Tax Information Exchange Agreement

Tax Information Exchange
Who qualifies as a reportable person

Over the last year or so I too have written quite a bit about the automatic exchange of banking information. To tell the truth I’d just about had enough of it by the end of the year. The main problem is that we can’t say anything with any real certainty, and can’t provide our readers with any concrete useful information. If I asked 3 of our banking partners from the same country the same question, I usually got 4 different answers. They also generally ended each piece of concrete information with a reminder that „this may change in the future, so let’s come back to the question in a month or two.”

I waited patiently, and each time the „month or two” came and went. Now, at the beginning of 2016, I still can’t get a meaningful reply from the banks. Even those banks which are going to report on the year 2016 are incapable of putting a complete information package on the table; they are unable to provide detailed information on even the most basic questions. For example, one of the most important questions centres on exactly who qualifies as a reportable person. If someone manages to wade through the handbook which the OECD issued for the banks in regard to the exchange of information, they will see very clearly that in many instances the banks have to decide for themselves. There are no central edicts, and very often the central banks and other supervising bodies also fail to issue clear guidelines.

In the case of a personal account, identifying the reportable person is relatively straightforward. The individual who opened the account was identified by the bank at the time. The majority of banks will follow the practice whereby if the individual concerned is resident in a country which has signed an information exchange agreement with the country in which the bank is located and the balance on the account at the end of the year, or at the time when the account was closed during the year, reaches or exceeds a certain amount, then a report is necessary. In the case of company bank accounts, on the other hand, it is much more complicated. I don’t want to go into this in detail here, but I would like to draw your attention to one important fact, which is the whole essence of this post. A significant number of banks differentiate between active and passive companies, with only the bank accounts of passive companies being subject to reporting. This raises the assumption that the banks place companies in categories, and differentiate between them accordingly. Here, however, there are no unified rules, and in each case it is up to the banks to define who, and on what grounds, they classify as active. If they place us in the active category, then we have managed to avoid the exchange of information and the report for the company.

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Who qualifies as a reportable person

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