International Tax Cooperation: OECD Standard for Automatic Exchange of Financial Account InformationSullivan & Cromwell LLP - February 27, 2014
The Organisation for Economic Cooperation and Development has published a Standard for Automatic Exchange of Financial Account Information to aid in the global fight against international tax avoidance and evasion. Implementation of the Standard has been formally agreed to by the G20.
The Automatic Exchange Standard sets out a Model Competent Authority Agreement and a Common Reporting and Due Diligence Standard. The Automatic Exchange Standard is intended to facilitate the process by which jurisdictions obtain financial information from their account holders and automatically exchange that information with other jurisdictions on an annual basis. The Model Competent Authority Agreement contains detailed rules on the exchange of information. The Common Reporting and Due Diligence Standard contains reporting and due diligence rules under which the relevant information is to be identified and collected.
The Automatic Exchange Standard, which generally tracks a model intergovernmental agreement developed by the United States Treasury Department for purposes of implementing its “FATCA” rules, sets out:
- The financial account information to be exchanged;
- The financial institutions that need to report;
- The different types of accounts and taxpayers covered; and
- Common due diligence procedures to be followed by financial institutions.
- The standardization of terms, concepts and approaches to allow application to countries other than the U.S.;
- More discretion for the jurisdiction providing information as to how it gets the information;
- A wider scope of accounts held by individuals that will be subject to review and reporting; and
- Different treatment of certain investment entities and different treatment of the equity and debt interests of certain investment entities.
This memorandum also sets the Automatic Exchange Standard in the context of other international agreements on tax cooperation (through a brief history) and goes on to consider its prospects and some of the wider implications.