11 november 2014
51 countries undertook on request of the concerned country to provide information about financial accounts of the taxpayers – residents of that country from 2017. It is a mega- issue for decision making. Taking into account a great number of articles on the Internet and inquiries received by Collegia specialists we have every reason to say about some uproar in business circles, as one is always interested in financial stability, protection of assets and individual sovereignty, and it may all end.
We think that concerned persons first of all paid their attention to the conclusions made in one article placed on the Belarusian reputable news website, namely that:
From September 2017 information about all personal foreign accounts will be annually provided to the Belarusian financial authorities;
All central banks of the signatory countries will be obliged to provide information about all registered foreign taxpayers to the central financial authorities of all other countries.
How Belarus is involved into this process
I. On 29 October 2014 OECD countries and G20 - 51 jurisdictions altogether - (the list of countries can be found here http://www.oecd.org/tax/exchange-of-tax-information/MCAA-Signatories.pdf) signed a multilateral international agreement that will activate automatic exchange of tax information from September 2017. Text of this agreement can be found here: http://www.oecd.org/ctp/exchange-of-tax-information/multilateral-competent-authority-agreement.pdf).
II. Exchange of tax information will be based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which can be found here http://www.keepeek.com/Digital-Asset-Management/oecd/taxation/the-multilateral-convention-on-mutual-administrative-assistance-in-tax-matters_9789264115606-en#page1 As of 13 October 2014 84 countries joined the Convention (the list of countries: http://www.oecd.org/ctp/exchange-of-tax-information/Status_of_convention.pdf).
III. The common Reporting Standard on automatic exchange of information for tax purposes published by OECD on 21/07/2014 was taken as a basis for the signed multilateral international agreement http://www.keepeek.com/Digital-Asset-Management/oecd/taxation/standard-for-automatic-exchange-of-financial-account-information-for-tax-matters_9789264216525-en#page1
IV. 34 countries and European Commission are the members of the Organisation for Economic Co-operation and Development (OECD) (the list of countries can be found here: http://www.oecd.org/about/membersandpartners/list-oecd-member-countries.htm).
V. The G20 membership comprises the world's largest advanced and emerging economies. The members include 19 the world's largest national economies— Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, United States, and the European Union.
First of all, we intentionally expanded on the foregoing to stress that: Belarus is not a party to the signed multilateral international agreement (see clause I), is not a member of the Convention on Mutual Administrative Assistance in Tax Matters (see clause II) and is not OECD or G20 member country, which inter alia apply the common Standard on automatic exchange of information for tax purposes (clauses III, IV, V). Moreover, Belarus has not joined the Global Forum on Transparency and Exchange of Information for Tax Purposes so far, which membership already comprises 123 jurisdictions of the world http://www.oecd.org/tax/transparency/membersoftheglobalforum.htm
Furthermore, text analysis of the multilateral agreement signed on 29 October 2014 (see clause I above) does not give us reason to believe that the signatory countries are planning to inform and automatically send any information to the authorized bodies of the countries that are not parties to this international agreement.
Of course the drawn conclusion does not diminish the importance of the signed international agreement for all concerned countries and persons as the fresh ground broken in automatic exchange of tax information shows that this process is going to be simplified to just one touch of a button: touch, receive and use. Belarusian tax residents should also be prepared to that. Think about protection of your assets right now!
Should we pay attention that Belarus mainly on bilateral basis is involved in rendering mutual legal assistance in tax matters. Sources of international legal regulation of such cooperation of our country can be divided into three groups, depending on detail of the respective legal norms with respect to taxation.
A. The first group comprises international agreements that specially regulate cooperation and mutual assistance concerning tax compliance, including Tax Information Exchange Agreements – TIEA, cooperation agreements on preventing tax crimes, etc. As an example of the agreement included into this group one can mention the Agreement between the CIS Members on cooperation and mutual assistance concerning tax compliance and combating tax violations of 04.06.1999. For Belarus it became effective from 5 October 2000. Parties to this Agreement are: the Republic of Belarus (05.10.2000), Kyrgyz Republic (05.10.2000), the Republic of Kazakhstan (05.10.2000), the Republic of Armenia (24.10.2000), and Russian Federation (03.01.2001). Information about tax violations made by legal entities or individuals can also be exchanged under this Agreement.
B. The second group comprises intergovernmental double tax treaties (DTT), which besides the main subject of regulation– mechanism for avoidance of double taxation, also include the basic principles of cooperation between authorized bodies of the respective states in the sphere of taxation. As a rule, these basic principles concern exchange of information and assistance in tax collection. Belarus has 65 DTT in force. The list and texts can be found here: http://www.nalog.gov.by/ru/soglashenie-vo-izbejanie-2-nalogooblojeniya-ru/ To our opinion, bilateral double taxation treaties are now the main international legal basis for the Belarusian authorized bodies to obtain information about tax residents of our country.
C. And finally, the third group of agreements comprises multilateral and bilateral mutual legal assistance treaties. In particular, legal assistance can ensure such activities as transfer and delivery of documents, expert investigation; transfer of material evidence; examination of witnesses and other trial participants; exchange of legal and tax information; notification of court judgments; location and identification of persons and things; execution of requests for search and seizure; taking measures for location, arrest, seizure and forfeiture of property obtained as a result of crime; other assistance.
As an example of such treaties one can mention:
Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Cases dated 22.01.1993 (as revised by the Minutes from 28.03.1997) concluded in Minsk by the CIS members. For Belarus the Convention came into force on 19 May 1994.
Bilateral agreements on legal assistance in civil, family and (or) criminal cases. At present Belarus has such agreements in force concluded with 13 countries http://www.minjust.by/ru/site_menu/inter_cooper/new_url_874062972/new_url_1529379009. We’d like to notice that such bilateral agreements have been already concluded with Poland, Lithuania and Latvia.
Thus, international legal assistance is an actively developing form of interstate and interdepartmental cooperation between Belarus and other countries, as well as in the sphere of taxation. Belarusian taxpayers should have no illusions, because this cooperation will only strengthen and become for the state more and more effective. And everyone who keeps his assets abroad using foreign bank accounts and other instruments should once more analyze legality and reasonableness of the used protection scheme …
Going back to the multilateral international agreement on automatic exchange of information in tax matters signed on 29 October 2014, we would like to make a number of observations about its conclusion.
51 states – it is more than a quarter of the world’s countries; moreover, this list includes all the EU countries plus such states as Liechtenstein, Luxembourg, United Kingdom Overseas Territories: Gibraltar, British Virgin Islands, Bermudas etc.
It is a very interesting fact that Switzerland, Russia, the USA and China have not signed the agreement so far.
Among the nearest neighbors of Belarus the agreement has been signed by Poland, Lithuania and Latvia.
It is planned to launch the automatic exchange of information in three years, by September 2017, on an annual basis.
Of course, even now this signed agreement is a serious problem for those who do not think about the effective protection scheme for their personal finance and tax safety.
This agreement already involves a quarter of the world, and with due time more countries will enter into it, therefore all further steps should be taken taking into account the new reality.
We are glad to be of service to you!
Igor Stukanov and the team of COLLEGIA.BY