International Tax Law Exchange of Information Cross-Border Collaboration

EXCHANGE OF INFORMATION AND
COLLABORATION ACROSS BORDERS

ARTS 26 AND 27
Queen Mary, University of London
LLM 2013-2014
Dr Anzhela Yevgenyeva,
Oxford University Centre for Business Taxation
anzhela.yevgenyeva@sbs.ox.ac.uk
Outline
I.
THE EXISTING NETWORK OF INTERNATIONAL LEGAL INSTRUMENTS

a.
b.
c.
d.
e.
f.
g.
h.
II.
Overview & historical developments

The OECD standards of transparency and exchange of information on tax matters
Double Tax Treaties
Tax Information Exchange Agreements
The Multilateral Convention on Mutual Administrative Assistance in Tax Matters
Regional instruments for information exchange (the EU)
Other instruments (US FATCA, Swiss Rubik Agreements)
Exchange of information in practice, tendencies & challenges
THE UK PERSPECTIVE
a.
b.
c.
Sources
Extent and forms of the exchange
Limits on the exchange of information
III. THE RECENT DEVELOPMENTS

a.
b.
The BEPS Action Plan

Automatic exchange of information
I. THE EXISTING NETWORK OF

INTERNATIONAL LEGAL INSTRUMENTS

Overview
Countries generally cannot exchange information in tax purposes unless there is a legal
instrument or mechanism for doing so.
The legal authority to exchange information may be achieved through:
Bilateral instruments (through DTT and/or TIEAs).
Multilateral instruments (multilateral agreements, could be regional).
Unilateral instruments: domestic legislation.
Note
Most states prefer to follow a bilateral approach:
The tendency of the past decade: to increase the number of DTTs (with the standard clause of
the OECD MTC); also a large number of bilateral agreements are based on the OECD TIEA
model (since 2002).
At the same time, the use of the multilateral instruments has been increasing:
Several groups of countries exchange information efficiently following a multilateral approach.

1872:
19th-20th:
1996:
1998:
2000:
2002:
2009:
2006-2010:
Since 2010:
2013-onwards:
UK-Swiss DTT.
Tax administrations heterogeneous, informal and over-secretive.
G7 Lyon Summit: tackling harmful tax practices and tax havens.
OECD report, which includes a definition of tax havens.
OECD list of tax havens.
Commitments to implement the standards allow jurisdictions in a
newly created Global Forum (blacklist of uncooperative tax havens).
The London G20 summit: We agree [...] to take action against noncooperative jurisdictions, including tax havens. We stand ready to
deploy sanctions to protect our public finances and financial systems.
The era of banking secrecy is over.
Global Forum annual assessment (reformed in 2009).
Global Forum peer reviews.
The BEPS Action Plan & the international standard for automatic
exchange of information.

The OECD standards
The standards of transparency and exchange of information on tax matters (as
formulated by the Global Forum) require:
Exchange of information on request where it is foreseeably relevant to the
administration and enforcement of the domestic laws of a treaty partner;
No restrictions on exchange of information because of banking secrecy or other
domestic tax interest requirements;
Respect for taxpayer s rights; and
Strict confidential information exchange.
These standards are translated into reality via:
The Agreement on Exchange of Information on Tax Matters (2002) and its
commentary.
Article 26 of the OECD Model (2010) and Article 26 of the UN Model (2011)
essentially the same in both models.
Other instruments.

The OECD standards
The Elements of Peer Review (I)
The Global Forum break the OECD standards down into 10 essential elements against
which jurisdictions are reviewed.
A. AVAILABILITY OF INFORMATION
A.1.
Jurisdictions should ensure that ownership and identity information for all
relevant entities and arrangements is available to their competent authorities.
A.2.
Jurisdictions should ensure that reliable accounting records are kept for all
relevant entities and arrangements.
A.3.
Banking information should be available for all account-holders.

The OECD standards
The Elements of Peer Review (II)
B. ACCESS TO INFORMATION
B.1.
Competent authorities should have the power to obtain and provide

information that is the subject of a request under an EOI agreement from any
person within their territorial jurisdiction who is in possession or control of such
information.
B.2.
The rights and safeguards that apply to persons in the requested jurisdiction
should be compatible with effective exchange of information.

The OECD standards
The Elements of Peer Review (III)
C. EXCHANGING INFORMATION
C.1.
EOI mechanisms should provide for effective exchange of information.
C.2.
The jurisdictions network of information exchange mechanisms should cover all

relevant partners.
C.3.
The jurisdictions mechanisms for exchange of information should have

adequate provisions to ensure the confidentiality of information received.
C.4.
The exchange of information mechanisms should respect the rights and

safeguards of taxpayers and third parties.
C.5.
The jurisdiction should provide information under its network of agreements in

a timely manner.

Double Tax Treaties (DTT)
The preamble to most tax treaties usually states that the purpose of the relevant treaty
is the avoidance of double taxation and the prevention of fiscal evasion, Article 26 of
the OECD Model (2010) provides for exchange of information in tax matters between
the contracting states about the investments of a contracting states residents in the
other contracting state. More than 3,600 DTT worldwide are based on this model.
Article 26(1)
1. The competent authorities of the Contracting States shall exchange such information
as is foreseeably relevant for carrying out the provisions of this Convention or to the
administration or enforcement of the domestic laws concerning taxes of every kind and
description imposed on behalf of the Contracting States, or of their political subdivisions
or local authorities, insofar as the taxation thereunder is not contrary to the Convention.
The exchange of information is not restricted by Articles 1 and 2.
The OECD commentary: [t]he standard of foreseeable relevance is intended to provide

for exchange of information in tax matters to the widest possible extent and, at the same
time, to clarify that Contracting States are not at liberty to engage in fishing expeditions
or to request information that is unlikely to be relevant to the tax affairs of a given
taxpayer

Article 26(2)
2. Any information received under paragraph 1 by a Contracting State shall be treated as

secret in the same manner as information obtained under the domestic laws of that State
and shall be disclosed only to persons or authorities (including courts and administrative
bodies) concerned with the assessment or collection of, the enforcement or prosecution in
respect of, the determination of appeals in relation to the taxes referred to in paragraph
1, or the oversight of the above. Such persons or authorities shall use the information only
for such purposes. They may disclose the information in public court proceedings or in
judicial decisions. Notwithstanding the foregoing, information received by a Contracting
State may be used for other purposes when such information may be used for such other
purposes under the laws of both States and the competent authority of the supplying
State authorises such use.

