On 15 July 2015, the federal cabinet adopted two draft bills that will enable Germany to exchange financial account information in tax matters automatically with other EU member states and non-EU countries from 2017 onwards. Germany is one of the countries that has taken the lead in pressing for comprehensive international cooperation in the area of taxes.
Commenting on the federal cabinet’s decision, Finance Minister Wolfgang Schäuble stated:
“From 2017 onwards, Germany will join other countries in the automatic exchange of financial account information in tax matters. This is the most effective means to curtail tax flight and tax evasion on a comprehensive basis. In this way, we are acting in the interests of all individuals and companies who are honest taxpayers.”
The most effective way to combat tax flight – that is, the failure to declare taxable foreign income – is for as many countries as possible to engage in the comprehensive exchange of information. Upon the invitation of Minister Schäuble, Germany and 50 additional countries and jurisdictions signed a multilateral agreement in Berlin on 29 October 2014. In this agreement, the signatories pledged to introduce the automatic exchange of information in accordance with the OECD’s Common Reporting Standard. The number of participating states and jurisdictions has now climbed to over 60, including Switzerland and Liechtenstein.
In order to take effect at the national level, the multilateral agreement must be approved by domestic lawmakers. To this end, the federal cabinet today adopted a draft bill that will enact the agreement into national law. In addition, the German government adopted a draft act on the exchange of financial account information, which lays down the details for automatic information exchange in Germany. The draft bill also provides for the amendment of Germany’s EU Mutual Assistance Act in response to the EU’s adoption of the Common Reporting Standard (which was incorporated into the EU’s Mutual Assistance Directive) in December 2014.
In Germany, the Federal Central Tax Office (Bundeszentralamt für Steuern) will be responsible for collecting the relevant data from German financial institutions and sending this information to the competent authorities of other countries. To do this, it will be necessary for financial institutions to transmit the relevant data to the Federal Central Tax Office in advance, using an officially prescribed data set. This obligation on the part of financial institutions will be laid down in law. In turn, other countries will send the Federal Central Tax Office data that they have received from financial institutions in connection with persons who are resident in Germany for tax purposes, and the Federal Central Tax Office will then forward these data to the competent revenue authorities of the Länder.
The German government has taken care to ensure that automatic exchanges of information comply with the highest data protection standards. To this end, Germany will make use of its option to adopt a special data protection clause, which will be submitted to the OECD. This will ensure that all countries conducting automatic information exchanges with Germany on the basis of the multilateral agreement must comply with Germany’s high standards of data protection. In this context, Germany will set the conditions that other countries must observe in connection with the transmission of personal and company data.