The Core CRS / FATCA Principle: No Look-Through of Financial Institutions

At the heart of both CRS and FATCA lies a fundamental architectural rule:

Financial Institutions (FIs) are not treated as reportable persons.

This is not accidental—it is structural. In this episode, we unpack why the system is designed this way and why requiring look-through of Financial Institutions can undermine the logic of the framework.

Under the Common Reporting Standard issued by the Organisation for Economic Co-operation and Development and under FATCA:

• Financial Institutions are Reporting Entities

• They are generally not Reportable Persons

• The system is designed to avoid duplicate and redundant reporting

The objective is administrative efficiency and clarity of responsibility.

If a Financial Institution were required to look through another FI:

• The upstream FI would report

• The downstream FI would also report

• The same underlying individual could be reported twice

This would create:

• Duplication

• Administrative inefficiency

• Increased risk of inconsistent reporting

• Systemic complexity

To prevent this, the OECD framework allocates reporting to the FI closest to the reportable person—the institution best positioned to know its account holder.

The OECD has repeatedly emphasized that reporting responsibility should rest with the Financial Institution that:

• Maintains the account

• Has direct access to the account holder

• Conducts due diligence

This ensures reporting is:

• Centralized

• Accurate

• Non-duplicative

When an FI-trust is required to look through FI equity interests, as seen in certain interpretative approaches, the result may be:

• Reporting by the FI-trust

• Reporting by the institutional FI

• Potential duplication of the same underlying individuals

Critics argue that this outcome conflicts with the core CRS principle against redundant reporting.

Supporters may argue that such look-through enhances transparency—but it arguably shifts the architecture from allocation of responsibility to expansion of responsibility.

The CRS and FATCA systems are built on a simple but powerful structural rule:

Requiring look-through of Financial Institutions risks:

• Blurring that structural boundary

• Creating duplication

• Departing from the “closest FI” reporting principle

Understanding this architecture is essential for trustees, compliance officers, and advisors navigating evolving interpretations of CRS and FATCA.

In this episode, we examine a controversial development in Swiss CRS practice: the extension of look-through obligations for trusts that qualify as Reporting Financial Institutions (FI-trusts).

The issue centers on whether a trust must look through entity account holders—even when those entities themselves qualify as Financial Institutions.

Under the Common Reporting Standard (CRS) issued by the Organisation for Economic Co-operation and Development, an account holder that qualifies as a Financial Institution (FI) is generally a non-reportable person.

For FI-trusts, equity interest holders are typically:

• The settlor

• The beneficiary

• Any natural person exercising ultimate effective control

Where such persons are themselves Reporting FIs, the traditional interpretation is that reporting stops at that institutional level.

The controversy arose from language in the OECD CRS Implementation Handbook, which states that:

This has been interpreted by some jurisdictions to require trusts to look through entity settlors, trustees, protectors, or beneficiaries to identify natural controlling persons.

In 2021, guidance issued by the State Secretariat for International Finance (SIF) and adopted by the Swiss Federal Tax Administration revised Switzerland’s CRS position.

The Revised Swiss CRS Guidance introduced an obligation for FI-trusts to:

• Look through entity account holders

• Identify and report the controlling persons

—even where the entity itself qualifies as a Financial Institution.

This effectively removes the traditional “FI blocker” concept.

Critics argue that this approach:

• Conflicts with the text of the CRS itself

• Conflates Financial Institutions with Passive NFEs

• Treats FI equity interest holders similarly to Passive Non-Financial Entities

• Expands reporting obligations beyond the Standard

Supporters contend that:

• The OECD Implementation Handbook clarifies the intended scope

• The FI status of an entity does not eliminate the need to identify natural persons ultimately connected to the trust

• The approach enhances transparency and consistency

The question is not merely academic. It affects:

• The scope of reporting by FI-trusts

• The treatment of institutional settlors and beneficiaries

• Whether FI status acts as a reporting “blocker”

• The balance between textual interpretation and administrative guidance

At its core, this debate illustrates a broader tension within CRS implementation:

Does administrative clarification expand obligations, or merely explain them?

Switzerland’s revised approach reflects a broader trend toward substance-over-form transparency. Whether it constitutes a reinterpretation or an expansion of the CRS remains debated among practitioners.

For advisors and trustees, the lesson is clear:

CRS compliance now depends not only on the Standard itself—but also on how individual jurisdictions interpret and implement it.

Understanding who counts as an equity interest holder is central to how the Common Reporting Standard (CRS) operates for trusts that qualify as Reporting Financial Institutions (FIs). In this episode, we break down the legal definitions, explain why this classification matters, and clarify a common area of confusion around look-through rules.

At the heart of the CRS is the obligation imposed on Reporting Financial Institutions—including certain trusts—to identify their financial accounts and determine whether those accounts are reportable accounts.

This identification process determines who gets reported, to which tax authority, and why.

Under Section VIII.C.1 of the CRS, a Financial Account includes, in the case of an Investment Entity, any equity or debt interest in the FI.

➡️ For a trust that qualifies as an FI, this means the focus shifts to who holds an equity interest in the trust.

