The exchange of tax information with third countries is a necessary tool to combat tax fraud and is regulated by a variety of international multilateral and bilateral agreements.

introduction

The international exchange of data for tax purposes is a necessary tool to combat tax fraud in a globalised world. Within the European Union, this exchange is regulated by Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation ( DAC ), which in our Ordinance is transposed into the various precepts that Law 58/2003, of December 17, General Tax, dedicates to mutual assistance. This Directive has been subject to successive modifications to accommodate new categories of information to be exchanged.

Trade with third countries, for their part, is regulated by international agreements, both bilateral and multilateral. Here the complexity scales several orders of magnitude as a consequence precisely of this regulatory dispersion. On the one hand, the rules to be applied in exchanges with a particular jurisdiction may differ significantly from those applicable to exchanges with others. On the other hand, the system of these agreements, which often includes several texts that are developments of each other, contrasts with the unity of European regulation, contained in the DAC and its transposition rules. The purpose of this article is to shed some light on the system of international agreements on tax information exchanges, to serve as a map to help navigate what can sometimes seem like a dense forest of regulations.

II. The system of rules on international exchanges of tax information

International exchanges of tax information are regulated by a variety of international agreements, including bilateral and multilateral agreements. However, by far the most important is the multilateral system based on the Convention on Mutual Administrative Assistance in Tax Matters of the OECD and the Council of Europe (MAC). The original version dates back to 1988, but the current one is the result of a modification made in 2011 ⁽¹⁾. The MAC provides various forms of administrative assistance, such as notifications or collection. These include the exchange of tax information, regulated in Articles 4 to 10, together with Article 22, relating to confidentiality.

The MAC provides for three types of information exchange: on request (by the recipient to the referring jurisdiction), spontaneous (on the initiative of the referring jurisdiction) and automatic. The first two refer to information relating to a specific taxpayer or transaction, so they are dealt with on a case-by-case basis. Automatic exchange of information, for its part, involves the periodic exchange of certain information relating to categories of taxpayers, automatically.

The MAC provides that, in order to carry out automatic exchanges of information, new agreements will be concluded between two or more parties (Article 6). This has given rise to several Multilateral Competent Authority Agreements ( MCAA ) on the automatic exchange of various types of information, for example on Country-by-Country Reporting (CbC MCAA), on Digital Platform Revenue (DPI MCAA) or on Financial Account Information (CRS MCAA, named after the Common Reporting Standard of the OECD according to which this information is structured). These MCAA follow roughly the same model.

This model implies, among other characteristics, the use of several Annexes, which each jurisdiction notifies to the Secretariat of the Coordinating Body (i.e., the Secretariat of the OECD ) and where various aspects are developed of the MCAA . Of these, we can highlight the annexes dedicated to data protection guarantees and confidentiality. In the first, each party to the agreement establishes the data protection guarantees that it requires other jurisdictions to apply in order to exchange information with them; while in the second, each of the parties reports on its own mechanisms for ensuring the confidentiality of the information exchanged. Also noteworthy is another Annex in which each jurisdiction establishes with which other jurisdictions it will exchange information – a decision that is taken, in part, in light of the previous Annexes. The exchange is thus based on the reciprocal guarantee of compliance with a series of standards, in particular with regard to the security and confidentiality of the information exchanged. However, there are also some jurisdictions that have no interest in receiving information and therefore simply send it (“non-reciprocal jurisdictions”).

III. The CRS MCAA

The CRS MCAA deserves a separate study, as it was the first MCAA to appear, in 2014, and has served as a model for subsequent ones, so it can be described as the first and possibly the main one of the MCAA .

Under this, each participating jurisdiction collects information on financial accounts (primarily, but not exclusively, bank accounts) held in it by residents of other participating jurisdictions, whether individuals or legal entities. This information includes details about the account, its balance, the interest it receives and its owner. It then sends to each of the other jurisdictions information on the accounts held in the sending jurisdiction by tax residents in the receiving jurisdictions. All this takes place automatically on an annual basis.

This information is structured according to the Common Reporting Standard, or common reporting standard ( CRS ), which gives its name to the MCAA . This is a document issued by the OECD that specifies how information will be collected and exchanged, in particular with regard to the due diligence standards that financial institutions must apply. obliged to transmit it to the tax administrations. The MCAA CRS refers to it several times, so participating jurisdictions are required to comply with it.

The OECD has also published comments to the MCAA and the CRS , which, although they cannot be said to be binding, do have great value for interpretative purposes.

Finally, all participating jurisdictions are subject to a peer review process by the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum), a multilateral body sponsored by the OECD and composed of 168 jurisdictions that have voluntarily committed to applying global standards of transparency and information sharing and to undergo a peer review process. This review process takes place before a jurisdiction begins to exchange information under the system. CRS , and from then on, periodically; and is based on Terms of Reference ( ToR ) and a Methodology established by the Global Forum. It covers, among other aspects, confidentiality and information security requirements.

IV. Conclusion

To orient yourself in the territory of automatic exchanges of information with countries not belonging to the European Union, within the multilateral system of the OECD , it is necessary to take into account that the regulations that govern them are multi-level structure. First, we find the MAC, on which each of the MCAAs depends, on each of which their Annexes in turn depend. On the other hand, specifically regarding the automatic exchange of financial account information, we find the CRS , to which the corresponding MCAA is referred, as well as the comments to the MCAA and to the CRS . Finally, it should not be forgotten that the effective implementation of this system is supervised by the Global Forum according to its ToR and its Methodology.

Furthermore, in each case it will be necessary to determine which specific rules govern exchanges with each jurisdiction, since even within this system they may not be the same for all. And finally, it should be remembered that, although this is probably the main system of information exchange, it is not the only one, but there are others such as the North American FATCA or even bilateral systems – but that is a topic for another article.

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⁽¹⁾ Another source of complexity is that some of the States Parties to the original version of the MAC did not ratify the amendment, so the original version continues to apply with respect to exchanges with them. This is the case, for example, of the United States of America. ^(Back)