Article 26(3)
3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on

a Contracting State the obligation:
a. to carry out administrative measures at variance with the laws and administrative
practice of that or of the other Contracting State;
b. to supply information which is not obtainable under the laws or in the normal
course of the administration of that or of the other Contracting State;
c. to supply information which would disclose any trade, business, industrial,
commercial or professional secret or trade process, or information the disclosure
of which would be contrary to public policy (ordre public).

Article 26(4)
4. If information is requested by a Contracting State in accordance with this Article, the

other Contracting State shall use its information gathering measures to obtain the
requested information, even though that other State may not need such information for
its own tax purposes. The obligation contained in the preceding sentence is subject to the
limitations of paragraph 3 but in no case shall such limitations be construed to permit a
Contracting State to decline to supply information solely because it has no domestic
interest in such information.

Article 26(5)
5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting

State to decline to supply information solely because the information is held by a bank,
other financial institution, nominee or person acting in an agency or a fiduciary capacity
or because it relates to ownership interests in a person.

Article 27(1)
1. The Contracting States shall lend assistance to each other in the collection of revenue
claims. This assistance is not restricted by Articles 1 and 2. The competent authorities of
the Contracting States may by mutual agreement settle the mode of application of this
Article.
Note
Article 27 was incorporated in the OECD model in 2003.
Except for a few countries (e.g. Mauritius, Uruguay and Colombia) which include this
article in most of their DTTs, the general tendency is either not to include Article 27, or
to include it very rarely.
Moreover, even if a similar provision is inserted, it does not normally follow the model
of Article 27 OECD MTC.

The main reasons (I)
1. The preference in the collection of taxes is given to multilateral cooperation:

The OECD Mutual Assistance Convention (most commonly used source).
EU countries: Directive 2010/24/EU (EU Member States assist each other in the
recovery of tax).
The Nordic countries (Denmark, Finland, Iceland, Norway and Sweden): the Nordic
Convention on Mutual Assistance in Tax Matters (diverges from the OECD standards
in some respects).
The Benelux Mutual Assistance Treaty (cooperation in the collection of tax claims
between Belgium, the Netherlands and Luxembourg).
The South African Development Community (SADC) Multilateral Agreement on
Assistance in Tax Matters (contains an equivalent of Article 27 OECD MTC).

The main reasons (II)
2. The difficulties of implementation of the necessary rules:

Article 27 sets high demands on tax administration and causes problems of
implementation for some countries (e.g. Serbia, Portugal).
The similarity of legal systems is important: countries are likely to include Article 27
in the treaties where their counterpart has a comparable legal system.
3. For some countries this is a matter of policy choice
The US: according to the revenue rule (customary international law), a country
will generally not enforce the collection of another countrys tax, or permit
collection activity of the other sovereign upon its territory, unless otherwise agreed
by the two sovereign states. This rule was called into question in a recent decision
rendered by the US Supreme Court, where the Court upheld the conviction of two
men under a US criminal statute for attempting to defraud Canada of alcohol taxes.
*Note: find more in IFA Cahiers 2013 - Volume 98B:
Exchange of information and cross-border cooperation
between tax authorities (Xavier Oberson).

Article 27 Commentary (I)
Assistance under Art 27 not restricted by Arts 1 and 2.

Assistance provided as regards a revenue claim owed to a Contracting State by any
person, whether or not a resident of a Contracting State (Para 4); BUT States may limit
assistance to taxes owed by residents of either Contracting State.
The competent authorities of the Contracting State may, by mutual agreement, decide
the details of the practical application of the provisions of the Article (para 6), e.g.
documentation accompanying the request, costs, time limitations, how amount
collected is to be remitted (Paras 7-9).

Article 27 Commentary (II)
Revenue claim under Art 27(2) applies to any amount owed in respect of taxes that are
imposed on behalf of the Contracting States, but only insofar as imposition of such
taxes is not contrary to Convention or other instrument in force between Contracting
States (Para 10).
Also applies to interest, administrative penalties and costs of collection or conservancy
that are related to such an amount
States may limit application of this paragraph to taxes covered by the Convention (Para
12).

Article 27 Commentary (III)
Revenue claim has to be enforceable under law of requesting State and be owed by a
person who, at that time, cannot under the law of that State prevent its collection
(Para 15).
What about pending appeals?
Need to check if under domestic law the requested State is allowed to collect its
own revenue claims when appeals are still pending.
States may allow collection even if under their domestic laws could not have done
so alternative wording in para 16.
Revenue request may concern a tax that does not exist in the requested State (Para
18).

Article 27 Commentary (IV)
Art 27(4) should only be included in Conventions between States that are able to make
measures of conservancy under their own laws.
Re Art 27(5), as long as the revenue claim can be enforced/collected, or give rise to
measures of conservancy in the requesting State, there can be no objection based on
the time-limits of the requested State (Para 22).
States may agree to the contrary, or that after certain period of time the obligation
to assist in the collection of the revenue claim no longer exists (Paras 23-24).
Priority rules of requested or requesting States are inapplicable (Para 25).

