This episode examines a pivotal provision in the CRS Commentary—paragraph 178 (Section VIII, C(4))—and its implications for trusts that qualify as Reporting Financial Institutions (FI-trusts).

The key issue:

When equity interests in an FI are held through a Custodial Institution, who reports?

Under the Commentary issued by the Organisation for Economic Co-operation and Development, paragraph 69 clarifies that:

This defines who holds an equity interest in an FI-trust.

Paragraph 70 then adds a critical allocation rule:

The Commentary provides a concrete example:

• Reportable Person A holds shares in Investment Fund L

• A holds those shares in custody with Custodian Y

• Fund L is an Investment Entity (an FI)

• Custodian Y is a Custodial Institution (an FI)

Under the CRS:

• Fund L treats Custodian Y as its account holder

• Because Y is a Financial Institution, it is not a Reportable Person

• Therefore, L does not report

Instead:

• Custodian Y reports the shares it holds for A

• Reporting responsibility rests with the FI closest to the Reportable Person

This illustrates the “closest FI” principle and prevents duplication.

The Commentary appears explicit:

• If equity interests are held through a Custodial Institution

• The Custodial Institution reports

• The upstream FI does not look through

Critics argue that requiring FI-trusts to look through **all entities—including non-reportable entities such as Custodial Institutions—**conflicts with:

• Paragraph 70 of the Commentary

• The non-reportable status of Financial Institutions

• The structural allocation of reporting responsibility

Supporters may argue that broader transparency objectives justify expanded look-through in certain contexts.

This debate is not theoretical. It affects:

• Whether FI-trusts must look through FI equity holders

• Whether Financial Institution status functions as a reporting “blocker”

• The risk of duplicate or redundant reporting

• Consistency between CRS text and administrative interpretation

At its core, the Commentary example reinforces a structural rule:

Understanding this allocation principle is critical for trustees, compliance officers, and cross-border advisors navigating divergent national interpretations.

This episode examines a core structural rule of the Common Reporting Standard (CRS):

Financial Institutions are non-reportable persons and must not be looked through for due diligence purposes.

We analyse the relevant CRS provisions and explore why this principle is central to the reporting framework.

Under the CRS issued by the Organisation for Economic Co-operation and Development, reporting obligations are carefully tiered.

Only Reportable Accounts are subject to due diligence.

This distinction is fundamental.

The Standard states:

It further clarifies that accounts held by non-reportable entities—including:

• Financial Institutions (e.g., custodial institutions)

• Central banks

• Government entities

• International organisations

• Regularly traded corporations

—are not subject to due-diligence procedures.

Section VI requires a determination of whether an entity account is a reportable account.

Where the account holder is a non-reportable entity, including a Financial Institution:

➡️ The entity must not be looked through.

The due diligence obligation ends at that level.

The CRS is built on an allocation model:

• Financial Institutions report

• They are generally not reported on (in their capacity as FIs)

• Look-through applies to Passive NFEs—not to Reporting FIs

This prevents:

• Duplicate reporting

• Administrative inefficiency

• Confusion over responsibility

Against this background, debate arises where guidance suggests that FI-trusts should look through entity equity holders—even where those entities qualify as Financial Institutions.

The textual question becomes:

If the CRS explicitly states that non-reportable entities must not be subject to look-through, can administrative interpretation require otherwise?

Critics argue this creates tension with:

• The no-look-through rule for non-reportable entities

• The structural allocation of reporting responsibility

• The prohibition against duplicative reporting

Supporters argue the approach enhances transparency.

This is not a narrow drafting issue—it affects:

• How FI-trusts classify equity interest holders

• Whether FI status acts as a reporting “blocker”

• The integrity of the CRS due diligence hierarchy

At stake is a foundational principle:

Understanding this architecture is essential for trustees, compliance officers, and advisors operating across jurisdictions with divergent interpretations.

This episode examines a narrow but consequential interpretative issue:

Did Switzerland extend the CRS look-through rules for FI-trusts beyond what the OECD Implementation Handbook actually provides?

The debate centers on Chapter 6.3 of the CRS Implementation Handbook, specifically paragraphs 254–256 (pp. 109–110), dealing with trusts that qualify as Reporting Financial Institutions.

The Handbook states:

It then clarifies that the CRS defines the following entities as non-reportable persons:

• Financial Institutions

• Regularly traded entities

• Central banks

• International organisations

• Government entities

This establishes the starting point:

If the equity interest is held by a Financial Institution, it is not a Reportable Person.

The Handbook further states:

It then explains that a trust must apply a look-through approach to a settlor, trustee, protector, or beneficiary that is an Entity to identify the relevant Controlling Persons—corresponding to AML/KYC beneficial ownership principles.

The controversy arises from how the term “Entity” is read in paragraph 256.

The critical observation:

Nowhere—explicitly or implicitly—does paragraph 256 state that “Entity” includes non-reportable entities such as Financial Institutions.

Paragraph 254 has already distinguished:

• Reportable Persons

• Non-reportable entities (including FIs)

The textual argument advanced by critics is therefore:

If paragraph 254 establishes that Financial Institutions are non-reportable persons, and paragraph 256 refers to “Entities” without overriding that distinction, then the look-through rule logically applies only where the entity is a Reportable Person (e.g., Passive NFE), not where it is a Reporting FI.

Swiss revised guidance interpreted paragraph 256 as requiring FI-trusts to:

• Look through entity equity holders

• Identify and report controlling persons

—even where the entity is itself a Financial Institution.

Critics argue that this effectively:

• Treats FI equity interest holders similarly to Passive NFEs

• Removes the structural “FI blocker” principle

• Expands reporting beyond the CRS text

Supporters argue the approach aligns with transparency objectives and AML alignment.

The dispute is not about transparency—it is about architectural coherence.

If Financial Institutions are non-reportable persons by design, then requiring look-through of FI equity interests may:

• Create duplicate reporting

• Disrupt the “closest FI” allocation principle

• Blur the boundary between FI and Passive NFE treatment

The question is whether the Implementation Handbook clarified the Standard—or extended it.

Paragraphs 254–256 of the CRS Implementation Handbook distinguish clearly between:

• Reportable Persons

• Non-reportable entities (including Financial Institutions)

The debate turns on whether “Entity” in paragraph 256 implicitly overrides that distinction—or must be read consistently with it.

For trustees and advisors,

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.