...In fact, my last blog on the subject explained that the OECD had signed up approximately 53 members countries and were working on a standardised format (Common Reporting Standard, CRS) with which to exchange information across borders.
This email expands on this subject as more information has now become available.
The CRS, formally the Standard for Automatic Exchange of Financial Account Information in Tax Matters, (SAEFAITM - this abbreviation just flows off the tongue!) seeks to establish a global methodology for the sharing amongst tax authorities of relevant data in relation to financial assets. The transparency created by the CRS is meant to be a deterrent to taxpayers use of offshore accounts and to non-declaration of assets in other states/countries.
So far 100 countries signed up and committed to implementing this Standard and it is 'likely to' become (Sorry! I meant, 'will become') the most powerful tool of tax authorities worldwide.
There are nearly 60 “early adopters”, (see list below) and for these countries the Automatic Exchange of Financial Account Information will commence from 2017 on an annual basis between participating countries in respect of their tax residents, and in certain cases domicile persons. But here is the catch....It will relate to all account information of 1 January 2016.
The information on each reportable person generally includes:
Early adopter countries – undertaking first AEI by 2017 in respect of 2016 information
Anguilla, Argentina, Austria, Barbados, Belgium, Bermuda, Bulgaria, British Virgin Islands, Cayman Islands, Chile, Colombia, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos, Uruguay, United Kingdom.
The CRS, formally the Standard for Automatic Exchange of Financial Account Information in Tax Matters, (SAEFAITM - this abbreviation just flows off the tongue!) seeks to establish a global methodology for the sharing amongst tax authorities of relevant data in relation to financial assets. The transparency created by the CRS is meant to be a deterrent to taxpayers use of offshore accounts and to non-declaration of assets in other states/countries.
So far 100 countries signed up and committed to implementing this Standard and it is 'likely to' become (Sorry! I meant, 'will become') the most powerful tool of tax authorities worldwide.
There are nearly 60 “early adopters”, (see list below) and for these countries the Automatic Exchange of Financial Account Information will commence from 2017 on an annual basis between participating countries in respect of their tax residents, and in certain cases domicile persons. But here is the catch....It will relate to all account information of 1 January 2016.
Reporting will have to be made by all individuals who own or control accounts in financial institutions either directly or through companies, trusts, foundations and in certain cases insurance policies.
Financial institutions include, but are not limited to, banks, collective investment vehicles, custodians and insurance companies.
Financial institutions in each country will basically collect and report information to their local tax authorities regarding their clients who are resident in another participating country.
Financial institutions in each country will basically collect and report information to their local tax authorities regarding their clients who are resident in another participating country.
And the local tax authorities automatically exchange this information on an annual basis with their counterparts in the other participating countries.
Account information to be reported will generally include
Account information to be reported will generally include
* account number,
* account balances
* gross earnings in respect of any payments through the account, including but not limited to any investment income such as dividends or funds from insurance companies,
* income earned from assets and sale profits from financial assets.
The exact nature of information to be exchanged between each participating country must be defined in the intergovernmental agreement between the two countries, but all European states and the USA will be sharing data in a standardised format.
The information on each reportable person generally includes:
* name,
* address,
* country of residence,
* tax identification numbers,
* place and date of birth.
Financial institutions will also need to disclose not only the account holder but also any beneficial owners, controlling persons or even in certain cases “relevant persons” of entities and trusts.
Data protection is also going to be a very interesting issue and the OECD do say that information exchanged in this way, i.e through the common reporting standard, cannot be provided to other governmental institutions once shared. I have my doubts whether that will happen!
Data protection is also going to be a very interesting issue and the OECD do say that information exchanged in this way, i.e through the common reporting standard, cannot be provided to other governmental institutions once shared. I have my doubts whether that will happen!
So what can we take from this? Well I think it is becoming more and more self explanatory. Big brother has finally arrived and there are no more hiding places. As I have been 'preaching' for many years now: if you are a resident in Italy and have still not arranged your financial affairs 'in regola' then you have about 2 months to do so until all financial information will become available to tax authorities: 1st January 2016.
I have found the key to living in Italy is knowing that there is a difference between tax reporting and tax planning. Your commercialista is there to help you report your taxes through the overly complicated tax reporting system in Italy. However they are not there to help and discuss ways to plan around the Italian tax system. That is where the role of the financial planner comes in and with the extensive knowledge I have built up over the 11 years I have been living and working in Italy, I can sometimes identify areas where you can save tax, increase incomes and restructure your affairs in a compliant manner, not always, but I am happy to give it a go!
So, if you would like to contact me about this then feel free to do so on gareth.horsfall@spectrum-ifa.com or on cell 3336492356.
If you are also interested to know who are the early adopting countries, then the list is below. You will note that Italy and the UK appear on that list. The USA does not because it has already commenced its own International tax reporting standard known as FATCA.
Early adopter countries – undertaking first AEI by 2017 in respect of 2016 information
Anguilla, Argentina, Austria, Barbados, Belgium, Bermuda, Bulgaria, British Virgin Islands, Cayman Islands, Chile, Colombia, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos, Uruguay, United Kingdom.
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