Article 27 Commentary (V)
Re Art 27(6): the purpose of this rule is to prevent administrative or judicial bodies of
the requested State from being asked to decide matters which concern whether an
amount, or part thereof, is owed under the internal law of the other State (Para 28).
If circumstances for making claim change, requested State must be promptly notified
(see Art 27(7) and para 29).
Exceptions to the duty to assist: Art 27(8).

Tax Information Exchange Agreements (TIEA)
The OECDs Global Forum TIEAs
In 1998, the OECD Report pointed out that international harmful tax practices are encouraged by
the lack of effective exchange of information; in response, the OECDs Global Forum developed a
Model Agreement on Exchange of Information on Tax Matters (2002). Since then, this model has
been used as a basis for negotiating TIEAs.
Why do we need TIEAs?

Provide a forum to exchange information even if a tax treaty is not in place (as most tax havens do
not levy income taxes, they often do not sign tax treaties).
Could be advantageous for some developing countries that wish to be aligned with the standards
of exchange of information without necessarily signing a tax treaty that would bind them to
restrictive bilateral treaty provisions (e.g. the provisions that require source countries to levy
reduced withholding taxes on dividends, interest and royalties) or if the treaty is abused by third
country residents through treaty shopping schemes.
Note: while a DTT usually requires a formal ratification process, which typically (but not always)
includes acceptance by Parliament and, in the case of Switzerland, a facultative referendum, TIEAs
are negotiated at the level of the administration and do not provide, in most cases, for formal
parliamentary acceptance.
The OECD TIEA Model & Article 26 of the OECD Model (2010): similar, but different

Multilateral Convention on Mutual Administrative
Assistance in Tax Matters
Although the bilateral approach is preferred, the Mutual Assistance Convention over
the last few years has considerably strengthened its position:
It was developed by the Council of Europe and the OECD and opened for signature by the
member states of both organisations on 25 January 1988. BUT, no widespread implementation
(e.g. the UK did not sign until 2007).
In 2008, the OECD, the G20 and the Global Forum agreed to turn the Convention into a global
legal instrument for transnational tax administrative cooperation.
In April 2009, the G20 called for action to make it easier for developing countries to secure the
benefits of the new co-operative tax environment that entailed a multilateral approach for the
exchange of information.
In 2010, the Convention was amended by a Protocol to align it to the international standards
on information exchange for tax purposes (new rules to remove obstacles to effective
cooperation and exchange of information and to tackle bank secrecy, narrows grounds
countries may invoke for refusing an information request from another signatory, requesting
State can provide less information in making request for information easier to prosecute tax
crimes); and it was openned to all countries outside the Council of Europe or OECD.
This amended version entered into force on 1 June 2011.
By March 2014, more than 60 countries have become signatories to the Convention.

Multilateral Convention on Mutual Administrative
Assistance in Tax Matters
The Convention largely overlaps with the OECD Model and the OECD TIEA Model:
Article 4(1) of the Convention provides for the exchange of information that is foreseeably
relevant for the administration or enforcement of the parties domestic laws concerning the
taxes covered by the Convention.
Article 4(3) deals with notification procedures and provides that a party may, according to its
internal legislation, inform its residents or nationals before transmitting information
concerning him.
The Convention provides for different forms of exchanging of information:
exchange of information on request (article 5),
automatic exchange of information (article 6),
spontaneous exchange of information (article 7), simultaneous tax examinations (article 8)
and
tax examinations abroad (article 9).
The Mutual Assistance Convention allows signatory states to extend their treaty networks
related to exchange of information not only to new contracting partners but also to other
taxes, in accordance with the latest criteria established by the OECD.

Note also other examples of international or regional instruments for multilateral
cooperation.
One of the most developed examples is the European Union: it has been designed
through the EU directives:
Legal obligations for information exchange within the European Union date back to
1970s, when the European Council adopted Directive 77/799 concerning mutual
assistance and information exchange and Directive 76/308 on mutual assistance in
recovery of tax claims.
These directives were replaced by Directive 2010/24 and Directive 2011/16 to
reflect the currently applicable internationally agreed standards.

Administrative Cooperation Directive: Council Directive 2011/16/EU of 15 February 2011 on
administrative cooperation in the field of taxation.
Mutual assistance between the Member States in the tax field has been possible since the 1970s
on the basis of Council Directive 77/79/EEC. This Directive complemented the existing provisions
on mutual assistance in DTT between the Member States.
Council Directive 77/799/EC was amended by Council Directive 2004/56/EC in 2004:
(a) Reinforced the exchange of information by introducing the principle of equivalence (the
requested State was required to gather the requested information as if it needed it for itself or
for domestic authority); (b) added two new provisions: (i) notification of documents to the
taxpayer and (ii) simultaneous controls in different Member States; (c) relaxed the limitation
on the use of the information.
The ECOFIN Council of 15th February 2011 formally adopted a new version, which repealed the
previous act. The new Directive entered into force on 1 January 2013 (with the exception of the
provisions relating to automatic exchange of information which will enter into force on 1 January
2015).

The main reasons for changes were as follows:
Even after the 2004 amendments, the Directive was slow/inefficient.

In certain aspects it did not meet the OECD standard (Art 26 OECD Model Tax Convention
following the 2005 amendments).
The EU Directive did not cover all national taxes.
Automatic exchange was left to bilateral negotiations (the common system of automatic
exchange was limited to the Saving Interest Directive).
Council Directive 2011/16/EU referred to the deep weaknesses of the old directive.
Note also the CJEU case law concerning the effectiveness of fiscal supervision:
The Court forced Member States to actually use their mutual assistance instruments.
See, inter alia, Persche (Case C-318/07).

