What is the precise meaning of Automatic Exchange of Information (AEOI)?

Automatic Exchange of Information (AEOI) agreement is an effort to minimize tax evasion and ensure that taxpayers pay their tax to the relevant tax authorities. On July 15th, 2014, the Common Reporting Standard (CRS) that was created in reaction to the G20 request was confirmed by the OECD council. It required jurisdictions to gain information from their financially supporting agencies and then transfer it annually with other jurisdictions. It specifies the sort of financial information to be transferred, the reporting institutes, different account kinds or taxpayers involved and the usual timely diligence processes these institutes need to follow. Many countries are involved in making Automatic Exchange of Information (AEOI) agreements. These agreements letinformation transfer occurs among tax authorities in a variety of countries concerning financial accounts or investments that aid in collecting tax from all.

List of countries that agreed to share information

Domestic tax authorities are capable of obtaining information on non resident bank account owners from such financial institutes as banks, building communities, insurance companies, and investment companies. Once obtained, this information will be shared with relevant countries.

The Basis of AEOI:

As a package, AEOI is comprised of four components within OECD’s Standard for the Automatic Exchange of Financial Account Information (explained below).

1. International/intergovernmental agreements: If two countries intend to act out the AEOI standard together, they need to form an intergovernmental agreement. To this aim, a model convention is offered by OECD, Competent Authority Agreement or CAA. Only those states which have the power to enforce the new standard in the country can use these models.
2. Common Reporting Standard The authentic AEOI standard is included in the Common Reporting Standard (CRS) which has to be transferred to the national law.
3. Commentary on interpretation The Competent Authority Agreement (CAA) and the Common Reporting Standard (CRS) are proved by commentaries on interpretation. There are instances include too.
4. Technical implementation guidelines These guidelines specify what is technically needed to transfer data among tax authorities. These guidelines determine how we are to be ensured of data security.

What financial account information will Revenue receive from other jurisdictions under CRS?

The following information of newly opened account will be exchanged between jurisdiction participants. This includes the old accounts opened from January 1st, 2016.

• Every account owner’s name, address, tax identification number (TIN/My Number)
• financial institute’s name and ID number
• the amount of interest paid on each deposit account
• the amount of dividends spent or credited to each account
• thegross amount of income such as dividends or interest transferred to an account
• thegross proceeds of sale/redemption of financial assetsheld in an account
• account balance/amount at the time of reporting
• date of closing a reportable account

CRS covers Trusts too:

CRS deals with the reporting of accounts held by trusts. Identification and reporting is that of the settler, trustees and beneficiaries of trust (also called those in control).

How are account owners who are tax residents of other jurisdictions identified by financial institutes?

Due diligence process needs to be followed by financial institutes so as to identify customers living in other jurisdictions. Those who open a new account are asked to state where their tax residence belongs. Then the credibility of these statementsshould be checked by the institutes along with the other information they receive from Know your Customer (KYC) requirements of anti money laundering measures. In the case of accounts that already exist, the institutes should look into the list of foreign residence indices including:

• the address and incorporation place of a company within a foreign jurisdiction
• some phone numbers from the foreign jurisdiction
• postal address from the foreign jurisdiction
• guidelines on how to send money to a foreign account
• authority of an attorney or signatory authority with someone owing an address in the foreign jurisdiction
• foreign birth place

List of countries that agreed to share information:

Anguilla, Argentina, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Turks and Caicos Islands, United Kingdom

Jurisdictions that had the first exchange until 2018 (51 cases):

Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Bahrain, Barbados, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Curacao, Dominica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Lebanon, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Niue, Pakistan, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Trinidad and Tobago, Turkey, United Arab Emirates, Uruguay, Vanuatu.

Please visit the OECD official website to get the latest information related to Automatic Exchange of Information (AEOI) or visit the following link for participating countries:

Resources:
http://www.oecd.org/tax/automatic-exchange/commitment-and-monitoring-process/AEOI-commitments.pdf

AEOI Automatic Exchange Exchange