Is taxpayer data recognised as highly confidential and adequately safeguarded against disclosure to third parties, including other parts of the Government?
Is it a signatory (or does it propose to become a signatory) to the Common Reporting Standard? And/or does it maintain (or intend to maintain) a public Register of beneficial ownership?
Tax (3rd edition)
Swiss tax legislation provides for strict confidentiality and non-disclosure rules regarding taxpayer information. However, other Swiss authorities can receive taxpayer information in certain situations.
Switzerland has entered into numerous tax treaties and tax information exchange agreements under which Switzerland will exchange tax information on a government-to-government basis in certain situations.
Switzerland is a signatory to the Multilateral Competent Authority Agreement and the Common Reporting Standard (‘CRS MCAA’), therefore committing to implement the OECD’s standard for automatic exchange of information. The appropriate legal bases have been introduced into Swiss law, and the first automatic exchanges of information will take place in autumn 2018.
Switzerland has responded to calls to increase the company transparency with the Federal Act for Implementing the Revised FATF Recommendations of 2012. Whilst this Act has brought a number of changes and obligations, it also included some very important updates to the requirements around beneficial ownership. Any individual who owns or controls over 25% of an entity’s share capital or voting rights (whether held by bearer shares or registered shares) is required to be identified to the company or an appointed financial intermediary. The information will be made available to the Swiss authorities, which increases the transparency of Swiss companies.
Code Section 6103 provides for confidentiality of tax return information obtained by the IRS during the course of an audit. Section 6103 generally prevents the IRS from disseminating tax return information to any third parties outside of the IRS, or subject to limited exceptions, to other parts of the government not involved in the audit. IRS employees that violate the restrictions on disclosure of taxpayer information may be subject to civil or even criminal penalties.
The US has not adopted the OECD’s Common Reporting Standard (CRS). The Code requires different beneficial ownership information to be collected by financial intermediaries and reported to the IRS and withholding agents pursuant to the Foreign Account Tax Compliance Act (“FATCA”) and related intergovernmental agreements between the United States and various countries worldwide.
The CRA is obliged by statute to safeguard the confidentiality of taxpayers’ information, and it has robust internal screening and security measures in place to ensure that this information is not disclosed to third parties without the taxpayers’ written consent. To supplement these measures, the CRA also provides tips to the public on how to avoid identity theft and how to identify fraudulent communications from third parties purporting to be acting on behalf of the CRA.
However, the CRA is permitted to disclose taxpayer information in certain limited circumstances provided in the Income Tax Act, including for purposes of investigating whether a criminal offence has been committed.
In addition, the CRA is not immune to system failures; it periodically issues notifications to the public announcing material privacy breaches, which are frequently attributable to employee error / misconduct or cyber-attacks. Information about unreported data breaches has been obtained by various media outlets through requests filed under the federal Access to Information Act.
The Common Reporting Standard was implemented in Canada effective July 1, 2017. Canada does not presently maintain a public Register of beneficial ownership.
The data relating to tax matters are subject to the tax secrecy which basically stipulates that the tax authorities are not allowed to disclose any data they gained knowledge of during the tax proceedings to any third party including other public authorities. However, there are exceptions to the tax secrecy rule, like the disclosure of facts in connection with criminal tax proceedings or other cases stipulated by the law or in case that imperative public interest requires it.
Austria is a signatory of the Common Reporting Standard providing for the automatic exchange of information between member countries on financial accounts of non-residents. It exchanges information on accounts which non-residents hold with Austrian financial institutions with all EU member countries and the countries which have signed and ratified the multilateral competent authority agreement of 29 October 2014, appearing on a list.
Austrian corporations have to disclose their beneficial ownership information to a central register kept by the Austrian Ministry of Finance by May 2018.
The FTA is required to keep confidential any kind of information they may be granted access to in the course of an audit, and do so in practice. Other administrations (criminal enquiries, Social Security) can be provided with information about a taxpayer.
France is a signatory of the multilateral Convention on Mutual Administrative Assistance in Tax Matters and has activated exchange relationships for the Common Reporting Standard information with 50 jurisdictions. France has authorised the approval of the multilateral agreement by the law 2015-1778 dated December 28, 2015 and the Common Reporting Standard is applicable in France since January 1, 2016.
