Automatic Exchange of Information in a nutshell
July 2014. 47 countries have just agreed to introduce a new framework for the automatic exchange of financial information without having to request it. It is called the Common Reporting Standard, and it has been developed and approved by the OECD Council in response to the G20 request. Not only is its informal name, GATCA (Global Account Tax Compliance Act), remarkably similar to the American FATCA, the Foreign Account Tax Compliance Act. GATCA, or CRS, is the new global version of FATCA.
Within this new framework, each country/region involved in the exchange collects (through its tax authorities) financial information on foreign bank accounts of its residents which is provided by any and all financial institutions operating in that particular country/region and automatically exchanges that information with other jurisdictions by the end of each year. The main purpose of the exchange is to combat global tax evasion.
July 2016. 83 jurisdictions have already signed the agreement to automatically exchange information. Even jurisdictions commonly known for enabling corporate tax avoidance, such as the British Virgin Islands, Bermuda, the Cayman Islands, the Isle of Man, Panama, Vanuatu and others, confirmed their participation in the CRS.
As of September 2020, the number of jurisdictions that signed the AEOI has reached 109. The most current list of countries is published on the OECD’s official website.
AEOI in practical terms
For the bilateral application of the AEOI framework, every two participating jurisdictions have signed an intergovernmental agreement based on the model agreement developed by the OECD. Financial institutions that must submit client data to the tax authorities in their country include banks, brokers, insurance companies, mutual funds, depositaries and other financial institutions.
The amount of information exchanged between the parties is defined in separate intergovernmental agreements. As a rule, it includes the account number(s), account balance and total income from all transactions made on the account, including investment income in form of dividends or insurance payments, real estate income and profits from the sale of financial assets as well as similar account information. Personal information that is also subject to the exchange usually includes names, date and place of birth, residential and/or registered address, national insurance number and taxpayer identification number. This information is exchanged both in regard to the account holder and all beneficiaries, persons and entities associated with the account.
Jurisdictions participating in the AEOI
Exchange of information for 2016, starting from January 1, 2017
Anguilla, Argentina, Austria, Barbados, Belgium, Bermuda, Bulgaria, Cayman Islands, Chile, Colombia, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faeroe Islands, Finland, France, Germany, Gibraltar, Guernsey, Greece, Greenland, Hungary, Iceland, India, Ireland, Italy, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovakia, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos, UK, Uruguay.
Exchange of information for 2017, starting from January 1, 2018
Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Bahamas, Bahrain, Belize, Brazil, Brunei, Canada, China, Cook Islands, Costa Rica, Grenada, Hong Kong, Indonesia, Israel, Japan, Macao, Malaysia, Marshall Islands, Monaco, Nauru, New Zealand, Panama, Russian Federation, Saint Kitts and Nevis, Saint Lucia, Saint Vincent, Samoa, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Turkey, United Arab Emirates, Vanuatu.
Exchange of information for 2019, starting from September 2020
Dominica, Ecuador, Kazakhstan, Liberia, Oman.
Particularly worth mentioning is the fact that the USA do not participate in the global AEOI framework. The country has its own system of automatic collection of financial information within the FATCA law signed in 2010, which served as a prototype for the AEOI. The relevant FATCA agreements have been signed with over 50 countries; these countries automatically send information about US tax residents to the US tax authorities. However, the USA do not provide information about foreign residents holding accounts in the United States in return.
In addition to the USA, such countries as Kuwait, Maldives, Moldova, Thailand, as well as most of the former USSR countries - Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Tajikistan, Turkmenistan, Ukraine and Uzbekistan - have refused to participate in the AEOI framework so far. However, these countries may change their stance at any time as Kazakhstan did in 2020.
Who is not affected by AEOI/CRS?
Accounts of individuals and legal entities which are not subject to the automatic exchange of information
Unless the respective financial institution determines otherwise, existing accounts of legal entities with a balance not exceeding US$ 250,000 as of December 31 of the relevant year are not subject to the automatic exchange.
The same applies to individual accounts with a balance not exceeding US$ 50,000.
This information has been provided for information purposes. Please consult a specialist for more details before making any important decisions.