Tax Information Exchange – Where Are We Now?

Since the financial crisis there has been a marked acceleration in the number and scale of initiatives designed to enable states to get information about income its taxpayers earn abroad. The aim is to prevent tax evasion through automatic exchange of information between states and, unlike proposals aimed at aggressive tax planning (e.g. BEPS), they are being implemented with some speed. They create significant administrative burdens for legitimate financial institutions and investment vehicles and, due to significant overlap between initiatives, may create duplicate or conflicting obligations.

FATCA

The Foreign Account Tax Compliance Act ("FATCA") is US legislation that requires non-US financial institutions ("FFIs") to report information on accounts held by US persons or else face a 30% withholding on payments they may receive from US sources. The definition of an FFI is broad and includes "investment entities" which would encompass investment funds and structured finance vehicles.

The US has signed inter-governmental agreements ("IGAs") with several countries, including Ireland and the Cayman Islands, both Model 1 IGA jurisdictions, which permit information to be provided to local tax authorities rather than the US Internal Revenue Service ("IRS"). The Irish Revenue published draft regulations and guidance on FATCA in May 2013 and is expected to publish revised drafts before the end of 2013. Maples and Calder published a number of updates on 29 November 2013 with regard to the Cayman Islands IGA with the US.

The FATCA portal is now open on the IRS website. This allows FFIs to register for a Global Intermediary Identification Number ("GIIN"). If an FFI has a GIIN or is able to certify that it is deemed compliant, payments may be made to it by US payers without withholding. GIINs will be issued from 1 January 2014 and a list of registered FFIs will be published on 2 June 2014 and monthly thereafter. If an FFI located in a Model 1 IGA jurisdiction is not registered or deemed compliant by 31 December 2014 it may be subject to a 30% withholding on US source income received from that date.

OECD Convention

The OECD's Multilateral Convention on Mutual Administrative Assistance in Tax Matters is a multilateral agreement that provides for administrative co-operation between states in the assessment and collection of taxes. The original 1988 Convention was amended in 2010 following the April 2009 summit in London to provide, in Article 6, for...

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