In order to comply with the Directive 2011/16/UE dated February 15, 2011 modified by the Directive 2014/107/UE that resumed the Organisation for Economic Co-operation and Development (OECD) reporting and the Directive 2015/2376/UE, the law 2015-1786 of December 29, 2015 provides that French financial institutions have to declare specific information for the application of the automatic exchange of information provided by French tax conventions but also for the application of the Directive regarding the administrative cooperation and finally for the Common Reporting Standard.
Companies are now required to disclose the identity of their beneficial owners – i.e. individuals owning, directly or indirectly, more than 25% of the company’s equity or voting rights or, failing that, the person exercising control over the management or management bodies within the companies and undertakings for collective investment.
As of 1 April 2018, this obligation will extend to all legal entities registered before 1 August 2017. This means that all legal entities currently registered in France needed to identify their beneficial owners and prepare to file the declaration of beneficial owners before 1 April 2018.
The right of communication of the beneficial owner's register is therefore limited to the legal representatives, some entities listed within the French monetary and financial code (such as judges, custom officers or General directorate of public finances, investigators of the French financial market authority), entities falling within the scope of anti-money laundering and terrorist financing (such as credit institution, insurance companies, mutual insurance, investment service providers, etc…), or any person justifying a legitimate interest, upon an order made by the judge engaged in the supervision of the companies register.
While complying fully with all information exchange standards, Cyprus takes taxpayer confidentiality very seriously. The Assessment and Collection of Taxes Law contains strong safeguards against inappropriate disclosure of taxpayer information and requires requests for disclosure to conform with strict requirements, thus ruling out so-called fishing expeditions.
As an EU member Cyprus is bound by Directive 2014/107/EU on mandatory automatic exchange of information in the field of taxation. It is also a signatory to the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information. Cyprus implemented the Common Reporting Standard from the beginning of 2016 and will exchange information regarding 2016 in 2017.
Registers of beneficial ownership are maintained by the regulatory authorities such as the Cyprus Securities and Exchange Commission, which regulates corporate and fiduciary service providers, and the Cyprus Bar Association and the Institute of Certified Public Accountants of Cyprus, which regulate their members’ activities in this area. The registers are open to inspection by the relevant authorities for appropriate purposes, but they are not open to inspection by others.
Yes, taxpayer data is recognized as confidential, however some exceptions are applicable mostly to assure that the confidentiality of the tax data will not be an obstacle for the proper administration of justice by the Brazilian courts. In this sense, there are judicial precedents ruling that information provided solely for the tax authorities is subject to such privacy. Therefore, if the tax authorities require documents and information from taxpayers as provided by law, taxpayers cannot refuse to provide them based on confidentiality.
Pursuant to article 198 of the Brazilian Tax Code, tax information obtained by the Brazilian tax authorities concerning “the economic or financial status of a taxpayer or third party and the nature and state of their business or activities” is treated as confidential and may not be disclosed by them and/or by its public servants.
As mentioned above, there are however exceptions, which are foreseen in sections 1 and 3 of the mentioned article 198, allowing for the disclosure of tax information when requested by:
- a judicial authority, in the interest of justice; or
- an administrative authority, in the interest of Public Administration, upon proof that an administrative proceeding was regularly initiated before the administrative body with the aim to investigate the taxpayer regarding administrative infringements supposedly committed by him.
Three other exceptions to the general rule of confidentiality are foreseen in section 3 of article 198, allowing the disclosure of tax information concerning (i) criminal prosecution for a criminal tax offence; (ii) tax debts registered as overdue Treasury liability and (iii) tax installments or moratorium.
At a transactional level, all of Brazil’s DTCs contain confidentiality provisions, based on the OECD Model Convention (as of 1963 or 1977). The aim is to assure that the information exchanged between tax authorities of both contracting parties will solely be disclosed to persons authorized by the DTCs.
In case of a conflict between a DTC and the domestic legislation, international treaties should prevail as already ruled by the Brazilian Supreme Court.
