What is the Automatic Exchange of Information (AEI)?
The AEI is a mechanism enabling the national tax authorities to collect the taxes that are due on income and capital that their residents have in other jurisdictions.
The countries collect information on the income earned in their territory by non-residents, which is then transmitted automatically to the authorities, where the individual or the legal entity is tax resident.
The OECD developed a Global Standard of automatic exchange of information, which aims to ensure full transparency and cooperation between the tax authorities, aiming to fight tax evasion. The Global Standard was agreed by the G20 Finance Ministers in February 2013.
How often will the AEI take place?
The AEI will take place on an annual basis (starting in 2017 for data obtained in 2016).
How does the AEI work?
- Financial institutions, (including banks, forex companies, brokers, collective investment vehicles, insurance companies and others), in each participating country have to collect and transmit to the local tax authorities relevant information about their clients who are tax residents in another jurisdiction.
- The local tax authorities will then automatically exchange this information with the other participating countries.
What countries are going to participate in the AEI?
Early adopter countries (starting in 2017 regarding the information obtained in 2016)
Argentina, Belgium, Bulgaria, Colombia, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, the Faroe Islands, Finland, France, Germany, Greece, Greenland, Hungary, Iceland, India, Ireland, Italy, Korea, Latvia, Liechtenstein, Lithuania, Malta, Mauritius, Mexico, the Netherlands, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovakia, Slovenia, South Africa, Spain, Sweden, and the United Kingdom; the UK’s Crown Dependencies of Isle of Man, Guernsey and Jersey; and the UK’s Overseas Territories of Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat, and the Turks & Caicos Islands.
Late adopter countries (starting in 2018 regarding the information obtained in 2017)
Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Bahamas, Belize, Brazil, Brunei Darussalam, Canada, Costa Rica, China, Grenada, Hong Kong, Indonesia, Israel, Japan, Macao, Malaysia, Marshall Islands, Monaco, New Zealand, Qatar, Russia, Saint Kitts & Nevis, Samoa, Saint Lucia, Saint Vincent, Saudi Arabia, Singapore, Saint Marten, Switzerland, Turkey, United Arab Emirates.
The aforementioned early adopter countries announced in a joint statement (in October 2014) the following timetable:
- “Pre-existing accounts would be those that are open on 31 December 2015 and new accounts would be those opened from 1 January 2016. Hence, new account opening procedures to record tax residence will need to be in place from 1 January 2016.”
- “The due diligence procedures for identifying high-value pre-existing individual accounts will be required to be completed by 31 December 2016, while the due diligence for low-value pre-existing individual accounts and for entity accounts will be required to be completed by 31 December 2017”
- “The first exchange of information in respect of new accounts and pre-existing individual high value accounts will take place by the end of September 2017.”
- “Information about pre-existing individual low value accounts and entity accounts will either first be exchanged by the end of September 2017 or September 2018 depending on when financial institutions identify them as reportable.”
For tax planning advice, you can get in touch with our tax planning lawyers and consultants.