Forty-four countries issued a joint statement pledging their commitment to early adoption of the Organisation for Economic Co-operation and Development’s (OECD’s) common reporting standard on automatic exchange of information among countries for tax enforcement purposes.
The statement sets a September 2017 deadline for the first exchange of information.
The 44 countries include ten UK crown dependencies and overseas territories, some of which, such as Jersey, the Isle of Man, and Bermuda, are commonly regarded as tax havens. Liechtenstein is also one of the signers. Luxembourg, which reportedly was prepared to become an early adopter, but which also recently scuttled proposed EU legislation on automatic exchange of information, is not.
In the statement, the countries set out a timetable for implementation:
- January 1st 2016: New account opening procedures to record tax residence will be in place;
- December 31st 2016: Due-diligence procedures for identifying high-value pre-existing individual accounts (pre-existing accounts are those open on December 31st 2015; high-value accounts are those with a balance exceeding $1 million on the last day of the year);
- September 30th 2017: First exchange of information about new accounts and pre-existing individual high-value accounts;
- September 30th 2017 or 2018: First exchange of information about pre-existing individual low-value accounts and entity accounts,
- December 31st 2017: Due-diligence procedures for low-value pre-existing individual accounts and for entity accounts.
The OECD common reporting standard was issued in February. It provides for automatic exchange of financial account information among countries and contains due-diligence procedures for financial institutions to follow. The standard is designed to reduce costs for governments and financial institutions by ensuring that they do not have to deal with a variety of information-exchange standards in different countries.
The financial information to be reported under the standard includes investment income from interest, dividends and similar types of income. It also includes account balances and sales proceeds from financial assets. The financial institutions that are required to report include banks and custodians, brokers, certain investment vehicles and certain insurance companies.
—Alistair M. Nevius (email@example.com) is CGMA Magazine’s editor-in-chief, tax.