It is also important to mention that attorneys and clients are not obliged to disclose messages, information or documents exchanged within the scope of an attorney-client relationship to tax authorities, as they are deemed confidential by the Code of Ethics and Discipline of the Brazilian Bar Association (OAB).
With respect to the Common Reporting Standard (CRS), Brazil is a signatory to the automatically exchange of financial account information with the other countries and Brazil intends to maintain a public Register of beneficial ownership. Brazil is committed to promoting greater transparency in beneficial ownership information of legal persons and arrangements and to implementing the G20 High Level Principles on Beneficial Ownership Transparency. Brazil has taken concrete steps to enhance the effectiveness of national legal, regulatory and institutional frameworks.
In this sense, Brazil has already enacted a recent regulation in 2016, Normative Instruction from the Brazilian Revenue Service No. 1.634/2016, which has been amended from time to time. Pursuant to this regulation, a domestic or foreign company incorporated in Brazil before July 1, 2017 must report its ultimate beneficial owner (UBO) to Brazil’s Federal Revenue (RFB) by December 31, 2018 or immediately when processing any registration changes with the RFB or the Board of Trade. A company registered on or after July 1, 2017 must report its UBO within 90 days of incorporation.
Brazil’s definition of an UBO is a “natural person who ultimately, directly or indirectly possesses, controls or significantly influences the entity” or someone “on whose behalf a transaction is conducted.”
In this scenario, most Brazilian entities must comply with the UBO requirements. Companies that must disclose their UBO must provide that individual’s name, place and date of birth, place of residence and certified passport copy. In addition, the company must submit notarized and apostilled copies of the company bylaws, the power of attorney for the company’s local legal representative, documentation verifying that the person who signed the power of attorney has the power to do so, and photos of the person who signed the power of attorney and of the local legal representative.
Publicly-traded companies and certain non-profits organization need not to identify their UBOs.
If for any reason a company subject to the requirement is unable to identify its UBO, it must notify the RFB and inform them of this.
Companies that fail to identify their UBOs, will not be subject to any financial penalties. However, their CNPJ (tax registration number) will be suspended and they will also be “prevented from effecting transactions with financial institutions, including withdrawing funds from local bank accounts, the realization of financial investments and the obtaining of loans.”
The data relating to tax matters is safeguarded against disclosure to third parties by the tax secrecy rule. The tax secrecy rule basically stipulates that the tax authorities are not allowed to disclose any data they gained knowledge of during the tax proceedings to any third party. However, there are several exceptions to the tax secrecy rule, like disclosure of facts in connection with criminal proceedings unrelated to tax.
Germany is signatory of the Multilateral Competent Authority Agreement and therefore has implemented the common reporting standard into national law. The first automatic exchanges of tax relevant information with other countries, such as information about banking accounts or realized capital gains, have started as of September 2017.
Germany has also implemented information exchange clauses in the vast majority of its double taxation agreements under which certain information might be disclosed to other countries’ tax authorities.
As of 1 October 2017, Germany maintains a public register of beneficial ownership. Amongst others, any individual who owns 25% of the share capital or voting rights of an entity or controls the entity is treated as the beneficial owner, which has to be identified by the company or the financial intermediary as the case may be and has to be registered in the so-called transparency register. However, if the beneficial owner is already registered in the commercial register as a shareholder of the respective entity, no additional registration in the transparency register is required. The information contained in the transparency register will be made available to governmental bodies or to any person who can provide evidence of a legitimate interest. According to the explanatory memorandum to the act implementing the transparency register, in particular anti-corruption or tax-related NGOs and specialized journalists shall have such a legitimate interest to inspect the transparency register.
Section 851A Taxes Consolidation Act 1997 (“TCA”) provides statutory protection in respect of the confidentiality of taxpayer information. The protection is not absolute and taxpayer information may be disclosed by the Revenue in certain limited circumstances prescribed within that section. Under separate legislation confidential taxpayer information may also be disclosed to the Office of the Director of Corporate Enforcement (“ODCE”) where an offence has been committed or to the Official Assignee or trustee in bankruptcy.
