Richard Cornelisse

Standard for Automatic Exchange of Financial Information in Tax Matters

In Audit Defense, Belastingontduiking, Benchmark, BEPS, CCCTB, EU development, Indirect Tax Strategic Plan, SAFT, State Aid, tax avoidance, tax rulings, tax transparency on 11/08/2015 at 7:16 pm

The purpose of the CRS Handbook is to assist government officials in the implementation of the Standard for the Automatic Exchange of Financial Account Information in Tax Matters (herein the “Standard”).

The Handbook provides a practical guide to the necessary steps to take in order to implement the Standard. Against that background, the Handbook is drafted in plain language, with a view to making the content of the Standard as accessible as possible to readers.

The Handbook provides an overview of the legislative, technical and operational issues and a more detailed discussion of the key definitions and procedures contained in the Standard. It is intended to be a living document and will be updated and completed over time.

The Handbook is to assist in the understanding and implementation of the Standard and should not be seen as supplementing or expanding on the Standard itself. Cross references to the Standard and its Commentary are therefore included throughout the document (in the column on the right hand side of the page in Parts I and II of the Handbook). The page numbers refer to the pages in the consolidated Standard.

Background to the creation of the Standard for Automatic Exchange

  1. For many years countries around the world have been engaging in the automatic exchange of information in order to tackle offshore tax evasion and other forms of non-compliance. The OECD has been active in facilitating automatic exchange by creating the legal framework, developing technical standards, providing guidance and training and seeking to improve automatic exchange at a practical level. As shown by the 2012 OECD report to the G20 in Los Cabos, automatic exchange of information is widely practiced and is a very effective tool to counter tax evasion and to increase voluntary tax compliance.
  2. In 2010, the US enacted the laws commonly known as FATCA, requiring withholding agents to withhold 30-percent of the gross amount of certain US connected payments made to foreign financial institutions unless such financial institutions agree to perform specified due diligence procedures to identify and report information about US persons that hold accounts with them to the US tax authorities. Many jurisdictions have opted to implement FATCA on an intergovernmental basis and, more specifically, to collect and exchange the information required to be reported under FATCA on the basis of a Model 1 FATCA Intergovernmental Agreement (herein “FATCA IGA”). Many of these jurisdictions have also shown interest in leveraging the investments made for implementing the FATCA IGA to establish automatic exchange relationships with other jurisdictions, which themselves are introducing similar rules.
  3. These countries recognise that, through the adoption of a common approach to automatic exchange of information, offshore tax evasion can be tackled most effectively while minimising costs for governments and financial institutions.
  4. With the strong support of the G20, the OECD together with G20 countries and in close cooperation with the EU and other stakeholders has since developed the Standard for Automatic Exchange of Financial Account Information, or the Standard. This is a standardised automatic exchange model, which builds on the FATCA IGA to maximise efficiency and minimise costs.
    The automatic information exchange framework
  5. The diagram in the next page (Figure 1) depicts the automatic exchange framework for reciprocal information exchange under the Standard. In broad terms, financial institutions report information to the tax administration in the jurisdiction in which they are located. The information consists of details of financial assets they hold on behalf of taxpayers from jurisdictions with which their tax administration exchanges information. The tax administrations then exchange that information.
  6. This process requires: rules on the collection and reporting of information by financial institutions; IT and administrative capabilities in order to receive and exchange the information; a legal instrument providing for information exchange between the jurisdictions; and measures to ensure the highest standards of confidentiality and data safeguards.

Schermafbeelding 2015-08-11 om 20.13.26

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