EU Commission Report Reveals Rapid Advancement of AEOI Following Implementation of CRS

Tom Hospod
December 19, 2018

Automatic Exchange of Information, or AEOI, has picked up serious momentum since 2015 and continues to grow, a new European Commission study shows. One important element in managing AEOI is assigning tax identification numbers (TINs), a trend that should grow as AEOI expands.

AEOI involves the exchange of asset information among countries via a protocol called the Common Reporting Standard (CRS). With AEOI, national tax authorities can know when their countries’ citizen have assets in foreign nations and how much they hold. Financial institutions report on their account holders’ assets via CRS, and then nations share that information with each other. CRS is a global standard, except in the United States, which uses a different protocol.

The European Commission recently published a report reviewing the implementation of CRS, the costs and benefits, and the ways in which jurisdictions have made use of the financial account information received. The Commission found that the exchange of information has been crucial in administrative cooperation among member states of the Development Assistance Committee (DAC), part of of the Organisation for Economic Development (OECD).

Some of the more specific conclusions of the Committee include:

  • The volume of information doubled between 2015 and 2016, a trend expected to continue based on initial data from the first half of 2017. The first year of mandatory CRS reporting concluded in mid-2017. There is not yet any data available for the September 2017 – March 2018 reporting period.
  • The process for national tax administrations to mandate and gather information for AEOI has been costly and time consuming, but beneficial. A strategy to mitigate this has been to issue Taxpayer Identification Numbers (TINs) to allow for easier identification of taxpayers. Presently, only two countries (Ireland and Lithuania) always include TINs per their specifications in the information exchanged, but the trend is likely to grow. Currently, other countries don’t require TINs but will transmit this information if available.
  • Overall, only 2 percent of the information exchanged included the TIN of the taxpayer issued by the recipient country. Other countries have relied on name and birthdate information to identify taxpayers. Seven member states were able to match 80 percent or more of the information received. Estonia reported the lowest matching rate at 37 percent.
  • The DAC2, an EU Council Directive, has implemented CRS within the EU, making it broadly applicable at the international level. Under DAC2, information on 8.7 million accounts has been exchanged, equaling a value of €2.919 billion. There are more TINs included in account data under DAC2 than under DAC1. Overall, 70 percent of account holders who are natural persons have at least one TIN associated with the account holders, while 73 percent of account holders who are legal persons (entities) have an associated identification number.
  • Bilateral exchanges are centered on Luxembourg, and to a smaller extent, Ireland. Luxembourg sends out information on 17 percent of all EU accounts and makes up nearly 80 percent of all EU amounts reported. Only three countries, Bulgaria, Slovakia, and Malta, have not reviewed the account information received.

The EU Monitor Webpage has more details.

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Author
Tom Hospod
Tom Hospod is a Regulatory Counsel at Sovos Compliance. Within Sovos' Regulatory Analysis function, Tom focuses om Affordable Care Act (ACA) reporting, Tax Withholding, and Automatic Exchange of Information (AEOI). Prior to Sovos, Tom worked as a legislative aide in the Massachusetts House of Representatives. Tom is a member of the Massachusetts Bar, earned his B.A. from Boston College and his J.D. from the University of Miami.

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