Ireland is a signatory to the CRS. The development of a central register of beneficial ownership is in progress and is expected to go-live at www.cro.ie during 2019.
The ITA is under a statutory duty to keep taxpayers’ information confidential, a breach of which may trigger criminal offences. Exceptions apply with respect to disclosure of such information to the NII or in certain bankruptcy procedures.
Similar to other countries, Israel has also committed to implementing automatic exchange of information under the OECD Common Reporting Standard (“CRS”) and the US Foreign Account Tax Compliance Act (“FATCA”). Under both the CRS and FATCA, the ITA will obtain financial information from Israeli financial institutions pertaining to financial accounts of non-Israeli residents and will exchange such information with partner jurisdictions on an automatic and annual basis. Domestic legislation and regulations have been adopted to facilitate compliance with said exchange of information obligations.
Under Section 138 of the ITA, every classified person must regard and deal with classified material as confidential; and, if he is an official, make and subscribe a declaration that he will do so.
A "classified person" is defined to include officials (i.e.: a person having an official duty under or employed in carrying out the provisions of the ITA); any person advising or acting for a person who is or may be chargeable to tax, and any employee of a person so acting or advising if he is an employee who in his capacity as such has access to classified material; or any employee of the IRB.
However, there are some qualifications to the rule, as no classified material shall be produced or used in court or otherwise except for the purposes of the ITA or another tax law; in order to institute or assist in the course of a prosecution for any offence committed in relation to tax or in relation to any tax or duty imposed by another tax law; or with the written authority of the Minister or of the person or partnership to whose affairs it relates.
Further, the law does not prevent the production or disclosure of classified material to or the use of classified material by the Auditor-General where necessary or expedient for the proper exercise of the functions of his office, or the DGIR from publicising, from time to time in any manner as he may deem fit, particulars in respect of a person who has been found guilty or, convicted of any offence or dealt with pursuant to certain sections under the ITA unless voluntary disclosure has been made before any investigation or inquiry has been commenced.
Any classified person who communicates to another person or allows another person to have access to classified material in contravention of the Act shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding four thousand ringgit or to imprisonment for a term not exceeding one year or to both.
Under the Convention on Mutual Administrative Assistance in Tax Matters, Malaysia has joined over 100 other countries in agreeing to automatic exchange of information relating to financial accounts (AEOI). As on 7.8.2018, the intended first information exchange for Malaysia is on September 2018.
Pursuant to the Common Reporting Standards (“CRS”), information to be collected and reported by financial institutions of participating jurisdictions includes the financial account information, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. Through the operation of legislation, the Malaysian tax authorities has set down timelines for implementation of the CRS, with special provisions for pre-existing individual accounts which are high value accounts.
Presently, Malaysia does not maintain a public register of beneficial ownership, nor is there any indication of any intention to maintain such a register. Nonetheless, under various provisions and guidelines, regulatory authorities mandate relatively high level of disclosure of control and ownership by taxpayers.
From a domestic standpoint, taxpayers’ data is generally kept as confidential by tax authorities. In fact, the Federal Fiscal Code requires them to maintain absolute confidence when it comes to tax returns and other information provided by taxpayers or other third parties related to them, with certain exceptions. For instance, tax authorities could share taxpayer’s information to authorized credit and financial management platforms that issue credit reports when a tax assessment is final, to the Federal Antitrust Commission, to the Health Ministry, among others Mexican agencies in order to safeguard the Mexican Governments’ fiscal sustainability.
From an international perspective, exchange of information agreements and other international conventions permit the Federal Government to disclose taxpayers’ information under the terms, conditions and limitations established therein.
Yes, Mexico is a signatory to the Common Reporting Standard (CRS). CRS was first implemented in Mexico primarily through the Tax Administration Rules, which came into force on January 1, 2016, while the automatic exchange of information under the CRS provisions effectively started in 2017. In general, CRS requires Mexico to obtain information from its financial institutions and automatically exchange that information with other jurisdictions on an annual basis.