The CRS provides a specific definition:

An Equity Interest in a trust is considered to be held by:

• Any person treated as a settlor

• Any person treated as a beneficiary (of all or part of the trust)

• Any other natural person exercising ultimate effective control over the trust

These persons are treated as account holders for CRS purposes.

Correctly identifying equity interest holders determines:

• Whether an account is reportable

• Which persons must be assessed as reportable persons

• The scope of the trust’s CRS reporting obligations

Errors at this stage can lead to over-reporting, under-reporting, or misclassification.

Early CRS guidance issued by the Swiss Federal Tax Administration closely tracked the CRS itself. It confirmed that, for a trust qualifying as an FI, equity interest holders are limited to:

• The settlor

• The beneficiary

• Any other natural person exercising ultimate effective control

No additional categories were introduced.

A key clarification often missed in practice:

• Equity interest account holders are not subject to a look-through approach where the account holder is a Reporting FI

• The only exception is where the entity is a non-participating investment entity, which is treated as a Passive NFE

Outside that narrow exception, reporting stops at the FI level.

For trusts that qualify as Reporting Financial Institutions:

• Equity interest holders are settlor(s), beneficiary(ies), and natural persons with ultimate effective control

• These persons are treated as account holders

• No look-through applies when the account holder itself is a Reporting FI

• Proper classification is essential to getting CRS reporting right

Understanding this distinction is critical to avoiding incorrect look-through assumptions and ensuring accurate, defensible CRS compliance.

Leaving a country does not automatically mean you stop being a tax resident. In this episode, we explain why tax residency is a legal status, not a travel diary—and why long periods of absence can still leave you fully taxable on your worldwide income.

Tax residency is determined by legal tests, not by where you happen to be on any given day.

While physical presence matters, it is rarely decisive on its own.

Many individuals assume that time spent abroad equals non-residency. Tax authorities often disagree.

Even during extended absences, you may remain tax resident if you retain “significant and enduring ties” to a jurisdiction. Authorities assess the totality of your circumstances, commonly referred to as:

• The ties test

• Vital interests analysis

• Centre of life assessment

Tax authorities typically look at a combination of the following:

Do you maintain a dwelling—owned or leased—that remains available for your use?

Does your spouse, partner, or dependent children continue to live in the country?

Do you retain:

• Bank accounts or credit cards

• Investments or pensions

• Business interests or directorships

Are you still connected through:

• A driver’s licence

• Voter registration

• Professional or regulatory memberships

Do your belongings, health insurance, lifestyle choices, and behaviour suggest a temporary absence or an intention to return?

Where these ties remain strong, tax authorities often treat absence as:

• Temporary work placement

• Travel or education

• Short-term mobility

—not as a genuine severing of tax residency.

This can result in continued liability for worldwide income, even while physically abroad.

You don’t cease to be tax resident just because you leave.

Residency ends only when your centre of life actually moves—in substance, not just on paper.

For internationally mobile individuals, digital nomads, and executives, understanding this distinction is critical to avoiding unexpected tax exposure.

As global tax enforcement intensifies and private wealth comes under greater scrutiny, the role of the tax advisor is evolving fast. In this episode, we outline the three-pillar framework that Fernando Del Canto consistently uses when advising clients in an increasingly complex international tax environment.

This approach is not about chasing loopholes—it’s about building durable, defensible outcomes.

Tax residence remains the single most powerful connecting factor in personal taxation.

Key considerations include:

• Selecting (or relinquishing) residence deliberately, not accidentally

• Understanding center-of-life, substance, and tie-breaker rules

• Accepting that mobility without substance is increasingly ineffective

For many clients, the most important tax decision is not what structure to use, but where to be resident—and why.

How assets are held is now as important as where the individual lives.

Del Canto emphasizes:

• Trusts, foundations, and corporate vehicles

• Use of well-regulated, reputable jurisdictions

• A move away from aggressive “tax haven” narratives toward legal certainty and substance

The objective is risk management, not opacity—structures must withstand regulatory, judicial, and reputational scrutiny.

Not all income is taxed equally—and classification matters more than ever.

Effective planning focuses on:

• Structuring income streams to be inherently tax-efficient

• Distinguishing between salary, dividends, capital gains, and retained earnings

• Aligning income type with the tax profile of the individual’s residence

For example, in some jurisdictions capital gains may be exempt or lightly taxed, while employment income is fully exposed—making income characterisation a critical planning lever.

The future of tax advice is foundational, not tactical.

Successful advisors will:

• Anchor planning in residence first

• Build structures for substance and longevity

• Align income type with jurisdictional reality

In a world of transparency and coordination, simple but well-aligned planning now outperforms complex but fragile strategies.

As global tax policy shifts toward greater scrutiny of private wealth, advising high-net-worth individuals with international assets requires a fundamentally different approach. In this episode, we outline the three core pillars that Fernando Del Canto consistently emphasizes when preparing clients for this new environment.

These principles are increasingly relevant across Spain, the UK, and the wider European Union.

Structures must reflect genuine economic reality, not artificial arrangements designed solely for tax outcomes.

