Automatic and International Information Exchange
Automatischer und Internationaler Informationsaustausch
Automatic Exchange of Information
All OECD and G20 countries and virtually all financial centres agreed to implement the new OECD/G20 standard at the annual meeting of the Global Forum for Transparency and Exchange of Information on 29 October 2014. This provides for automatic annual exchange of tax information starting in 2017. The basis for this is the multilateral convention on mutual administrative assistance in tax matters.
Several terms are used in connection with this exchange of information:
- Automatic Information Exchange – AIA
- Directive on Administrative Cooperation – DAC
- Common Reporting Standard – CRS
So far, 6 stages (DAC) of exchange have been agreed:
DAC 1 = Tax data from EU Member States
DAC 2 = Bank data from EU Member States and (currently) 26 OECD countries
DAC 3 = Rulings, transfer pricing
DAC 4 = Country-by-country report
DAC 5 = Fiscal access to bank information
DAC 6 = Tax planning models
DAC 1 – Tax information
The Directive on Administrative Cooperation (DAC) is one of the measures taken by the EU to implement the anti-tax evasion strategy adopted in 2006. Its purpose is to ensure that the OECD standard for the exchange of information upon request is uniformly implemented in the EU. A Member State should not be prevented from passing on information concerning a taxpayer to another Member State by the fact that the information required can be provided only by a bank or financial institution. The Directive applies to taxes of all kinds levied by a Member State or by territorial or administrative subdivisions of a Member State, including the local authorities. This excludes indirect taxes already covered by Union legislation on administrative cooperation between Member States.
With effect from 01 January 2015, the Directive provides for the Automatic Information Exchange on five non-financial categories of income and capital on the basis of available information
- Earnings from gainful activity
- Supervisory board remunerations
- Ownership of and income from immovable property
- Life insurance products
The obligation to report exists from 01 July 2015.
DAC 2 – Bank data
The European Commission had proposed to expand the Automatic Information Exchange between tax administrations in the EU to strengthen the fight against tax evasion. With the amending Directive 2014/107 of 09 December 2014, a list of financial information now also falls within the scope of the Automatic Information Exchange, with effect from 01 January 2017.
Within the EU (as well as participating third countries), information on financial accounts held by a person resident in another participating country is transferred. The financial institutions (banks, trustees, brokers, certain investment vehicles, certain insurance companies) are obliged to report such data to the local tax authorities. These data are then forwarded to the relevant tax authorities in the other country.
The following information is to be reported from the cut-off date 31 December 2016 onwards:
- Data of a person or entity subject to reporting (name, address, country of residence, tax identification number (TIN), date and place of birth for persons, account number)
- Name and the Austrian tax identification number of the reporting financial institution
- Account balance or value (including the cash value or surrender value in the case of redeemable insurance or annuity contracts) at the end of the respective calendar year.
- For custody accounts: Total gross amount of interest/dividends/other earnings and total gross proceeds from the sale or repurchase of financial assets
- For deposit accounts: Total gross interest income
This regulation is intended to avoid that capital yields that were earned abroad and that are subject to declaration or taxable in the country of residence are not declared by the taxpayer. The Savings Taxation Directive as well as the Savings Taxation Agreements with Switzerland or Liechtenstein will become obsolete. The treaties allowed individuals resident in a Member State to choose between an anonymous 35% withholding tax on the capital stock or reporting the interest income to their tax authorities.
DAC 3 – Rulings
Even after the amendment of the Mutual Assistance Directive by Directive 2014/107, the Commission and the Council considered further improvement of administrative cooperation and transparency in the tax area as a priority. Directive 2015/2376 extends Directive 2011/16 to ensure full and effective administrative cooperation between tax authorities by introducing a mandatory Automatic Information Exchange on advance tax assessment notices with a cross-border dimension and on Advance Notice Agreements – a specific form of advance tax assessment notice used in the context of transfer pricing agreements.
This is based on the following notion: Where Member States provide binding preliminary information in situations or in relation to transactions that are likely to be of interest to the tax authorities of other Member States, those Member States providing preliminary information shall be required to systematically provide information on decisions to other Member States.
Directive 2015/2376 therefore requires Member States to automatically exchange basic information on advance tax assessments and prior agreement arrangements with all other Member States. Member States had to implement this Directive in their national legal systems by 31 December 2016 and apply it from 01 January 2017 on.
There is a duty to inform EU Member States and/or third countries in the case of information notices pursuant to § 118 of the Austrian Federal Tax Code (Bundesabgabenordnung, BAO) or good faith information if the information relates to cross-border transactions
- in particular transfer pricing
- occasionally also reorganisations or group taxation requests.
The assessment is made by the relevant department of the office or department of the auditing division for large companies. Involvement of the nationwide department ESt/KÖSt (income tax / corporate tax) or transfer pricing control department is mandatory.
DAC 4 – Country-by-country reporting
In stage 4, the Mutual Assistance Directive will be extended to include country-by-country reporting (CBCR) into the Automatic Information Exchange.
Under the laws of numerous countries, groups with consolidated total sales of at least € 750 million must prepare and submit country-by-country reporting. This “country-by-country report” is a report containing information on the worldwide distribution of income, taxes and business activities of a multinational group of companies broken down by country or territory.