Mexico does not maintain a public register of beneficial ownership; however, please note that the Mexican Income Tax Law often times requires beneficial owner tests in order to apply reduced rates for payments made to foreign jurisdictions. In addition, this standard requirement is also included in most of Mexico’s Double Taxation Treaties to access benefits included under certain provisions (i.e., dividends, interest or royalties). Lastly, the Anti-money Laundering Law requires financial institutions to identify the beneficial owner of certain payments made as a consequence of engaging in “vulnerable activities”.
The tax authorities are bound by the confidentiality provisions set out in the Tax Administration Act, and the breach of those obligations are considered a legal offence. Apart from some statutory exemptions the tax authorities are not allowed to share information received from a taxpayer with other government agencies. In addition, the tax authorities may share information with other countries' tax authorities pursuant to tax treaty obligations and the procedure of information sharing under the country-by-country reporting regime.
Norway is a signatory to the Common Reporting Standard and it has been incorporated in national law.
The Government (Ministry of Finance) presented a proposal to the Parliament (Stortinget) on 22nd June 2018 for a new act for the establishment of a register of beneficial ownership. As of 12 September 2018 the proposal had not yet been debated and voted over in the Parliament.
Tax data is not public information therefore is treated as confidential information. Only in specific cases such as criminal process, family process such information could be obtain but through the requirement of the judges.
Only the taxpayer and its authorized people are able to access to the tax data.
Panama has implemented the Common Reporting Standard (CRS) obligations. On July 31st, 2018 was the final date for filing CRS reports regarding 2017 information.
There is no public registry of beneficial ownership.
Yes, it is confidential and cannot be divulged to third parties unless judicially ordered in connection with a pending court case. There is also a specific provision in the Tax Code which makes it unlawful for any officer or employee of the Bureau of Internal Revenue to divulge trade secrets and other information acquired in the performance of their official duties. However, the Tax Code mandates the Bureau of Internal Revenue and other government agencies to share information which are necessary to improve tax collections. This data sharing can cover matters relating to production and sales of manufacturing companies, gross receipts of land, sea and air transport firms, revenue of telecommunications firms, amount of interest and other income of banks, contracts entered into with private contractors, and names and addresses of all active registered corporations and partnerships with their financial statements. In addition, taxpayer’s information on bank deposit accounts can also be shared under existing international conventions on tax matters subject to the terms provided therein. In any case, all request for information and documents should be coursed through the Commissioner of the Bureau of Internal Revenue who alone approves all these requests as a matter of procedure.
The Philippines is not a signatory to the Common Reporting Standard and does not maintain a public Register of beneficial ownership at the moment. However, as it considers global trends and adheres to international norms that are consistent with its domestic policies, it may in the future implement these matters.
Officers working for the tax authorities must treat as confidential (including with respect to other parts of the Government) the information obtained on the tax situation of taxpayers and the elements of personal nature obtained during a tax procedure, including those covered by professional secrecy or any other legally protected secrecy duty, with the following exceptions:
i) authorization of the taxpayer for the disclosure of his tax situation;
ii) legal cooperation of the tax administration with other public entities;
iii) mutual assistance and cooperation of the tax administration with the tax administrations of other countries resulting from international conventions to which the Portuguese State is bound, whenever reciprocity is contemplated; and
iv) collaboration with justice under the Code of Civil Procedure and Code of Criminal Procedure; and
v) confirmation of the tax identification number and fiscal domicile to the entities legally competent to carry out the commercial, land or car registration.
The State Budget Law usually foresees a one-year valid authorization for the exchange of information between the AT and the Social Security.
In addition, both the AT and the Social Security are authorized by the National Data Protection Commission to publish lists with the identification of their debtors.
That said, in recent years other parts of the Government have been exerting pressure to obtain taxpayer data for the purposes of facilitating the execution of their public policies.
Portugal is a signatory to the Common Reporting Standard which is into force since January 2016.
In addition, the Legal Regime of the Central Registry of the Beneficial Owner was introduced by Law n. º 89/2017, of the 21st of August, which transposed chapter III of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015, resulting in the creation of a public Register of beneficial ownership.