Persche (Case C-318/07)
Tax incentives for donations
Germany
Mr Persche
Charity
Portugal
Donation of everyday
consumer goods
Charity (Centro
Popular de Lagoa)

Persche (Case C-318/07)
The balancing exercise that the Court gets involved in to balance the free movement and the need
to ensure the effectiveness of fiscal supervision:
The burden of proof is carried by a taxpayer with the Court giving limited guidance on the scope
of relevant supporting evidence that can be requested by tax authorities.
The Court did not adopt the wording proposed by AG Mengozzi in Persche:
That tax authorities cannot refuse to allow the taxpayer the tax deduction without first having taken into
account the difficulties encountered by that taxpayer in collecting the evidence requested in spite of all
the efforts he has already made, and without examining, in the light of those difficulties, whether it is
actually possible to obtain that evidence with the assistance of the competent authorities of another
Member State within the framework of Directive 77/799 or, where appropriate, in the context of the
application of a bilateral tax convention.
The possibility to rely upon the Mutual Assistance Directive should be considered as a right of
tax authorities that is exercised were deemed appropriate.
Supported by the presumption of incompatibility.
Third countries additional constrains.

The 2008 crisis provided the momentum to bringing EU cooperation up to the OECD standard:
Exchange of tax information relevant for the administration and enforcement of all taxes.
Domestic availability of reliable information and of the competence to obtain it.
Refusal may not be based on the bank secrecy and lack-of-own-interest.
No fishing expeditions: requests must be specific.
Respect for the rights of the taxpayer.
Confidentiality of the information obtained.
The new Council Directive 2011/16/EU:

Member States can no longer refuse to supply information solely because this information is
held by a bank or other type of financial institution.
Provides for the exchange of information that is of foreseeable relevance to the
administration and the enforcement of Member States' tax laws. This clause has a wide
interpretation, but excludes fishing expeditions.
The scope of the Directive covers taxes of any kind (except of VAT, customs duties, excise duties
and compulsory social contributions already covered by other EU legislation).
The exchanges can relate to natural and legal persons, to associations of persons and any other
legal arrangement (Art 3(11) defines person very broadly).

The Council Directive 2011/16/EU introduces automatic exchange of information from 1 January
2015 on 5 categories of income and capital based on available information:
Income from employment, director's fees, life insurance products not covered by other
Directives, pensions, ownership of and income from immovable property.
Following a Commission report to be submitted before 1 July 2017 and on the basis of a new
proposal by the Commission, this list might be extended to dividends, capital gains and
royalties.
On 6 December 2012 the European Commission adopted a Regulation laying down detailed rules
for implementing Council Directive 2011/16/EU. It includes various provisions on the standard
forms and means of communication that Member States will use when exchanging information.
In June 2013 the Commission proposed extending the automatic exchange of information between
EU tax administrations, as part of the intensified fight against tax evasion (COM/2013/348).

The Directive ensures that the existing mechanisms for exchange of information are improved:
Deadlines are introduced to accelerate procedures both for the exchange of information on
request (reply within 6 months following receipt of request) and for spontaneous exchange of
information (transmission of information no later than 1 month after it becomes available).
If the old directive only called for designation of a competent authority, the new version
required a single central liaison office.
The Directive introduces a mechanism to encourage feedback by the Member States that have
received the information: such feedback should be given, at the latest, 3 months after the
outcome of the use of the information is known.
The Directive provides for other means of administrative cooperation including being present
in the offices where the administrative authorities of the requested Member State carry out
their duties, being present in administrative enquiries of the requested Member State,
simultaneous controls, requests for notification and sharing of best practices, etc.
The Directive provides for the introduction of standard forms for exchange of information on
request and spontaneous exchanges, computerised formats for the automatic exchange of
information and channels for exchanging information.

The Directive provides for common minimum rules. Consequently, Member State may bilaterally
agree to cooperate on a wider scale.
The Directive contains a most favoured nation clause:
If a Member State provides wider cooperation to a third country than that provided for under
the directive it may not refuse such wider cooperation to another Member State that requests it
on its own behalf (this clauses does not apply within the EU).
Retrospective effect: it is immaterial whether the information requested and exchanged relates to a
(tax) year which predates the implementation date of the Directive, see Joint Cases C-361/02 and C362/02 Tsalpalos and Diamantakis. The only exception (Art 18(3)) allows Member States to refuse
cooperation as regards bank secrecy information on tax years before 2011.
The Directive includes a number of provisions that allow future extension, e.g:
The gradual extension of mandatory automatic exchange of information (Art 8).
The possibility for wider bilateral arrangements (Arts 1(3) and 8(8)).
The sharing of best practices and experience with a view of producing guidance (Art 15).
Evaluation and yearly effectiveness reports (evaluation every 5 years).
The adoption of implementation measures (e.g. standard forms). The Directive establishes a
regulatory committee, which will be competent for implementing the technical aspects of the
directive (comitology procedure Commission proposal may be adopted by qualified majority
in a committee; this is very light voting requirement).

Types of information exchanged
Mandatory exchange upon request: means the exchange of information based on a request made
by a Member State in a specific case Arts 5-7.
Mandatory automatic exchange: means the systematic communication of predefined information
to another Member State, without prior request, at pre-established regular intervals Art 8 (in the
context of Article 8, available information refers to information in the tax files of the Member State
communicating the information, which is retrievable in accordance with the procedures for
gathering and processing information in that Member State).
Spontaneous exchange: means the non-systematic communication, at any moment and without
prior request, of information to another Member State Art 9.
Simultaneous controls
Where two or more Member States agree to conduct simultaneous controls, in their own territory,
of one or more persons of common or complementary interest to them, with a view to exchanging
the information thus obtained Art 12.

