Proposed Amendment to the Administrative Cooperation Directive - - PowerPoint PPT Presentation

Proposed Amendment to the Administrative Cooperation Directive (EU 2011/16/EU)

Aldo Farrugia Director General, Legal and International Office of the Commissioner for Revenue

New Commission Proposal

 Proposal issued on 12th June 2013  Full name: Proposal for a Council

Directive amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation

 Purpose: To extend Automatic

Exchange of Information (AEOI) to a wide range of income sources

Contents of Presentation

 What is AEOI?  History of AEOI  Present Instruments concerning

AEOI

 The New Proposal

AEOI (What it involves - 1)

 Involves the systematic and periodic

transmission of bulk taxpayer information by the source country concerning categories of income

 Information that is collected in the

source country on a routine basis is reported by the payer (or other entity) to the taxpayer’s source country tax authority for onward transmission to the residence country tax authority

AEOI (What it involves - 2)

 Information can be used to verify

that taxpayers have accurately reported their foreign source income

 Information on acquisition of

significant assets may help evaluate the net worth of an individual and to see if reported income reasonably supports the transaction

AEOI (The basic Process -1)

 The payor or paying agent collects

information from the taxpayer and/or generates information itself

 Payer or paying agent reports information

to its tax authorities

 Tax authorities consolidate information by

country of residence

 Information is encrypted and bundles are

sent to residence country tax authorities

AEOI (The basic Process - 2)

 Information is received and decrypted by

residence country tax authorities

 Residence country feeds relevant

information into an automatic or manual matching process

 Residence country tax authorities analyses

the result and takes compliance action as appropriate

History of AEOI (1)

 Major step towards transparency was

accomplished in 2009 when information exchange upon request become the international standard

 Now there is another step change in international

tax transparency driven by developments around the globe (most notably by the US FATCA), with increasing political support for AEOI

 In April 2013: A Pilot Project was announced -

• Ministers of Finance of France, Germany, Italy, Spain

and the UK announced their intention to exchange FATCA-type information amongst themselves

• 18 countries have since joined the initiative plus Britain’s

Overseas Territories and Crown Dependencies

History of AEOI (2)

 In June 2013 the G8 leaders welcomed the OECD

report “A step change in tax transparency” which sets out the concrete steps that need to be taken to put a global model of automatic exchange into practice

 On 5 September 2013 G20 Leaders meeting in

• St. Petersburg committed to automatic exchange
• f information as the new global standard

Current Global Context

 European Savings Directive

• Interest income reported by financial institutions

is shared between EU Member States

 Nordic Convention  FATCA

• US reporting provisions will require foreign

financial institutions to provide information about world wide income and assets of US persons

• Has generated support for automatic exchange

between governments through an intergovernmental agreement

The EU and AEOI

 Savings Directive (+ proposed

amendments)

 Administrative Cooperation Directive:

from 2015 AEOI on 5 categories of income and capital (if available) –

• Income from employment
• Directors’ fees
• Life insurance products
• Pensions
• Ownership of and income from immovable

property

The New Proposal

Reasons cited by EU Commission for Proposal

 Intense new drive to clamp down harder

• n tax evasion by Member States

 Any measure needs to be coordinated  Negotiation of FATCA agreements with US

triggers Most Favoured Nation clause in Administrative Cooperation Directive

 Fair and neutral approach to all different

types of assets.

Contents of Proposal (1)

 Explanatory Memorandum

• Context of Proposal
• Results of Consultations
• Legal Elements of the Proposal
• Budgetary Implications

Contents of Proposal (2)

Four Articles

• Article 1: Proposed changes to Article 8
• f Directive 2011/16/E

(including removal of threshold)

• Article 2: Proposed adoption/publishing

by 31st December 2014 Applicable from 1st January 2015

• Article 3: Proposed entry into force of

20th day following publication

• f Directive in Official Journal
• Article 4: Directive is addressed to

Member States

Contents of Proposal (3)

What is being Proposed

 Extends AEOI to –

• dividends,
• capital gains,
• any other income generated with respect to

the assets held in a financial account,

• any amount with respect to which the financial

institution is the obligor or debtor, including redemption payments

• Account balances

 Removes condition of “availability”

for these items.

Scope of AEOI within EU with new Proposal

Current Savings Directive Revised Savings Directive Current Admin.

• Coop. Directive

Revised Admin.

• Coop. Directive

Since 1/7/2005 From 1/1/2015 (if available) From 1/1/2015

Interest income Sales proceeds

• n debt claims

Distributions of

UCITS that invest in debt claims

Distributions of

all investment funds that invest in debt claims

Income from

innovative financial instruments that are substantially similar to debt claims

Income from life

insurance products that are substantially similar to debt claims

Income from

employment

Directors’ fees Pensions Life insurance

products not covered by other EU laws on exchange of information

Ownership of and

income from immovable property

Dividends Capital gains Any other income

generated with respect to the assets held in a financial account

Any amount with

respect to which the financial institution is the

• bligor or debtor,

including redemption payments

Account balances

Reaction from Member States

 Member States (MS) met a number of

times to discuss

 MS concerns:

• lack of detail in Proposal
• Ensuring alignment with other AEOI initiatives in
• rder to avoid extra costs for business and tax

administrations

 MS generally want one system for AEOI  MS generally prefer that OECD takes lead

but agree that EU to take important role in discussions within OECD

 EU Presidency submitted concerns to OECD

Thank You For Your Attention