The Organization for Economic Cooperation and Development (OECD) has continued to net more jurisdictions under its common reporting standard (CRS) for the automatic exchange of tax information (AEOI). Since the OECD published the CRS in early 2014, many countries have signed on to use this model for their cross-border tax treaties.
According to Delaney Partners Commercial Lawyers, the Bahamas is among the more recent jurisdictions to agree to the standard. The nation has pledged to complete implementation by 2018 and will do so via separate tax treaties with various nations. This is a defining point, as the other method for facilitating the standard involves a jurisdiction joining the OECD Convention on Mutual Administrative Assistance in Tax Matters, which creates multilateral agreements between each nation in the convention.
Switzerland and Italy agree to AEOI
Many jurisdictions are further along than the Bahamas in implementing the CRS and have already begun signing bilateral treaties. According to Giambrone, an Italian law firm, Switzerland and Italy have reached a bilateral double taxation agreement. In December 2014, the two governments penned the formal document, which included a provision regarding AEOI.
With the agreement in place, the two countries will help each other prosecute any individuals and financial institutions they find to be involved in tax evasion. Additionally, this cooperation will foster positive sentiment between Switzerland and Italy.
“After years of controversy, this agreement should improve relations between Switzerland and Italy in relation to financial and tax matters,” Alessandra Bellanca, a partner with Giambrone’s European Union tax team, said. “It will simplify the regularization of untaxed assets before the automatic exchange of information is introduced and limit risks exposure arising from legal proceedings for banks and their employees.”
The expanding success of global AEOI
Since the CRS came to light, the OECD has had rousing success and approval from various jurisdictions within and outside of its membership. In October 2014, the organization said 51 countries endorsed the CRS via a Multilateral Competent Authority Agreement, and the overall total may continue to go up as more jurisdictions get serious about cracking down on cross-border tax evasion.
With multilateral and bilateral tax treaties appearing across the globe, financial institutions must be cognizant of new tax information reporting obligations that will come to fruition under these agreements. This means developing a sound process for gathering account data for relevant clients and understanding what steps are necessary for reporting this information.
