54 countries and territories agree to automatic exchange of tax information as from 2017

A total of 50 countries and jurisdictions around the world signed a multilateral agreement between the competent authorities on the automatic exchange of financial account information. Of those, 48 countries and territories will exchange this information as from 2017 and the other two will do so as from 2018. Another six more countries have committed to the agreement for 2017 (although they have not signed). In total, 54 countries and territories will exchange information in an automatic and standardised fashion as from 2017.

The Minister for Economic Affairs and Competition, Luis de Guindos, and the State Secretary for the Treasury, Miguel Ferre, attended the event on behalf of Spain, the latter in the capacity of competent authority. The signing took place after the plenary meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes, held in Berlin on 28 and 29 October.

The multilateral automatic exchange of financial account information agreement is the result of a project set in motion by Germany, Spain, France, Italy and the United Kingdom. The so-called G-5 sent a letter to the European Commissioner for Tax Affairs in 2013 expressing their intention to move forward with extending the automatic exchange of financial account information in line with the FATCA agreement model with the United States, the development of which they were all actively involved in. Based on this G-5 project, the OECD approved a model agreement on this common and standardised system for information exchange on 17 January 2014.

The signing on Wednesday, together with the political agreement reached at the EU ECOFIN Council meeting on 14 October for establishing this automatic exchange of financial account information system within the European Union, represents an historic and radical step forward in terms of transparency and international fiscal control within an economic climate that is becoming increasingly global and inter-related. Furthermore, the project remains open to new members and there is no doubt that new countries and jurisdictions will join in the future.

All types of financial accounts

The scope of the information to be exchanged via this system is extremely broad. Specifically, it covers all types of financial accounts (bank deposits, negotiable securities, holdings in investments funds, insurance policies, incomes, etc.) and will include data on balances, amounts received from incomes or transfers, and identification of the person or entity holding and effectively controlling the account.

The automatic exchange of information will begin in 2017 with data on financial accounts that are open at the end of 2015 and those that are opened subsequently.

The information will be exchanged on an annual basis and automatically, i.e. without the need to file a request with the foreign tax authorities for information regarding an individual case after possible fraud has been detected.

The Spanish Tax Office (Spanish acronym: AEAT) will hence have access to a system for the automatic and standardised exchange of information on all sorts of financial accounts. Appropriate use of the information received on taxpayers residing in Spain - in coordination with other initiatives such as the obligation to declare assets located overseas (Form 720) - represents a decisive step forward in the effective application of the Spanish tax system, enabling the practice of increased tax bases declared and fraud by those residents whose tax returns do not correspond with the assets or incomes they have overseas to be stamped out.

Furthermore, it will also lead to an increase in public revenue that will make it possible to reduce the burden on those taxpayers who comply with their tax obligations.

Countries and territories that will exchange information

The 54 countries and jurisdictions that have committed to exchanging information as from 2017 are as follows (six of them did not sign on Wednesday in Berlin): Germany, Argentina, Barbados, Belgium, Bulgaria, Cyprus, Colombia, South Korea, Croatia, Denmark, Slovakia, Slovenia, Spain, Estonia, Finland, France, Greece, Hungary, India, Ireland, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Mexico, Norway, the Netherlands, Poland, Portugal, the United Kingdom, the Czech Republic, Romania, San Marino, Seychelles, South Africa, Sweden, Trinidad and Tobago, Curaçao, Greenland, the Faroe Islands, the United Kingdom Crown Dependencies of Guernsey, the Isle of Man and Jersey, and the British Overseas Territories of Anguilla, Bermuda, Gibraltar, the Cayman Islands, the Turks and Caicos Islands, the British Virgin Islands and Montserrat.

The six countries and jurisdictions from the above list that did not sign on Wednesday but have committed to exchanging information as from 2017 are Barbados, Bulgaria, India, Seychelles, Trinidad and Tobago, and Greenland. Austria and Aruba also signed up to exchange of information as from 2018 in Berlin on Wednesday.

Pilot scheme between Spain and Colombia

Furthermore, in compliance with the mandate from the G-20 Summit in Saint Petersburg in 2013, a technical assistance mechanism has been established for those countries and jurisdictions that require assistance in applying the new standards for the automatic exchange of information. Spain has adopted a highly pro-active role in this regard and will lead a pilot scheme for the implementation of the system for the automatic exchange of information with Colombia.

Berlin Declaration

The group of countries and jurisdictions that committed to exchanging information as from 2017 issued the Berlin Declaration.

G-5 meeting and erosion of tax bases

Prior to signing the multilateral agreement, the G-5 held a meeting at which they debated how to promote the OECD project to combat tax base erosion and profit shifting (BEPS) at an EU level.

An initial exchange of opinions took place on this issue at the ECOFIN Council meeting held on 14 October. Prior to that, on 16 September, the OECD published a preliminary series of recommendations on how to tackle this problem in a coordinated and international fashion.

The Spanish tax reform currently being passed through Parliament includes regulatory changes in this regard, such as that referring to the fiscal treatment of so-called 'hybrid products'.