Taxpayer data are recognized as highly confidential and, in principle, cannot be shared by the tax authorities with others (including other public bodies) except in specific cases provided for by the law. In cases not provided for by the law, the data can be shared with other public bodies if they are necessary for the functioning of the requesting body.
Italy is a signatory to the Common Reporting Standard. Being one of the early adopters, the provisions of the CRS entered into force on January 1, 2017.
The legislative Decree No. 90 of 2017 which implemented the provisions of the Directive (EU) 2015/849 of the European Parliament and of the Council on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing provides for the introduction of a public register of beneficial ownership which shall include data relevant to beneficial owners of companies and other entities and arrangements (including trusts).
According to Article 5 of Tax Procedure Law, tax officers, court staff, members of the commissions formed under tax laws and expert witnesses cannot disclose taxpayers’ information to third parties. This restriction remains even after they leave their posts.
Article 362 of the same law makes it a criminal offense to violate this provision and requires incarceration of the offender from 1 year to 3 years with an additional fine at the amount of 5.000 days according to day-fine system.
There are some exceptions. For instance, taxpayers’ data may be shared with other public authorities if their own legislation gives them the power to request this data directly from the taxpayer and the data is relevant and necessary to perform the public service. Furthermore, taxpayers’ data may be shared with officials conducting a judicial or administrative investigation. Persons who have obtained taxpayers’ data through this exceptions become liable to protect it in the same way with the persons enumerated in Article 5.
Turkey, as a member of the G20 and the OECD, has officially stated that it will comply with the OECD’s Common Reporting Standards (CRS). In addition, the tax authorities shared with Turkish banks a draft version of the CRS Secondary Legislation, which was published and became effective on 30 June 2017, to request their comments. Accordingly, the first reporting will be made by 30 September 2018.
Decree of the Council of Ministers No: 2018/11790, regarding the entry into force of the Mutual Administrative Aid Convention, was published in Official Gazette No: 30460 dated 26 June 2018 and became effective 1 July 2018.
The agreement was published in the Official Gazette and entered into force on 20 May 2017.
Generally yes. The officials of the tax authority are bound by and subject to the confidentiality obligations under law, and unlawful disclosure will constitute a criminal offence. Taxpayers’ information is not generally shared with other parts of the government. This should remain true even after the introduction of the various transfer pricing documentation requirements, i.e., master file, country-by-country reports and local file; that is, these information is also supposed to be protected by the confidentiality obligations owed by the authority officials.
However, it is at the same time true, as a matter of fact, that there often are press coverages over an assessment made upon a specifically identified taxpayer (which is clearly confidential information), even if the taxpayer itself does not make it public, if the information has a news value. Many practitioners suspect that some officials of the tax authority having contact with the press are the news source, while the tax authority never admits it.
Yes, Japan is a signatory to the Common Reporting Standard, and has already promulgated and enforced its domestic legislation to implement the Common Reporting Standard. The NTA has released to the public detailed guidelines on what information will be disclosed and what due diligence should be undertaken by financial institutions as well as other details. There is no system of a public register of beneficial ownership; in practice the beneficial owner is identified through tax audit.
Based on Dutch law, data of taxpayers cannot be disclosed to third parties further than necessary for the collection of taxes. However, the information can be shared with other parts of the Government in the situation of a criminal offence.
Further, data of taxpayers has to be exchanged by the Dutch tax authorities (DTA) with relevant foreign tax authorities in specific situations. This is the case for certain rulings and for certain so-called Service Companies. In addition, the DTA will exchange information obtained under the EU mandatory disclosure rules. These categories are set out below.
Exchange of information on rulings
The Netherlands exchanges information on tax rulings with foreign tax authorities, based on the frameworks laid down by the OECD (BEPS action plan 5) and the EU. The information to be exchanged under both frameworks overlap to a great extent and includes information on the identity of the taxpayer, the date of issuance of the ruling, the start-date, the identification of any entity likely to be affected and a short summary of the content. The DTA have prepared an Excel template for both frameworks and, if completed, contains all information they want to exchange. The DTA gives taxpayers the choice to either complete the template themselves, or let the DTA do so. Under both frameworks the information exchanged will not be available to the public.
