Automatic Exchange of Information (AEOI)

Automatic Exchange of Information (AEOI)

AEOI refers to the automatic exchange, between international tax authorities, of information on Financial Accounts (as defined).

AEOI refers to the automatic exchange of information on Financial Accounts.

Introduction to AEOI

AEOI refers to the automatic exchange, between international tax authorities, of information on Financial Accounts (as defined) held by individuals, corporations, partnerships, trusts etc.

The exchange is achieved by requiring local country Financial Institutions (as defined), to provide information on in-scope account holders, to their local country tax authority. The local country tax authority in turn exchanges information on such account holders with the tax authorities in each relevant foreign jurisdiction provided that that foreign jurisdiction has signed up to the applicable AEOI regime.

A number of AEOI regimes have evolved over time including FATCA, the OECD’s global CRS and the EU’s DAC II.

FATCA

The Foreign Account Tax Compliance Act (“FATCA”) requires Financial Institutions to register and report information on accounts held by US persons and certain US controlled foreign entities. Failure to comply will result in a 30% withholding tax penalty on certain US sources of income with effect from 1 July 2014.

It is critical for Irish tax resident entities and Irish branches of foreign entities to determine whether or not they are classified as Reporting Irish Financial Institutions under Ireland’s IGA with potential registration and reporting obligations. Even if an Irish entity has no US ownership and does not earn any US source income, it may still fall in scope based on the nature of its activities.

CRS

The Common Reporting Standard (“CRS”) is effectively a global version of FATCA introduced by the OECD which will require Financial Institutions to report information on accounts held by tax residents of reportable jurisdictions and certain entities controlled by such tax residents. To date, 95 countries have either signed up to the CRS or publically announced their intention to implement the CRS. Therefore the scope of reporting under the CRS will be much more significant than under FATCA.

The CRS took effect from 1 January 2016 in Ireland. However, unlike FATCA, the CRS will be a pure reporting regime with no withholding tax.

Irish tax resident entities and Irish branches of foreign entities, similar to FATCA, will need to determine whether or not they are classified as Reporting Irish Financial Institutions under the Irish CRS provisions with reporting obligations.

In parallel with the CRS, the EU Commission has introduced its own directive to effectively fast track the “CRS” exchange of information between EU member states with effect from 1 January 2016.

Key decision steps for Irish entities

  • Determine whether an entity is classified as a Financial Institution with reporting obligations 
  • Determine whether the entity has any registration requirements 
  • Undertake the necessary due diligence procedures to identify any Reportable Accounts 
  • Prepare the applicable information to report to the Irish Revenue Commissioners by 30 June annually
  • Consider the applicability of local country legislation to subsidiaries or branches located outside of Ireland 
  • Consider the organisational impact of AEOI on an entity’s business, including its interactions with other service providers, the risk of the 30% FATCA withholding tax on US source income and the inclusion of AEOI language in legal agreements.

Recent AEOI publications

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Understanding AEOI

This video summarises the OECD’s Common Reporting Standards (CRS) deadline.

 
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Updated Irish Revenue guidance notes published

On 2 October 2014, the Irish Revenue Commissioners published Updated Guidance Notes on ...

 
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