Disclosure
Information obtained under the new Directive must be covered by the obligation of official secret
and must enjoy the same protection in the receiving State as similar information received under
domestic legislation (Art 16 (1)).
Usage
Under the old directive, the use of the information was limited: the information obtained may only
be disclosed in relation to persons directly involved in the assessment of taxes covered and to
persons directly involved in judicial or administrative proceedings involving sanctions that have
been undertaken with a view to the making or reviewing of a tax assessment. These provisions were
expanded by the 2003 amendments, and even further in the most recent version.
Arts 16(1)-(5) and 24 provide that the information obtained may be used for:
The assessment and enforcement of the domestic laws on taxes (e.g. imposition of penalties)
and of other taxes and duties covered by the recovery Assistance Directive (therefore, VAT,
excise duties and customs duties are covered even if it follows under other instruments of
exchange), and compulsory social security contributions (even if that purpose is outside the
Directive).
Judicial and administrative proceedings which may invoke penalties and which were initiated
because of tax law infringements, provided that the rights of defendants and witnesses are
respected.

Arts 16(1)-(5) and 24 provide that the information obtained may be used for:
(with the consent of the supplying State): any other purpose for which the use of the
information is legally permitted in the receiving Member State. If a similar use is possible on its
territory, the Member State may not refuse such request.
(with notification, which may be opposed): forwarding to a third Member State, if this accords
to the rules and procedures of the Directive.
(with the consent of the supplying Member State and given that the non-Member State has
given an undertaking to cooperate in tax avoidance and fraud): forwarding to a non-Member
State.
Grounds for refusal
Most importantly no banking secrecy requirement Art 8(1); neither can a Member State refuse
to cooperate on the ground of no domestic interest in the information asked for Art 18(1).
Art 17 contains 5 narrowly defined limitations, which largely correspond with those set by Art 26(2)
OECD Model Tax Convention: (a) non-exhaustion of appropriate domestic measures (Art 17(1)); (b)
lack of domestic legal basis (Art 17(2)), but bank secrecy is not recognised (Art 18(2)); (c) lack of
reciprocity (Art 17(3)); (d) protection of commercial secrets (Art 17(4)), and (e) going against public
policy.
More generally, the information requested lies outside the scope of the Directive.

What are the relationship between various rules?
At the level of EU Member States there will be multiple layers of rules regarding cross-border
cooperation in tax matters: domestic laws, double tax treaties, the Convention on Mutual
Administrative Assistance in Tax Matters, the EU Administrative Cooperation and Recovery
Assistance Directives.
Between EU Member States horizontally:
Article 27(2) of the Convention on Mutual Administrative Assistance in Tax Matters Member
States should apply the common rules in forced in the EU and the Convention were it allows a
wider co-operation; a limited scope is left after 1 January 2013.
The EU Directives take priority over domestic laws and DTT; to be applied unless any other
instrument provides more effective instrument.
Between a Member State and the taxpayer:
May an individual rely upon directly effective provisions of EU law were they protect him better
than domestic law? See C-276/12 Sabou.

Case C-276/12 Sabou [2013] ECR I-0000
Concerns the interpretation of the Mutual Assistance Directive (77/799/EEC, as amended by Council Directive
2006/98/EC).
A Czech football player, Mr. Sabou, claimed to have incurred expenses in several Member States. The Czech tax
authorities sent requests to these States on the basis of the Mutual Assistance Directive in order to verify his
expenses. The tax authorities issued a tax assessment which was challenged by Mr. Sabou claiming that they had
obtained the information illegally because Mr. Sabou was not informed about the request for assistance and did not
take part in the examination of witnesses.
The questions referred to the CJEU: (i) the taxpayers right to be informed about an information request to another
Member State; (ii) the taxpayers right to take part in the examination of witnesses; and (iii) the taxpayers right to
challenge the correctness of the information provided by other Member States.
The CJEU ruled that the Directive imposes certain obligations on Member States; but it does not confer specific rights
on taxpayers. The Directive and the fundamental right to be heard (EU Charter on Fundamental Rights) must be
interpreted as not conferring on a taxpayer of a Member State either the right to be informed of a request for
assistance from that Member State addressed to another Member State, in particular in order to verify the
information provided by that taxpayer in his income tax return, or the right to take part in formulating the request
addressed to the requested Member State, or the right to take part in examinations of witnesses organised by the
requested Member State.
The Directive does not govern the question of the circumstances in which the taxpayer may challenge the accuracy of
the information conveyed by the requested Member State, and it does not impose any particular obligation with
regard to the content of the information conveyed. Accordingly, the taxpayer may challenge the information
transported to the tax authorities of the requesting Member State under the rules and procedures envisaged by
domestic laws.

Mutual assistance in recovery of taxes, customs and certain fees was established in the Community
in the 1970s, when Directive 76/308/EC was adopted.
When the claims are not settled promptly by the debtor, tax authorities may recover the claim. At
the limit, the claim can be recovered through the seizure and sale of the debtor's property
("enforcement"). However, debtors (or recoverable assets belonging to the debtors) may be within
the jurisdiction of another Member State. This makes recovery assistance between tax authorities of
different States essential to help protect the financial interests of EU Member States.
Limited initial scope and further developments:
Initially, it provided assistance in the recovery of agricultural subsidies, levies and custom
duties.
It was extended to VAT by Directive 79/1071/EC, to excise duties by Directive 92/108/EC, and to
taxes on income, capital and insurance premiums by Directive 2001/44/EC.
In 2002, the detailed implementation rules were laid in Council Directive 2002/94/EC
(electronic communication system, deadlines for responses, administrative procedures,
reimbursement arrangements, etc).
In 2008, the Directive was recast (codified version 2008/55/EC).
BUT: mutual assistance in the field of recovery of claims was still ineffective only 5% of
requests for recovery actually were recovered.

