so to those people that are trying to get out of their old home tax system because they haven’t been living there for a long time, but haven’t bothered yet finding a new tax residency.

So, the recommendation is to set up a bank account with a Digital Bank because they don’t have to report anything to your country of tax residency.

How do I know this?

I wrote them an email and received a response and did a bit of research.

REVOLUT’S COMMENT

Here is the response I got from Revolut in February 2020:

Thank you for your request to explain whether Revolut has legal obligations to share information with tax authorities around the world under the Common Reporting Standard.

As a global financial institution, Revolut has to comply with tax obligations in a range of different jurisdictions. The Common Reporting Standard makes a distinction between reporting and non-reporting entities. Revolut Ltd is a non-reporting entity.

Notwithstanding this:

  • In Revolut’s Ltd’s Privacy Policy it reserves the right to share personal information where tax obligations require it to (e.g. the current Policy states: “We may also need to share your personal information with other third-party organisations… if we have to do so under any law or regulation”).
  • Revolut Ltd may become a reporting entity in the future.
  • The Revolut app may be used to access services provided by third parties who may be reporting entities.

Should you have any further questions or concerns, please do not hesitate to contact us again.

TRANSFERWISE’S COMMENT

On Transferwise’s website the following statement has been made:

Will you report my transfers to the tax authorities?

TransferWise Limited is a UK company authorised by the Financial Conduct Authority as an Electronic Money Institution. We are still evaluating the impact of the Common Reporting Standards, including FATCA, to our business and how we will adopt the new requirements. At this time we are not reporting this information to HMRC or any other tax authority.

FINAL COMMENT

I’ve seen many comments and blog posts on the internet speculating whether or not Digital Banks have to adhere to the CRS and automatically exchange information with tax authorities. So, I hope this blog post cleared up any doubts for now.

If you are interested to learn more about other Digital Banks then click HERE to check out my blog post about Alternative Bank Solutions.

Note, that Digital Banks are not only meant for Digital Nomads. They can be beneficial to anyone that is looking for an alternative bank solution. Even just making use of their debit cards across different countries when travelling and saving on ATM fees can be reason enough to set up an account with a Digital Bank.

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We hope you have enjoyed this article. If you have any further questions please leave us a message below and we’ll get back to you as soon as we can.

 

NOTICE: The content of this article is not to be considered as a legal opinion or tax advice. Wanderers Wealth does not hold itself out as a legal or tax advisor. If you want to receive a legal opinion or tax advice on the matter in this article please contact us directly and we will refer you to a legal practitioner.

 

 

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