The OECD framework for compulsory exchange of information only applies to taxpayer-specific rulings. The scope of the OECD framework is (further) limited to the following categories of rulings and arrangements:
(i) rulings related to preferential regimes (for the Netherlands, this category is limited to the innovation box and the shipping regime);
(ii) cross-border unilateral transfer pricing (TP) or other unilateral transfer pricing rulings;
(iii) rulings giving a downward adjustment to tax profits (e.g. informal capital rulings, excess profit rulings);
(iv) permanent establishment (PE) rulings (including absence of PE and the attribution of profits);
(v) conduit rulings; and
(vi) any other type of ruling on which it is agreed in the future that it would give rise to BEPS concerns.
As a general rule, the compulsory exchange of information for the six categories of rulings under the OECD framework needs to take place with:
(a) The countries of residence of all related parties (25% threshold) with which the taxpayer enters into a transaction covered by the ruling or which gives rise to income from related parties benefiting from a preferential treatment; and
(b) The residence country of the ultimate parent company and the immediate parent company.
The EU framework for exchange of information with tax authorities of the Member States applies to ‘advance cross-border rulings’ and ‘advance pricing arrangements’. These terms are very broadly described. An ‘advance cross-border ruling’ is essentially defined as any agreement, communication, or any other instrument or action with similar effects (a) issued by a Member State to a particular person, (b) upon which that person is entitled to rely, (c) concerning the interpretation of tax rules, (d) relating to a cross-border transaction or having a cross-border impact (including the question regarding the presence of a PE in another jurisdiction), and (e) made in advance of the transaction (or the activities potentially creating a PE), or in advance of the filing of a tax return covering the period in which the transaction (or activities) took place.
An ‘advance pricing arrangement’ means any agreement, communication, or any other instrument or action with similar effects (a) issued by Member State to a particular person, (b) upon which that person is entitled to rely, and (c) determining in advance of cross-border transactions between associated enterprises, an appropriate set of criteria for the determination of the transfer pricing for those transactions or determining the attribution of profits to a PE.
These broad EU definitions mean that not only advance tax rulings and advance pricing arrangements in the traditional meaning of these terms will be covered by the EU framework, but also a vast array of other agreements between taxpayers and tax administrators. Rulings and pricing arrangements concerning purely domestic situations, as well as rulings and pricing arrangements exclusively concerning the tax affairs of one or more natural persons, are out of scope. Unlike the OECD framework, the scope of the EU initiative is not limited to certain categories of rulings.
Under the EU framework, the information will be submitted into a central directory to which the tax authorities of all Member States have access. Further, the European Commission (EC) will have access to a limited set of information. The EC is only permitted to use this information for assessing Member States compliance with the EU framework; this means that the information cannot, for example, be used for state aid investigations.
Exchange of information on so-called Service Companies
Furthermore, a so called “Service Company” (i.e. a Dutch based company whose activities in a year predominantly consist of receiving and on-paying interest, royalties, rent or lease amounts to and from group companies based outside the Netherlands), that applies or is entitled to apply an EU Directive or tax treaty, but that does not meet certain minimum substance requirements, would be subject to the automatic exchange of certain information by the Netherlands with the relevant foreign tax authorities.
The Dutch minimum substance requirements are:
- At least half of the total number of statutory board members and board members with power of decision of the (domestic or foreign) Service Company resides or is actually established in the country of the Service Company.
- Board members residing or established in the country of the (domestic or foreign) Service Company have the required professional knowledge to properly perform their duties. The duties of the board include in any case the decision-making on transactions to be entered into by the Service Company – on the basis of the own responsibility of the Service Company and within the ordinary course of group involvement – and a proper handling of the transactions entered into.
- The Service Company avails of qualified employees for proper implementation and registration of the transactions to be entered into by it.
- The management decisions are taken in the country of the Service Company.
- The main bank accounts of the Service Company are held in the country of the Service Company.
- The bookkeeping of the Service Company is conducted in the country of the Service Company.
- The business address of the Service Company is in the country of the Service Company.
