Automatic exchange
of information on a global scale will become a reality in 2017, as 51 countries
signed an agreement to share financial information. Another 35 jurisdictions
will join the following year.
All Organisation
for Economic Cooperation and Development (OECD) and G20 countries, as well as
most major international financial centres, signed a “multilateral competent
authority agreement” that will activate the automatic sharing of financial data
for tax purposes. The signing ceremony took place at the Global Forum on
Transparency and Exchange of Information for Tax Purposes in Berlin on 29th
October.
It shows the
determination from governments across the globe to prevent tax evasion and
capture lost tax revenue. Tax authorities of participating countries will be
able to gather much more information on the assets their taxpayers hold abroad.
The OECD explains
that automatic exchange of information “can provide timely information on
non-compliance where tax has been evaded either on an investment return or the
underlying capital sum, even where the tax administrations have had no previous
indications of non-compliance”.
58 jurisdictions,
known as the “early adopters”, have pledged to make the first exchange in 2017.
This includes Spain, the UK, Spain, Germany, most of the EU, Isle of Man,
Jersey, Guernsey, Gibraltar, Bermuda, Cayman Islands, British Virgin Islands,
Iceland, Liechtenstein, San Marino, Seychelles, Argentina and South Africa.
A further 35
jurisdictions have said they will start in 2018. This includes Hong Kong,
Monaco, Singapore, United Arab Emirates and, significantly, Switzerland.
Although not one of
the early adopters, the Swiss government has adopted mandates to soon begin
negotiations with the EU and other countries on automatically sharing data on
bank accounts from 2018.
Only a few years
ago, in 2008, the then Swiss finance minister Hans Rudolf Merz vowed that
banking secrecy would prevail, saying that its foreign opponents would have to
“bite the bullet” and accept it.
The US does not appear
on any of the lists, since under its own Foreign Account Tax Compliance Act
(FATCA) it will start automatically exchanging information with countries
around the world from 2015.
After the signing
ceremony, OECD Secretary-General, Angel Gurria, commented:
“We are making
concrete progress towards the G20 objective of winning the fight against tax
evasion… The world is quickly becoming a smaller place for tax cheats.”
The global
“Standard for Automatic Exchange of Financial Account Information in Tax Matters”
is different from most current bilateral agreements, where authorities have to
make formal requests for information. Now they will automatically receive
information on all their taxpayers who hold assets in the participating
territories.
The standard sets
out the financial account information to be exchanged, including –
• Balances
• Interest
• Dividends
• Sales proceeds from financial assets
• Interest
• Dividends
• Sales proceeds from financial assets
It covers accounts
held by individuals and entities, including trusts and foundations.
The OECD will
establish a peer review process to ensure that the automatic exchange of data
is effectively implemented. It is encouraging developing countries to join the
movement.
This OECD standard
follows on from the US’ FATCA, established in 2010 to catch American citizens hiding
money abroad, and the April 2013 G5 agreement to automatically exchange
information, which Britain’s crown dependencies and offshore territories
quickly signed up to.
The move towards
the end of financial privacy has already had a significant impact on state
coffers, as more and more people realise there is nowhere left to hide.
According to the OECD, 20 countries have raised $47 billion (€37bn) through
voluntary disclosure schemes since 2009.
Cross border tax
planning has completely changed over recent 15 years; particularly since the
move towards global tax transparency escalated in the wake of the financial
crisis.
Where once we used
to take financial privacy for granted, we now have to accept that it is
history. Tax authorities will have information on our income and assets,
wherever we hold them.
One thing has not
changed however, which is that every individual has the right to structure
their assets in a tax efficient manner. You need to establish how you can use
approved tax advantageous structures here in Spain to reduce your tax
liabilities. It is important to be compliant with local tax law, but it is also
important to protect your wealth from taxation wherever possible by exploring
the option of a legal financial structure. You can do both if you take
specialist advice from the experts at Blevins Franks.
By Peter Worthington, Senior Partner, Blevins Franks (info taken from ABC Mallorca)
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