The country-by-country report is to be prepared for business years beginning on or after 01 January 2016 and is to be submitted no later than twelve months after the last day of the relevant business year to the competent tax office of the ultimate parent company (if domiciled in Austria) or to the tax office of a business unit domiciled in Austria which has assumed this obligation on behalf of the ultimate parent company.
DAC 5 – Fiscal access to beneficial owner information
Unlike previous amending directives, Directive 2016/2258/EU (DAC5) did not extend the scope of Automatic Information Exchange, but rather ensured access by the tax authorities to information on the beneficial owner collected in accordance with anti-money laundering legislation.
The new Directive 2016/2258/EU was adopted by the Council of Ministers on 6 December 2016 and published in the Official Gazette of the EU on 16 December 2016. The Member States have committed themselves to adopt the necessary implementation acts by 31 December 2017 at the latest and to apply the relevant regulations from 01 January 2018 on.
This essentially corresponds to the Beneficial Owners Register, which has been implemented in Austria since August 2018.
DAC 6 = Tax planning models
On 13 March 2018, the Council agreed on a proposal aimed at combating aggressive cross-border tax planning through greater transparency. It is becoming increasingly difficult for Member States to protect their tax assessment bases from erosion as cross-border tax planning structures are becoming ever more sophisticated. The aim of the proposed Directive is to prevent aggressive tax planning by strengthening the control of the activities of tax intermediaries. According to the proposal, these intermediaries, such as tax advisors, accountants and lawyers who design and/or offer tax planning models, are to be obliged to report models that are considered potentially aggressive. By means of defined “hallmarks”, models are to be identified that must be reported to the tax authorities. The fact that a model must be notified does not mean per se that it is harmful, but only that it may be of interest to the tax authorities to examine it more closely. While some models have perfectly legitimate purposes, the aim is to identify those where this is not the case.
The Member States are in turn to be required to exchange the information thus obtained automatically among themselves via a central database. This will make it possible to identify new tax avoidance risks more quickly, and to counter them with measures against harmful models. Member States would be obliged to impose penalties on intermediaries who do not comply with the transparency rules.
Member States have time until 31 December 2019 to implement the Directive into national law. The new reporting requirements apply from 01 July 2020. Member States must then exchange information every three months, namely within one month of the end of the quarter in which the information was received. The first Automatic Information Exchange will therefore take place on 31 October 2020 on the same platform as DAC 3.
International anti-fraud cooperation
In order for the EU Member States to be able to cooperate closely, particularly in the anti-fraud fight, regulations are needed which also define in particular the exchange of information in the tax and customs sector within the EU Member States.
In areas that are particularly susceptible to fraud, such as turnover tax, cooperation between Member States and the associated exchange of information is laid down in a Regulation. This means that each Member State has to fulfil the same obligations and enjoys the same rights.
In other areas, such as direct taxation, the exchange of information is regulated in the form of directives, which means that each Member State must implement the directives into national law, being able to take account of regulations of national law.
In particular in relation to third countries, the exchange of information and, where provided for, recovery assistance is based on existing double-taxation agreements.
- Mutual Assistance Directive 2011/16/EU for direct taxes
- Recovery Directive 2010/24/EU for direct and indirect taxes
- Recovery of financial penalties – Framework Decision 2005-214-JHA consolidated
- Implementing Regulation 1189/2011/EU for Directive 2010/24/EU
- Insolvency Regulation 1346/2000/EC consolidated
- VAT Refund Directive 2008/9/EC consolidated
- Value Added Tax Regulation 904/2010/EU
- EU Direct Tax Assistance Act
- EU Financial Penal Execution Act
- EU Enforcement Assistance Act for direct and indirect taxes
- Double-taxation agreement
- EU official assistance portal: Forms for federal states and municipalities
In many cases, agreements with third countries also provide for the use of information provided in criminal proceedings. Agreements with third countries do not provide for recovery assistance (enforcement assistance). Whenever a new agreement enters into force, it always applies retroactively, i.e. to all cases that are not yet time-barred.
Within the EU there are two main legal bases, Council Regulation 515/97/EEC of 13 March 1997 and its amendments for the communitarised customs sector, and the Naples II Convention for national legislation and criminal investigations. The Naples II Convention also regulates specific forms of cooperation such as cross-border surveillance, controlled deliveries and establishment of joint investigation teams.
- Council Regulation 389/2012/EU of 02 May 2012 lays down rules on administrative cooperation in the field of consumption taxes.
- For certain customs procedures, Council Regulation 904/2010/EU of 07 October 2010 on administrative cooperation and combating fraud in the field of value-added tax applies to the area of an immediately subsequent intra-Community supply as well.
- Within the EU, recovery assistance is also provided on the basis of the Recovery Directive 2010/24/EU, so that tax arrears can be collected by a requested administration.
- Regulation 515/97/EEC consolidated
- Naples II Convention
- Excise Duties Regulation 389/2012/EU
- Customs Code Regulation 450/2008/EC
- International administrative assistance – third countries
- International administrative assistance – Member States