The procedure was modernised by Council Directive 2010/24/EU (previous directive was repealed)
implemented by 31 December 2011.
In 2011, the Commission adopted a new implementing Regulation No 1189/2011 from 18
November 2011 for the application a new directive, providing, inter alia, detailed rules for various
assistance requests, a uniform enforcement instrument and a uniform notification form.
Council Directive 2010/24/EU:
Extends the scope of the recovery assistance to all taxes and duties levied by Member States
and by their territorial or administrative subdivisions (Art 2).
Introduces a single European enforcement instrument, which permits enforcement in another
Member State and is the sole basis for recovery measures taken in the requested Member State
(available in all languages) (Art 12).
Reinforcement of possibility to take precautionary measures in another MS (e.g. omitting some
of the procedures Arts 16 and 17).
Facilities recovery in practice by introducing spontaneous exchange of information (Art 6).
Introduces a standard form for notification of documents (Art 8) and relaxes language
requirements (Art 22(2)).
National officials to have competence to be present during enquiries and proceedings in
territory of other Member States (Art 7).

Council Directive 2010/24/EU:
Conditions for requesting assistance less strict, but a de minimis rule is introduced the claim
may be declined if the amount at stake in below 1500 Euro (Art 18(3)).
Provides a legal basis for direct notification, by registered mail or electronically, of documents to
persons in other Member States (Art 9(2)).
Like the Administrative Assistance Directive, it provides new rules for more effective
organisation, e.g.:
Facilitates direct contact between competent officials of different Member States (Art 4).
Creates electronic forms (Art 21).
Widens the permissible use of information that can be obtained (Art. 23).
Prohibits banking secrecy to be used as grounds for refusal to assist (Art 5(3)).
The provisions of both directives have been aligned were they address similar issues, e.g.
Common definitions (person).

Limitations on the obligation to assist.
Admission of foreign officials.
Organisation of the exchange of information.
Service of documents.
Standard forms .
Confidentiality issues.
Comitology procedure.

Which claims are covered?
Art 2(1): (a) all taxes and duties of any kind levied by or on behalf of a Member State or its
territorial or administrative subdivisions, including the local authorities, or on behalf of the Union;
(b) EU agricultural refunds, interventions and other measures alike; (c) levies and other duties
provided for under the common organisation of the market for the sugar sector.
Art 2(2): (a) administrative penalties, fees, surcharges; (b) fees for certificates and similar
documents issued in connection with admin procedures; and (c) interest and costs relating to
claims.
Art 2(3): like the Administrative Cooperation Directive, it DOES NOT cover compulsory social
security contributions, dues of a contractual nature such as consideration for public utilities,
criminal penalties imposed on the basis of public prosecution.
4 Types of Recovery Assistance:
i.
ii.
iii.
iv.
Exchange of information.
Notification of documents.
Recovery upon request.
Precautionary measures.

i. Exchange of information
Mandatory exchange upon request (Art 5):

The requested authority shall provide any information which would be foreseeably relevant to
the applicant authority in the recovery of its claim: Art 5(1).
Requested authority is not obliged to supply information:
If it could not have done so for similar domestic claims (Art 5(2)(a)); but, no exception for
information held by bank: Art 5(3).
If information would disclose any commercial, industrial or professional secrets or
disclosure would prejudice the security of MS or contrary to public policy of MS: Art
5(2)(b).
If the disclosure would jeopardize security or public policy (Art 5(c)).
The claim is older than 5 years (Art 18(2)).
The amount is below 1500 Euro (Art 18(3)).
Spontaneous exchange of information on (upcoming) refunds of tax other than VAT (Art 6).
Presence of officials of applicant authority may be authorised to participate in administrative
enquiries and during the court proceedings by agreement (Art 7).

ii. Notification of documents
Dealt with in Part III (Arts 8-9):

Request for notification of certain documents relating to claims (standard requirements) - Art 8
(also see Art 21 on standard forms and means of communication and Art 22 on use of
languages).
Notification according to national laws and regulations and administrative practices in force in
the requested Member State: Art 9.
Requested authority is not obliged to notify documents of the requesting State if:
The requesting State has not used its own notification possibilities, e.g. electronic
notification or registered mail (Art 9(2)), or
If that would be disproportionately difficult (Art 8(2)).
The claim is older than 5 years (Art 18(2)).
The amount is below 1500 Euro (Art 18(3)).

iii. Recovery upon request
Dealt with in Part IV (includes recovery or precautionary measures):

At the request of the applicant authority, the requested authority shall recover claims which
are the subject of an instrument permitting enforcement in the applicant Member (Arts 10-15);
automatically treated as an instrument permitting enforcement in the requested MS (national
treatment).
iv. Precautionary
At the request of the applicant authority, the requested authority shall take precautionary
measures (if allowed by its national law and in accordance with its administrative practices), to
ensure recovery
where a claim or the instrument permitting enforcement in the applicant Member State is
contested at the time when the request is made, or
where the claim is not yet the subject of an instrument permitting enforcement in the
applicant Member State
in so far as precautionary measures are also possible, in a similar situation, under the national law
and administrative practices of the applicant Member State: Art 16.

