Compliance When Emigrating: Reporting, CRS and Substance

What compliance when emigrating actually means

In this context compliance means every authority involved receives a consistent picture: residency, account ownership, shareholdings and place of management must line up. The data no longer comes only from tax returns but from automatically exchanged account information, registers and reports filed by banks and advisers. The risk is not the structure itself, it is the contradiction between what was reported and how you actually live.

CRS and automatic exchange of information

Under the Common Reporting Standard, banks and financial institutions report account balances, interest, dividends and disposal proceeds annually to their local authority, which forwards them to the country of tax residence. The basis is a self certification declaring that residency, so a wrong or outdated declaration immediately creates contradictions. The United States does not take part in CRS but exchanges information on US persons through FATCA.

Beneficial owners and transparency registers

Whoever controls a company is recorded as its beneficial owner in many countries, in the EU through national transparency registers. Following a ruling of the Court of Justice of the European Union, unrestricted public access to those registers no longer applies, while authorities and parties with a legitimate interest retain access. Anonymity is therefore not a realistic planning goal, although reasonable protection from general public access still is.

Reporting duties towards your former country

Anyone holding an interest in a foreign company must disclose it to the tax office in their home country above certain shareholding or value thresholds, in Germany usually together with the tax return. Disclosure rules for certain cross border arrangements apply on top and mainly affect advisers and intermediaries. These duties exist regardless of whether the participation results in any tax payment.

Substance and permanent establishment risk

Substance means the company is genuinely run where it is registered, with decision makers, premises and documented resolutions. Without it, the company can become taxable in the country where its management lives or create a permanent establishment there. Several jurisdictions additionally require dedicated substance reporting for specific activities such as holding, financing and IP functions.

What banks and payment providers check

Banks require evidence of residency, source of funds, business model and the ownership chain up to the natural person. If residency changes, the self certification must be updated, otherwise expect queries, restrictions or account closures. Payment providers additionally check whether billing address, registered seat and actual location are consistent.

Common mistakes

The most frequent mistake is failing to update the bank self certification after moving, which sends data to the wrong country. The second is not disclosing a foreign shareholding, which surfaces later as an omission. The third is a structure without substance that is formally reported yet cannot be defended on the facts.

What solid documentation contains

It includes a certificate of tax residence, a lease or ownership document, evidence of days spent, corporate documents showing the ownership chain, minutes of material decisions and agreements between related entities. Update it annually rather than assembling it once an audit starts. A well documented structure survives review, a well intentioned one does not.

Next steps

Reconcile everything that has been reported with the actual situation: bank records, registers, tax returns and corporate documents. Where contradictions exist, correct them promptly and document the correction. Assessment and remediation belong with licensed advisers in the home and destination country.

Frequently asked questions

What is the Common Reporting Standard?

The Common Reporting Standard is an international framework for the automatic exchange of financial account information. Banks report account data to their local authority, which forwards it to the account holder's country of tax residence.

Which data is reported under CRS?

Reported data includes name, address, tax identification number, account number and balance, plus interest, dividends and certain disposal proceeds. The scope is standardised and transmitted annually.

Does the United States participate in CRS?

No. The United States does not participate in the Common Reporting Standard but exchanges information on US persons with other countries through FATCA. The scope differs from CRS.

Do I have to report a foreign shareholding to the tax office?

Yes, above certain shareholding or value thresholds a disclosure to the home country tax office is required, in Germany usually with the annual tax return. The duty applies regardless of whether tax becomes payable.

Is my name publicly visible in a beneficial ownership register?

In the EU unrestricted public access ended following a ruling of the Court of Justice. Authorities and parties with a legitimate interest keep access, so full protection from inspection does not exist.

What happens if my bank does not know about my new residency?

Your data is reported to your former country, which can trigger queries and contradictions. The self certification should therefore be updated immediately after the move.

What does substance mean in a compliance context?

Substance means decisions, people and operations genuinely sit where the company is registered. Without it, the company can become taxable in the country where management actually takes place.

Can I keep my structure anonymous?

Not towards authorities and banks. Beneficial ownership registers, CRS reporting and bank due diligence make the ownership chain traceable. Protection from the general public is possible, protection from authorities is not.