On 29 October 2014, Finance Ministers from 51 countries and jurisdictions have signed a Multilateral Competent Authority Agreement (the “Multilateral CAA”) on the implementation of the Global Standard for the automatic exchange of financial account information.
The signature of the Multilateral CAA during the 7th Meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes (the “Global Forum”)1 in Berlin follows on quickly from the political agreement reached by Member States on 14 October to apply the Global Standard in relations between each other by way of a Directive (the future revised EU Administrative Cooperation Directive).
The OECD released on 13 February 2014 its global standard for automatic exchange of financial account information (the “Global Standard”). The Global Standard consists of two components, i.e. the Common Reporting Standard (“CRS”), which contains the reporting and due diligence rules to be imposed on financial institutions, and the Model Competent Authority Agreement (“CAA”), pursuant to which governments would agree to exchange the information reported.
The OECD/G20 Global Standard was endorsed on 29 October 2014 by all OECD and G20 countries as well as major financial centers participating in the annual meeting of the Global Forum. A status report on committed and not committed jurisdictions will be presented to G20 leaders during their annual summit in Brisbane, Australia on November 15-16.
Fifty-one jurisdictions, translated their commitments into action during a massive signing of a Multilateral CAA that will activate automatic exchange of information (“AEoI”), based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
Early adopters who signed the agreement have pledged to work towards launching their first information exchanges by September 2017. Others are expected to follow in 2018.
The Global Forum will establish a peer review process to ensure effective implementation of AEoI.
Governments also agreed to raise the bar on the standard of exchange of information upon request, by including a requirement that beneficial ownership of all legal entities be available to tax authorities and exchanged with treaty partners.
Luxembourg becomes Early Adopter
In March 2014, a group of 44 countries and jurisdictions (known as the “Early Adopters”) announced they would implement the CRS with the first exchange of information between them expected to take place in September 2017. Subsequently, on 6 May 2014, 47 countries signed a declaration in which they expressed their determination to implement the new Global Standard swiftly and called on all financial centers to do so without delay.
Whereas Luxembourg signed the declaration of 6 May 2014, the country did not range among the Early Adopters until yesterday (i.e. the Grand-Duchy did not take any commitment in terms of timeline for implementing the CRS).
The decision of 14 October 2014 changed the situation when Luxembourg confirmed at the occasion of the ECOFIN meeting its agreement on the revised Directive 2011/16/EU on administrative cooperation in the field of taxation (“EUACD”).
Under the agreed proposal the new rules on AEoI within the EU will apply to reportable accounts for taxable periods as from 1 January 2016, with first exchanges of information taking place in 2017, except for Austria that would apply the new rules from 1 January 2017, with first exchanges of information taking place in 2018. Logically enough, Luxembourg confirmed yesterday that it will also commit on the deadline of September 2017 for the first information exchange with non-EU countries and jurisdictions having signed the Multilateral CAA.
Level playing field
As it did in the context of the future revised EUACD, Austria signed the Multilateral CAA but only committed on September 2018 for the first exchange of information. Doing so, Austria is the only EU country not having committed on September 2017 but not the only European country in a wider meaning since Switzerland did the same.
Important countries ranging among those countries having expressed their determination to implement the new Global Standard swiftly and called on all financial centers to do so without delay on 6 May 2014 are not mentioned in the list of fifty-one jurisdictions having “translated their commitments into action during a massive signing of a Multilateral CAA” as the Global Forum press release says on 29 October 2014.
It is in particular the case of Singapore and even the United States in a quite paradoxical way for the country being at the origin of the process with its FATCA legislation.
Furthermore, despite the multilateral nature of the agreement, countries will still be allowed to choose on a case-by-case basis the countries with which they will effectively exchange information. Switzerland is reported to have announced that it will only exchange information with those countries “considered important (…) for the financial industry” in Switzerland.
Other countries such as Panama did not define a date for a potential implementation of the AEoI.
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1) The Global Forum is the world’s largest network for international cooperation in the field of taxation and financial information exchange gathering together 123 countries and jurisdictions on an equal footing. Peru and Croatia joined the Forum at the Berlin meeting.
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