The requested State is not obliged to grant a request for recovery or to take precautionary measures
if:
No obligation to provide for recovery of claim if, because of the situation of the debtor, it would
create serious economic or social difficulties in requested MS: Art 18(1).
No obligation to provide assistance for claims of more than 5 years from due date of claim to
date of initial request: Art 18(2).
Minimum amount of the claim 1500 Euros: Art 18(3).
The member State considering a request for recovery assistance may not make a request if the claim
or the instrument permitting its enforcement is still contested in its jurisdiction by the debtor (Art
11(1), unless the laws of both States nevertheless allow enforcement, and the requesting State pays
all damages and refunds if the debtor wins the contestation Art 14(4)).
Before making request, appropriate recovery procedures available in the applicant MS should be
applied, except where it is obvious there are no assets for recovery there or where recourse to such
procedures would give rise to disproportionate difficulty: Art 11(2).

A claim for request of information shall be treated as if it was claim of requested MS (national
treatment), even if it does not levy the same or similar tax/duty: Art 13(1).
If requested MS has similar claim, not obliged to give preference to applicant MSs claim.
Requested authority keeps applicant authority informed: Art 13(2).
Interest for late payment charged by requested MS from date on which recovery request
received: Art 13(3).
Also see Art 23: information communicated covered by obligation of official secrecy.

Cost of recovery
The requested authority shall remit to the applicant authority the amounts recovered with respect
to the claim and the interest (Art 13(5)). The requested authority shall seek to recover from the
person concerned and retain the costs linked to the recovery that it incurred, in accordance with the
laws and regulations of the requested Member State (Art 20(1)).
Member States shall renounce all claims on each other for the reimbursement of costs arising from
any mutual assistance. However, where recovery creates a specific problem, concerns a very large
amount in costs or relates to organised crime, the applicant and requested authorities may agree
reimbursement arrangements specific to the cases in question (Art 20(2)).
The applicant Member State shall remain liable to the requested Member State for any costs and
any losses incurred as a result of actions held to be unfounded, as far as either the substance of the
claim or the validity of the instrument permitting enforcement and/or precautionary measures
issued by the applicant authority are concerned (Art 20(3)).

Regional instruments for information exchange (other)
The Nordic countries alliance: a multilateral treaty for the avoidance of double
taxation and another on mutual assistance; in addition, these countries cooperate in
the negotiation of TIEAs with third states.
The Joint International Tax Shelter Information Centre (JITSIC), which currently has 7
formal members: Australia, Canada, Japan, the UK, the USA, the Republic of Korea
(South Korea) and China, as well as 2 observer members, France and Germany:
JITSIC was established in 2004.
Differs from that of the Nordic countries: no multilateral treaties on exchange of information
but are linked by bilateral agreements.
Aims at tackling abusive tax schemes: to improve members capacity to deal with risks posed by
tax havens, to share research and information on schemes encountered and strategies adopted,
and to conduct joint training sessions.
But also:
The Study Group on Asian Tax Administration and Research (SGATAR).
The Southern African Development Community (SADC).
The African Tax Administration Forum (ATAF).

US FATCA (I)
The Foreign Account Tax Compliance Act (FATCA) deals with the tax reporting of
assets held in foreign bank accounts, became law in March 2010 (unilateral basis).
FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts. The IRS on
the motivation: to prevent the abuse of the US voluntary tax compliance system and
address the use of offshore accounts to facilitate tax evasion.
The objective of FATCA is the reporting of foreign financial assets; withholding is the
cost of not reporting. FATCA focuses on reporting:
By U.S. taxpayers about certain foreign financial accounts and offshore assets;
By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign
entities in which U.S. taxpayers hold a substantial ownership interest.
Encountered strong criticisism for violating national sovereignty and bank secrecy laws;
placing administrative burdens on foreign financial institutions, which will need to
make significant process and technology changes to comply with FATCA or they could
face significant consequences for failure to enter into a FATCA agreement with the IRS.

US FATCA (II)
Individuals:
U.S. individual taxpayers must report information about certain foreign financial accounts and
offshore assets on Form 8938 and attach it to their income tax return, if the total asset value
exceeds the appropriate reporting threshold.
Financial Institutions:
Foreign. To avoid being withheld upon, a foreign financial institution may register with the IRS,
obtain a Global Intermediary Identification Number (GIIN) and report certain information on
U.S. accounts to the IRS.
U.S. U.S. financial institutions and other U.S withholding agents must both withhold 30% on
certain payments to foreign entities that do not document their FATCA status and report
information about certain non-financial foreign entities.
Governments:
If a jurisdiction enters into an Intergovernmental Agreement (IGA) to implement FATCA, the
reporting and other compliance burdens on the financial institutions in the jurisdiction may be
simplified. Such financial institutions will not be subject to withholding under FATCA.
*Find more at IRS

US FATCA (III)
The UK government (along with France, Germany, Italy, and Spain) and with the
support of the European Commission took part in joint discussions with the US
government to explore an intergovernmental approach to FATCA. Result: a model
intergovernmental agreement (IGA, July 2012).
The UK and the US subsequently signed an IGA: the 'UK-US Agreement to Improve
International Tax Compliance and to Implement FATCA, in September 2012 (subsequently
amended in 2013).
The IGA reduces the administrative burden of complying with the US regulations, and provides
a mechanism for UK financial institutions to comply with their obligations without breaching
the data protection laws. Under the IGA, financial institutions pass information to HM Revenue
& Customs (HMRC) who will then automatically exchange this information with the IRS.
On 12 July 2013 the US announced a delay of 6 months before the commencement of FATCA.
The effect of this delay is that there will be no reporting with regard to 2013, and all current
deadlines for undertaking due diligence etc will be pushed back by 6 months.
*Find more at HM Revenue & Customs

Swiss Rubik Agreements
Switzerland, while adopting the standard of article 26 OECD MTC, has also developed
bilateral agreements pertaining to the cooperation in the tax area (withholding tax
agreements, known as Rubik agreements).
Aim to find a solution for the past and a solution for the future.
The basic idea is to require the Swiss paying agent to levy the taxes due, in the form of
a final withholding tax, in accordance with the rules of the contracting state, while
preserving the confidentiality of the relevant resident taxpayer.
Such agreements are in force, as of 1 January 2013, with the UK and Austria. Germany
signed such an agreement on 21 September 2011 but in the end Parliament voted
against its ratification.
Offer a different approach to international cooperation in tax matters by using other
alternative measures to international cooperation instead of prioritizing exchange of
information.
*Find more on the UK-Swiss Agreement

Practice, tendencies & challenges
Practice the number of requests
The number of requests has increased remarkably in the last years.

