Passport, green card, residence permit and tax residency as well as the relationship with CRS

Today I learned through this article that many friends do not understand that CRS targets tax residents, and identity ID, passport, green card, residence permit, or any identification from a third country do not have a direct determining relationship with CRS.

CRS looks at where a person is considered a tax resident in various countries or regions. For the vast majority of Chinese friends, as long as your household registration, family, main assets, and primary economic interests are still in China, it is difficult to simply state that you are no longer a Chinese tax resident.

If you have a passport from a third country, it does not mean that you are not a Chinese tax resident. It only indicates that you have residency qualifications in that country or region, and does not mean you are not a tax resident of China.

The key point is whether you still have real estate in China or household registration, and also whether you have lived in China for a cumulative total of 183 days within a tax year.

Of course, in actual implementation, because tax residency is self-reported, for example, if you already have a U.S. passport, then filling out the U.S. tax resident information is the default, even if you still have household registration in China, you will not be considered a Chinese tax resident. However, if you are just a PR or another residency status, your primary identity will be checked; for instance, China requires that all information of individuals who open accounts using a Chinese identity must be reported back to China.

The tweet about Dubai is the best example. Even if you hold a Dubai ID, and even if you have lived in Dubai for more than 183 days, as long as you still have property and household registration in China, you are still a Chinese tax resident. Your banking information in Dubai, and stock trading information in Dubai, will all still be shared with China through CRS.

Some friends mentioned that if I register with Charles Schwab or Interactive Brokers using a Dubai ID, then do I not need CRS? This statement is valid only if you cannot use a Dubai bank. Once you open a bank account in Dubai and transfer money to Charles Schwab or Interactive Brokers, the bank information will still be shared through CRS.

Another friend asked, if I use my Dubai identity to open an account with Charles Schwab or Interactive Brokers and then open a U.S. bank account with the Dubai identity, will that work? Yes, that works, but it is like shooting yourself in the foot because even if you register with Charles Schwab or a U.S. bank using a Chinese passport, information will not be exchanged. So why go through Dubai at all?

In my personal understanding, the most important aspect of having an overseas identity is to achieve identity separation and to have a legitimate opportunity to transfer assets from within China out of China. Essentially, permanent residency is sufficient.

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