Commenting on the announcement from the OECD of the signing today of the Multilateral Competent Authority Agreement on implementation of the automatic exchange of information standard at the 7th meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes in Berlin, Tom Aston, Financial Services tax partner at KPMG in the UK said:
"Today’s groundbreaking agreement by the signatory jurisdictions to automatically exchange tax information under the Organisation for Economic Co-operation and Development’s (OECD’s) Common Reporting Standard, or CRS, is yet another step towards global transparency in tax affairs.”
Pointing to the complexities that financial institutions are likely to face following this agreement,Tom Aston continues:
“Implementating today’s agreement will impose complex new due diligence and automatic reporting requirements on financial institutions doing business in the signatory jurisdictions. From 2016, these institutions will need to implement new customer on-boarding processes, gather new information and documentation on existing account holders, and put in place systems to report required information to the proper government entities. Equally important, non-financial multinationals will also need to determine their status under the CRS and how they are affected.”
Tom Aston continues: “The Common Reporting Standard and attendant commentary provides guidance to financial institutions in the signing jurisdictions about the scope of the due diligence and reporting obligations that will apply in those jurisdictions."
“Now that the Multilateral Competent Authority Agreement has been signed, there will be a race against the clock for both governments and financial institutions to meet the ambitious timelines. For governments, they will likely need to enact legislation or regulations to implement the Multilateral Competent Authority Agreement in their jurisdictions. For financial institutions, they will be working hard to get customer due-diligence procedures in place by January 1, 2016 – less than 15 months from now – and then will turn to meet the deadline for the first reporting of information about nonresident account holders required in 2017.”
“HMRC will receive an unprecedented level of personal financial information on UK residents from overseas jurisdictions including details of personal bank accounts and on entities they are connected with such as trusts. Anyone with tax irregularities should be proactive and bring their affairs up to date as soon as possible and certainly before information exchange kicks in, using the specific disclosure facilities already up and running. Those with undisclosed assets who choose not to take action can expect to face an in depth HMRC investigation."
“We support any action undertaken that assists with clamping down on tax evasion which this measure clearly does. It is also important, however, to distinguish between tax evasion and those UK taxpayers who hold overseas assets for perfectly legitimate reasons. Such people will also come on to HMRC’s radar as a result of information exchange. Due to the complexity of tax legislation people can make mistakes in connection with these assets so reviewing the position now to ensure no issues exist would be a sensible approach.”
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Margot Cowhig, KPMG Corporate Communications
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