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How the size of the capital and the behavior of owners of foreign accounts: the study of Tranio and Adam Smith

Russia joined the agreement on the automatic exchange of financial information (Multilateral Competent Authority Agreement, MCAA), and at the end of December 2017 the OECD published a list of countries that will begin the exchange this year. Based on the results of the last Tranio and Adam Smith Conferences survey, which was attended by 60 private banking specialists, Tranio analysts found out how the amount of capital and the behavior of foreign account holders are related.

According to survey participants, about 40% of Russians who own accounts in foreign banks began to notify the Russian tax authorities after Russia joined the agreement, while earlier this share was about 10%.

According to Tranio, more affluent online professionals tend to declare their accounts rather than less affluent ones – this tendency was observed before Russia joined the agreement and continues to be relevant after it.
The less well-off hiineta (especially Mass Affluent), in turn, became much more active in declaring their foreign accounts precisely after Russia signed the MCAA.

Russians are obliged to notify tax authorities about the opening of foreign accounts since 2001, and from January 1, 2015 – also annually report on the movement of funds. Previously, if the owners did not report their accounts on their own, then it was quite difficult to find their Russian tax. After Russia joins the MCAA, the exchange of financial information between the parties to the agreement will occur automatically.

The “richer” heinets, the more often they change tax residency in fact, rather than nominally.
What do those who do not want to declare bills abroad do? The most popular answer is “change tax residency”, it was chosen by 78% of respondents.

According to the results of the study, “rich” Heinets are actively looking for ways to circumvent the law. Wealthy account holders prefer to change their tax residency if they do not want to declare their accounts. The “richer” heinets, the more they are inclined to change the tax residency in fact (that is, to spend abroad most of the time) rather than nominally (using foreign programs for investment residence permit or citizenship).
The Russians of the Mass Affluent category, unlike the wealthy hight, are more likely to transfer funds in the names of nominal owners or transfer capital to jurisdictions that do not participate in the exchange of information.

Wealthy Russians change tax residency in order not to report on bills and optimize taxation. To change this status, it may be enough to live in another country for six months, and in some jurisdictions and under certain conditions, a shorter period.

Well-off Russians of the Mass Affluent category are more likely to be inactive or transfer money to Russia because they risk less capital compared to the UHWNI category.

Tranio and Adam Smith
The “rich” Hayneta prefer the UK and Cyprus, and the “poor” prefer Hungary
The survey showed that those Russians who prefer a change of tax residency often choose Cyprus and the UK.

According to Tranio, the richer the tax residency changeers are, the more likely they are to choose the UK and Cyprus, and less – Hungary (the less wealthy ones are vice versa). People with a capital of more than $ 5 million prefer Monaco and Switzerland more often than the categories MA and HNWI. Among those who choose Malta, are leaders of the state with a fortune of $ 30 million.

Monaco and Switzerland are popular among more affluent Russians, since obtaining tax resident status in these countries is expensive. To become a tax resident of Monaco, you must open an account in a local bank in the amount of 500 thousand euros. Residence in Switzerland can be issued through a tax agreement, under the terms of which a person pays a fixed tax, the amount of which, depending on the canton and family income, ranges from 400 thousand to 1 million francs.

When asked which countries Russians prefer, transferring capital to jurisdictions that do not participate in the exchange of information, the majority of respondents chose the UAE and Singapore (the survey was conducted before they joined the agreement).

According to the survey results, the richer the Hineta, the more often they transfer capital to the United States and less often to the UAE (the less affluent are the opposite).

UHNWI is chosen as the “denomination” trusts, MA – relatives or friends
If wealthy Russians transfer capital in the name of nominal owners, who most often serves in this capacity? The study showed that relatives, friends, and other close people most often become “nominal” – 55% of respondents think so.

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