• Transparency update from the OECD

    Our summary of the OECD's annual report and what it means for Trustees.

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Transparency update from the OECD

14 December 2021

OECD Global Forum 2021 Annual Report

Last month the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes (“Global Forum”), the leading international body working on the implementation of global transparency standards around the world, released its Annual Report for 2021. The report stated that: 

  • The Global Forum has 163 member jurisdictions as of September 2021.
  • 108 of these jurisdictions have committed to the automatic exchange of financial (“AEOI”) account information by the end of 2021, with a further 12 jurisdictions committed to exchanging information by 2024.  42 countries have not yet committed to a first year of information exchange, whilst the USA has its own exchange mechanism.
  • Of the 108 jurisdictions committed to exchanging information by the end of 2021, two (Sint Maarten and Trinidad and Tobago) have not yet put in place the necessary legal frameworks to implement the AEOI standard, and one (Niue) has not yet put in place the technical requirements need to operate under the AEOI standard.
  • In 2021, 73 jurisdictions received technical assistance from the Global Forum’s capacity building and outreach (“CBO”) programme which aims to ensure transparency and exchange of information benefits all its members and specifically developing jurisdictions.
  • In 2020 information on more than 75 million financial accounts was automatically exchanged covering total assets of around €9 trillion.
  • Since the first automatic exchange of information commenced in 2017, €112 billion of additional revenues (tax, interest, penalties) have been identified through voluntary disclosure programmes and offshore investigations.  At least €3 billion of these additional tax revenues has been linked directly to the use of the information exchanged.
  • Almost 90% of the respondents to the Global Forum’s annual survey reported having already used the automatically exchanged information received with a view to increasing tax compliance domestically.
  • The Exchange of Information on Request (“EOIR”) continues to be the most widely used form of the exchange of information for tax purposes.  Approximately 30% of respondents to the Global Forum’s annual survey stated that they made follow-up EOIR requests because of information received under the AEOI standard.
  • The number of jurisdictions with whom both the UK and Switzerland exchange data has continued to increase year on year as follows:-

Jurisdiction

Year of commitment to first exchanges

Number of receiving partners for 2017 data sent in 2018

Number of receiving partners for 2018 data sent in 2019

Number of receiving partners for 2019 data sent in 2020

Number of receiving partners for 2020 data sent in 2021

UK

2017

62

68

70

72

Switzerland

2018

36

62

66

72

 

New Swiss Common Reporting Standard (“CRS”) Regulation

We also understand that Swiss trustees will have an additional layer of reporting to consider next year, as by 30 June 2022 trustees must declare as distributions all interest-free and below-market rate loans to reportable beneficiaries of any trusts classified as a financial institution.

The value of the deemed distribution is not the principal amount of the loan itself but the difference between the market rate of interest and the interest, if any, charged thereon.

If the loan is subsequently written-off at a later point in time at the expense of the trust, the amount written-off will constitute a deemed distribution to the respective beneficiary and therefore also become reportable under the Common Reporting Standard.

If you have any queries about how the information exchanged under the CRS may result in an obligation for any of your clients to report a UK tax liability or potentially lead to a future tax enquiry, then please don't hesitate to get in touch with a member of our team.