Bank Account

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Bank account: Automatic Exchange of Financial Information, 60+ countries, implications, compliance, what next

Bank account: Automatic exchange of financial accounts

Bank account: For the last 2 years concerted efforts were made to compel tax havens and banks all over the world to share information about their accounts.

The breakthrough came in May 2014 when Singapore and Switzerland agreed to share the information on bank accounts of foreign nationals.

The OECD Standard for Automatic Exchange of Financial Account Information (SAEFAI) was adopted by more than 60 countries. This includes Switzerland, Seychelles, Mauritius, BVI & even Saudi Arabia.

While China has signed, Hong Kong is not a signatory. It is early to tell whether China’s adoption will apply to Hong Kong banks.

The OECD declaration provides ‘the key elements for establishing a single, common global standard for the automatic exchange of financial account information thereby affording tax administrations around the world with a very powerful new tool to tackle cross-border tax evasion and non-compliance’.

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Bank account: 60+ countries

The bank secrecy busters are now united.The 60+ countries including 33 member nations of OECD together declared a pledge in Paris which required countries to collect and share information on bank accounts, beneficial ownership and legal structures such as trusts, automatically.

These countries consist of all G20 nations and also several offshore centres such as the Cayman Islands and Jersey. Switzerland and Singapore joining in have provided a major breakthrough for the banking secrecy busting efforts.

Switzerland broke away from its century’s old tradition of guarding banking secrecy agreeing to share information about wealthy taxpayers from all rich nations.

It reportedly holds US$ 2.2 trillion of funds in its more than 200 private banks.

Singapore is not far behind.

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Bank account: Automatic sharing of financial information

Under this pledge, tax-related financial information will be automatically shared among the adopting countries i.e. investments, dividends, bank balances, transfers and sales proceeds.

This is intended to calculate the fair tax liability. A common standard has been agreed about the information exchange.

Banks and financial companies will also be coming under the obligation to automatically transfer information. They must identify the ultimate beneficiaries of shell companies, trusts and other legal structures that are popularly used to escape taxes.

The whole campaign was accelerated when USA passed a law called FATCA- Foreign Account Tax Compliance Act which forces non-US banks to share foreign bank account information of US citizens.

As screws begin to tighten more countries are expected to fall in line.

Also, the demands made by US tax authorities may be echoed by other large countries.

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Bank account: Compliance issues

Although the signatories did not officially commit to a specific timetable, a group of early adopters has targeted to have automatic exchange of information implemented by the year 2017 using tax data collected from the end of 2015.

Banks will have a year to adapt their information technology systems while governments will have to modify their tax laws.

There may be those member countries that drag their feet in implementation or give it a low priority.

No formal sanctions are planned against them. Compliance by members will be watched by means of inter-member peer reviews similar to existing arrangements for the exchange of tax information on request.

Those who have not joined are expected to come under pressure as G20 nations have shown readiness to impose sanctions. A black-list of uncooperative countries may be drawn up by OECD for action.

Bank account: Get a free quote now by filling in the box on the right and discover how it affects offshore today

Bank account: What next?

So where will the big money go? Or what could be the way out for the wealth managers who want a haven of secrecy?

Likely areas of investment are property and investments via nominees.

There are still countries like the United Arab Emirates which have not signed this agreement.

Hong Kong is also a notable exception. It is also expected that there may be large residency transfers making it lucrative for small low-tax nations to attract money by offering residential rights.

Safe deposit lockers are also not yet a part of this exchange. So it could be possible to buy valuables and store them secretly. No bank account needed for that!

The ideal solution would be to have a low-tax but tax visible offshore structure.

Bank account: Get a free quote now by filling in the box on the right and discover how it affects offshore today

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Bank Account was last modified: June 8th, 2019 by Manu Raj

Manu Raj

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