At the behest of the G20, the Organisation for Economic Co-operation and Development (OECD) expanded the standard for the international exchange of information on request for tax purposes to include bank information as well as the economic beneficiaries of accounts or organisational structures. German Finance Minister Wolfgang Schäuble was a driving force in getting the G20 to mandate the OECD with the development of the Standard for Automatic Exchange of Financial Account Information in Tax Matters.
At an international tax policy conference held in Berlin in October 2014, 51 countries signed the Multilateral Competent Authority Agreement for the Common Reporting Standard (CRS MCAA), which lays the groundwork for the automatic exchange of information on accounts and investments between the participating countries and jurisdictions. Over 100 countries and jurisdictions have now pledged to introduce the CRS. As a result, it will become virtually impossible to hide income from tax authorities.
By implementing the CRS MCAA at the end of 2015 and adopting the Financial Account Information Exchange Act (Finanzkonteninformationsaustauschgesetz), Germany has established a legal framework that allows the transmission of information from Germany regarding persons and enterprises that are subject to taxation in other countries.
On 30 September 2017, Germany – alongside 49 other countries and jurisdictions – will start to automatically exchange financial account information using the CRS. This is a milestone in the fight against cross-border tax evasion. Working together with our partners in the G20 and OECD, we have succeeded in swiftly realising an ambitious project that few people could have imagined just a few years ago. As of today, over 2,000 bilateral exchange relationships have already been put into place around the world between participating countries and jurisdictions. Additional states and jurisdictions will take part as of 30 September 2018. Working within the OECD framework, Germany will continue to encourage as many countries and jurisdictions as possible to participate in the exchange of information.
“International tax evasion can be effectively combated only through global cooperation. The automatic exchange of financial account information therefore represents a milestone. Germany and 49 other countries are taking part in the first round. Soon, more than 100 countries will be participating. Taxpayers who have shifted their money abroad should know that, in future, it will be even more likely that the tax authorities will find out.”
Dr. Wolfgang Schäuble, Federal Minister of Finance
Q&A on the automatic exchange of information
What is the automatic exchange of information?
Automatic exchange of information means the systematic and regular transfer of precisely defined tax information on certain income types between countries and jurisdictions at a predefined point in time.
What is the Common Reporting Standard (CRS)?
Based on an initiative taken by Germany and other European countries, and a corresponding request by the G20, the OECD developed the Standard for Automatic Exchange of Financial Account Information in Tax Matters, also known as the Common Reporting Standard (CRS). This uniform global standard specifies the financial account information to be exchanged between the participating countries and jurisdictions as well as stipulating which financial institutions are affected, the accounts to be reported, and the due diligence requirements for the financial institutions in question. The Multilateral Competent Authority Agreement for the Common Reporting Standard (CRS MCAA) was signed by 51 countries and jurisdictions in Berlin in October 2014.
What are the benefits of the automatic exchange of financial account information?
In recent years, cross-border tax evasion has become a major challenge for countries, to the extent that they are no longer able to tackle it alone. Ensuring fair and consistent taxation is essential for society to be able to function and the government to be capable of action. Closer cooperation between national tax authorities is essential to ensure the proper determination of tax liabilities and to fight international tax evasion. In pursuit of this goal, the automatic exchange of information is of critical importance, in that it helps create transparency in tax matters by enabling tax authorities to take into account income generated abroad when determining tax liabilities at home.
What is the legal basis of the automatic exchange of financial account information in international law?
Multilateral Competent Authority Agreement for the Common Reporting Standard (CRS MCAA) of 29 October 2014
Council Directive 2014/107/EU of 9 December 2014 as regards mandatory automatic exchange of information in the field of taxation
Agreements between the European Union and Andorra, Liechtenstein, Monaco, San Marino and Switzerland on the automatic exchange of financial account information
- Bilateral agreements between Germany and third countries as regards the automatic exchange of information in the field of taxation
What was Germany’s role in the introduction of the automatic exchange of financial account information?
Germany made a considerable effort within the G20 process to ensure faster implementation of the CRS developed by the OECD. Germany also had a significant influence on the Multilateral Competent Authority Agreement for the Common Reporting Standard, which is a major step towards achieving fair international tax cooperation no longer characterised by distortions or a lack of transparency.
How many countries and jurisdictions does Germany automatically exchange financial account information with?
More than 100 countries and jurisdictions have committed to the automatic exchange of financial account information. As a member of the “early adopters” group, Germany will be one of the first countries to engage in the exchange, starting in September 2017. For this exchange, more than 49 exchange relationships have been activated. The next exchange is scheduled to take place in September 2018, with additional countries and jurisdictions participating. The number of exchange relationships that will be active in the future largely depends on domestic legal and technical requirements being fulfilled in the other country. Germany is pursuing this goal within the framework of existing OECD activities.