Recent rulings of the Court of Justice of the European Union (CJEU) have reinforced a clear message:

• Form without substance is vulnerable

• Control, decision-making, and activity matter

• Paper residency and nominal structures are increasingly challenged

For internationally mobile families, substance now underpins the durability of any planning.

Waiting for enforcement is no longer a viable strategy.

Del Canto stresses the importance of:

• Anticipating legislative and regulatory change

• Reviewing structures before they are challenged

• Aligning planning with the direction of travel, not just current law

In an environment of expanding audits and cross-border cooperation, early compliance reduces both financial and reputational risk.

Transparency is no longer optional—it is structural.

High-net-worth individuals must adapt to:

• Expanded reporting obligations

• Automatic exchange of financial and asset information

• Increased coordination between tax authorities

The focus has shifted from whether information is disclosed to how it is explained and supported.

Del Canto frequently applies this framework when analysing:

• Spanish tax reforms, particularly around wealth and succession

• UK tax enforcement, including residence and domicile scrutiny

• The broader EU tax landscape, shaped by CJEU jurisprudence and coordinated policy initiatives

Across all three, the same message emerges: substance, compliance, and transparency now determine outcomes.

For high-net-worth individuals with international exposure, the next phase of tax planning is not about secrecy or complexity—it is about resilience.

• Substance must match structure

• Compliance must be proactive, not reactive

• Transparency must be managed, not feared

Advisors who integrate these three pillars are best positioned to help clients navigate the new era of private wealth taxation.

Beyond Pillar One and Pillar Two, a new concept is beginning to surface in global tax policy discussions: an informal “Pillar Three”—focused not on multinational corporations, but on private wealth and mobile individuals.

In this episode, we explore how this emerging framework is being articulated, drawing on insights highlighted by Fernando Del Canto, and why it may represent the next frontier in international taxation.

A central feature of this emerging pillar would be a coordinated approach to taxing accumulated wealth, rather than focusing exclusively on annual income.

Key implications include:

• Net wealth as a standalone tax base

• Reduced reliance on realization events

• Greater scrutiny of asset holdings across borders

This would mirror the logic of Pillar Two—but applied to individuals instead of corporations.

Another likely component is greater alignment of inheritance and gift tax frameworks across jurisdictions.

The objective would be to:

• Reduce arbitrage between national systems

• Limit avoidance through migration shortly before death

• Improve transparency around cross-border estates

This would not require identical tax rates—but rather converging rules on scope, reporting, and connecting factors.

A Pillar Three framework would almost certainly include stronger measures targeting highly mobile individuals whose primary motivation for relocation is tax avoidance.

Expected features include:

• Enhanced center-of-life and economic substance tests

• Coordinated exit taxes and trailing tax liabilities

• Reduced effectiveness of short-term or purely formal relocations

The emphasis shifts from where someone claims to live to where their life and wealth are actually anchored.

Pillar Three would represent a philosophical shift in global taxation:

• From income → to wealth

• From corporations → to individuals

• From formal residence → to economic reality

While still conceptual, the direction of travel is clear: private wealth and mobility are becoming systemic policy targets, not edge cases.

Pillar Three is not yet law—but it reflects a growing consensus that global tax coordination cannot stop at corporations.

For HNWIs, families, and advisors, this signals:

• Increased long-term scrutiny of wealth structures

• Fewer safe havens based on mobility alone

• The need for planning grounded in substance, transparency, and durability

The era of global tax reform may be entering its third phase.

Digital nomads once thrived in the gaps between tax systems. Built around physical presence and permanent residence, traditional tax rules struggled to keep up with a workforce that could earn globally while living temporarily almost anywhere. That era is ending.

In this episode, we explore why governments are now actively targeting digital nomads—and how the regulatory “gray zone” is being closed.

Traditional tax systems assume work is performed in a specific country.

Digital nomads often work entirely online, with no physical office and no clear “place of work.”

Nomads may:

• Earn income from clients in one country

• Hold bank accounts in another

• Live temporarily in a third

This fragmentation made it difficult for any single jurisdiction to assert taxing rights.

Through tourist visas or newer digital nomad visas (DNVs), individuals could remain in a country for extended periods while technically avoiding tax residence—sometimes for years.

The result was a regulatory blind spot where income often went untaxed.

Governments are no longer tolerating this ambiguity. Instead, they are:

• Tightening tax residency rules and “center-of-life” tests

• Linking visa regimes more closely to tax compliance

• Expanding definitions of source and personal income

• Increasing information sharing between tax authorities

• Scrutinising lifestyle, presence, and economic substance—not just formal status

What was once informality is now being reframed as non-compliance.

The digital nomad “gray zone” is closing fast.

For individuals:

• Low-tax outcomes based on mobility alone are becoming harder to sustain

• Tax exposure increasingly follows presence, benefit, and economic reality

For governments:

• Mobile workers represent a reclaimable tax base

• Digital nomad regimes are shifting from attraction tools to compliance gateways

Digital mobility is no longer invisible—and tax planning based on ambiguity is rapidly becoming obsolete.