Fintech meet up
Out-Law News | 15 Oct 2014 | 3:27 pm | 2 min. read
A draft directive, first published by the European Commission in June 2013, would adapt EU laws on mandatory information exchange in line with the new global standard published in July by the Organisation for Economic Cooperation and Development (OECD). It would bring interest, dividends and other income, as well as account balances and sales proceeds from financial assets, within the scope of the existing rules, which apply to EU nationals with accounts in other member states.
"We decided to implement within the EU the new global standard on automatic exchange of information developed by the OECD and endorsed by the G20," said Pier Carlo Padoan, Council president and Italian finance minister. "This shows the EU is still at the forefront of the fight against cross-border tax fraud and evasion, for the benefit of all citizens."
The new directive will be officially adopted at a future Council meeting once it has been finalised in all official languages, the Council said. Once finalised, EU countries would be expected to include the new rules in national laws by 2017 in order to comply with the OECD's timetable. Austria will have until 2018 to comply, in order to give the country additional time to create a new reporting system, according to the Financial Times (registration required).
Certain information about EU-resident taxpayers with accounts in other member states is already shared under rules which were adopted in 2011 and came into force in 2013. The existing directive on "administrative cooperation" provided for mandatory automatic exchange of information on employment, director's fees, life insurance products, pensions and immovable property, but only where that information is available.
The new directive is intended to increase the "efficiency and effectiveness" of EU tax collection, while at the same time discouraging tax fraud and tax evasion. It will require tax authorities in the EU to automatically exchange information on more types of income, account balances and sales proceeds from financial assets, regardless of the "availability" of that information.
The EU's new framework has been agreed against a background of increasing concerns about cross-border tax fraud and tax evasion both within the EU and internationally. The Foreign Account Tax Compliance Act (FATCA), a US law creating a new tax information and reporting and withholding regime applicable to US taxpayers holding assets outside the US, came into force last year in respect of accounts in existence on or after 30 June 2014.
The OECD's global "common reporting standard" was endorsed by G20 finance ministers and central bank governors last month. More than 65 countries and jurisdictions have already publicly committed to implementing the standard, with more than 40 of those committed to making the first automatic information exchanges in 2017. The standard provides for the annual automatic exchange between governments of certain financial account information reported to governments by financial institutions.
"By agreeing on the new directive, the EU underscores the importance of these international developments by adapting its internal legislation as appropriate," the Council said in a statement.
Fintech meet up