Dominica's CBI Programme Does Not Jeopardise Tax Revenues, Say Accounting Firms and Renowned QC

LONDON, May 15, 2019 /PRNewswire/ -- Dominica is once again the subject of a report affirming that its Citizenship by Investment (CBI) Programme does not threaten global tax collection or reporting. According to a highly respected member of the United Kingdom's Queen's Counsel, obtaining Dominica's citizenship "does not, in and of itself, afford an individual the status of tax resident."

Last week, Balraj Bhatia QC issued a formal legal opinion on the relation between Dominica's Programme and global taxation, following an analysis of Dominica's tax laws and Programme. He also examined two reports issued by leading tax advisory groups Ernst and Young (EY) and Smith and Williamson, both of which found that the country's CBI Programme "does not present a risk" to global tax revenues or to CRS reporting. In completing his review, Bhatia states that "the conclusions of the EY and Smith and Williamson reports are sound."

Dominican's Programme Is Not a Gateway for Tax Evasion

A misconstruction of Dominica's CBI Programme, and those of other nations, is that economic citizenship automatically provides an individual with tax residency. This has led some intergovernmental organisations, such as the European Commission, to unfairly criticise such programmes for posing a risk to proper taxation, despite the Commission themselves recognising that, "the use of these schemes does not equate to tax evasion."

Bhatia clarifies this issue and, in agreement with EY and Smith and Williamson, finds that, in Dominica, "the concepts of citizenship and tax residency are entirely separate and distinct." This is significant because successful applicants under Dominica's CBI Programme "obtain citizenship only" and can therefore not use the Programme to become Dominican tax residents at the expense of the tax revenues of other countries. The reports of EY and Smith and Williamson make similar observations, the latter concluding that, "citizenship by investment does not present a risk to facilitating tax evasion, as citizenship alone is insufficient to secure tax residency."

No Risk Posed to CRS Reporting

CRS reporting is another area where inaccurate understanding has generated critique of Dominica's Programme. Yet, per Mr Bhatia's opinion, CRS reporting also is in fact, "based on tax residence rather than citizenship," meaning the Programme is not open to abuse by individuals wishing to circumvent CRS. This again directly counters criticism by entities who "erroneously associate CBI with tax residency."

CBI Brings Great Benefit to Local Citizens

For almost three decades, in return for the "stability, freedom, and a better lifestyle" that come with Dominican citizenship, applicants to the island's CBI Programme have provided "much needed investment" to this small Caribbean nation. Dominica in turn utilises investor funds to the benefit of its citizens, such as building hundreds of climate-resilient homes for residents, developing a geothermal plant to provide clean energy, and creating job opportunities in key sectors including ecotourism and construction. Dominica itself operates strict vetting procedures, including the employment of regional and international due diligence specialists to conduct checks on applicants. To reduce Dominica's CBI Programme "to no more than [an] elaborate tax evasion scheme," says Bhatia, "is unjustified." In light of this, Bhatia concludes that it is unnecessary to deprive individuals of the opportunity to seek Dominican citizenship through CBI or Dominica of vital funds for national development.

The full opinion and reports by EY and Smith and Williamson can be accessed here.

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