EU Mandatory Disclosure Directive
Finally, in 2018, the EU adopted the so-called ‘Mandatory Disclosure Directive’, which imposes the obligation on intermediaries to report to the relevant tax authorities potentially aggressive tax planning arrangements with a cross-border dimension as well as arrangements designed to circumvent reporting requirements like Common Reporting Standard (CRS) and Ultimate Beneficial Owner (UBO). The DTA will exchange such information automatically with the tax authorities within the EU through a centralized database.
Cross-border arrangements are arrangements concerning either more than one Member State or a Member State and a third (i.e. non-EU) country and meeting certain characteristics. Purely domestic situations and situations having no link to any EU Member State do not fall within the scope of the Mandatory Disclosure Directive.
Reportable cross-border arrangements are defined in the Mandatory Disclosure Directive as “any cross-border arrangements that contain at least one of the hallmarks as set out in Annex IV” of the Directive. A hallmark is defined as “a characteristic or feature of a cross-border arrangement that presents an indication of a potential risk of tax avoidance”. The hallmarks are divided into generic and specific hallmarks. The so-called generic hallmarks and some of the specific hallmarks only apply if the main benefit test is satisfied. This test is met if it can be established that the main benefit or one of the main benefits which, taking into account all relevant facts and circumstances, a person may reasonably expect to derive from an arrangement is the obtaining of a tax advantage.
Member States have to implement the Mandatory Disclosure Directive by 31 December 2019 at the latest and shall apply the provisions from 1 July 2020 onwards. It should be noted that the Mandatory Disclosure Directive has retroactive effect for all reportable arrangements the first step of which was implemented in the time frame between 25 June 2018 and 1 July 2020.The deadline to file these arrangements is 31 August 2020.
The Netherlands is a signatory to the Common Reporting Standards. As of 1 January 2016 the Netherlands has introduced the Common reporting Standards in Dutch tax law.
Currently, the Netherlands does not have a UBO-register. All of the EU Member States are obliged to have a UBO-register in place in January 2020 at the latest, based on the 4th European Anti-Money Laundering Directive. The legislative proposal is expected to be submitted to Dutch Parliament in 2019.
As a general rule, the fiscal secrecy rules prevent the tax authorities from disclosing taxpayer information and data to third parties. However, tax authorities may disclose such information and data to other public authorities and judiciary bodies, as per the law.
Yes, Romania is a signatory to the Common Reporting Standard. At this stage, we are not aware of an intention of the Romanian authorities to maintain a public register of beneficial ownership.
Yes, the Income Tax Office will need to ensure compliance with the provisions of the General Data Protection Regulation (“GDPR”) which has been transposed into Gibraltar law as a result of the European Directive.
The Tax Office will however, be required to disclose data on any particular taxpayer if he is the subject of an investigation by any other tax authority and the information requested has been done so validly under the provisions of a Tax Exchange of Information Treaty or applicable directive.
Yes, Gibraltar has adopted the Common Reporting Standard and also maintains a Register of beneficial ownership. The Register is maintained by the Finance Centre and is not public. However persons who demonstrate legitimate interest under the relevant regulations may make a request to the Finance Centre for such information to be disclosed.
Section 18 of the Commissioners for Revenue and Customs Act 2005 (CRCA) imposes a duty on HMRC officials to ensure that taxpayer information is kept confidential. It is a criminal offence to contravene section 18 by disclosing information to a person whose identity is specified in the disclosure or can be deduced from it. The s18 duty is not absolute and it does not apply to a disclosure which “is made for the purposes of a function of the Revenue and Customs and does not contravene any restriction imposed by the commissioners.”
A case of particular interest on this exception is R (Ingenious Media Holdings plc) v The Commissioners for HMRC  EWHC 3258 (Admin). This judgment emphasizes that HMRC’s duty of confidentiality is a fundamental duty owed to the taxpayer.
The UK is a signatory to the CRS. Financial Institutions will need to report specified information to HMRC by 31 May 2017. HMRC will then exchange the relevant information with participating jurisdictions by 30 September 2017. Information of beneficial ownership of companies is now publicly available on the Companies House website.