It varies widely from Colombia, which has not received any so far, to Russia, which
received more than 5,000 requests from foreign tax authorities in 2003.
Generally, countries receive a larger number of requests than they send abroad.
It is also important to underline that exchange of information for VAT purposes is
generally more significant than exchange on direct taxes.

Practice time to provide the requested information
The necessary amount of time to provide the information requested depends

mostly on the availability of that particular information.
If the data are already available the exchange is relatively swift, i.e. varying from
two to six months.
If the information has to be obtained by other institutions or from the taxpayer
itself, depending on the complexity of the request, the required amount of time
fluctuates between six to twelve months.
In some rare cases, due to the particularities of the request, the preparation of the
solicited data may take more than a year.

Practice the intensity of cooperation
Major trading partners, neighbouring countries and members of the same

organisations such as the EU, Nordic countries and JITSIC.
Other political and economic connections, e.g. large numbers of migrated citizens,
a large amount of investment, a large amount of cross-border activity and high
number of citizens living in that particular country.
Common language. In fact, most countries exchange information more frequently
with other countries using the same language.

Tendencies
1.
2.
3.
4.
5.
The legal basis for international exchanges of information remains by far provided through
bilateral conventions. The trend is to either modify existing DTTs or to adopt new ones based on
article 26 OECD MTC or the UN MTC.
After rather a slow start, the number of TIEAs (2002), particularly between developed countries
and tax havens, has grown rapidly after the G20 summit of 2009 more than 700 TIEAs signed as
of today.
There also appears to be a shift toward the use of multilateral conventions, such as the OECD
Multilateral Mutual Assistance Convention of 1988, especially after its new protocol of 2010. This
is of course also true within some groups of countries, notably EU Member States, based on
either the Savings Directives, or the Exchange of Information Directives and the various legal
materials in the field of indirect taxes.
Another trend is the development, sometimes on an informal basis, of political fora such as the
G20, on the one hand, and the Global Forum on Transparency and Tax Information Exchange, on
the other hand (in the same vein, we see the more frequent use of transnational networks such
as the JITSIC and SGATAR). These fora play an important role in fostering the developments.
The most common form remains as of today information upon request (as provided for in article
26 of the OECD MTC and most TIEAs). However, the use of automatic exchange is growing (in
particular, within the EU). Some states also use spontaneous exchange. Some countries
(Switzerland, the US) develop their own approaches.

Challenges
The so-called big bang of 2009 has led to an unprecedented network of DTTs, TIEAs,
multilateral treaties, directives and informal agreements on exchange of information.
Main challenges:
To coordinate all these legal rules;
To ensure that an effective exchange of information takes place, namely that states
can effectively obtain the relevant information domestically; and
Address the issues of
Legitimacy
Sustainability
Accountability
Efficiency
Protection of the taxpayer (time for an international standard of protection
rules for the taxpayer?)
*Find more on the practice, tendencies and challenges in
in IFA Cahiers 2013 - Volume 98B: Exchange of
information and cross-border cooperation between tax
authorities (Xavier Oberson).
I. THE UK PERSPECTIVE
THE UK PERSPECTIVE
Overview
Sources
Extent and forms of the exchange
Limits on the exchange of information
*Find more on the UK perspective in

IFA Cahiers 2013 - Volume 98B: United Kingdom
(Diane Hay and Kay Kimkana)
I. THE RECENT DEVELOPMENTS
RECENT DEVELOPMENTS
The BEPS Action Plan
The BEPS Action Plan recognises on transparency has been made by the Global Forum
on Transparency and Exchange of Information for Tax Purposes, but the need for a more
holistic approach has been revealed when it comes to preventing BEPS, which implies
more transparency on different fronts.
Example: Action 5 (Counter Harmful Tax Practices More Effectively, Taking Into
Account Transparency and Substance)
Revamp the work on harmful tax practices with a priority on improving
transparency, including compulsory spontaneous exchange on rulings related to
preferential regimes, and on requiring substantial activity for any preferential
regime. It will take a holistic approach to evaluate preferential tax regimes in the
BEPS context. It will engage with non-OECD members on the basis of the existing
framework and consider revisions or additions to the existing framework.
RECENT DEVELOPMENTS
Automatic Exchange of Information
At the L20 Labour Summit held in Los Cabos, Mexico, in June 2012, the L20 called on the G20 to
upgrade the standards of the OECD-led Global Forum on Tax Transparency to include automatic
exchange of information between tax authorities and the application of sanctions on jurisdictions
that fail the minimum requirements.
G20 Leaders at their meeting in Russia in September 2013 endorsed the OECD proposal for a global
model of automatic exchange and invited the OECD working with G20 countries to present such a
new single standard for automatic exchange of information in time for the February 2014 meeting
of the G20 Finance Ministers and Central Bank Governors.
13/02/2014: the OECD has unveiled a new single global standard for the automatic exchange of
information between tax authorities worldwide. Under the standard, jurisdictions obtain financial
information from their financial institutions and automatically exchange that information with
other jurisdictions on an annual basis.
More than 40 countries have committed to early adoption of the standard. The Global Forum on
Transparency and Exchange of Information for Tax Purposes has been mandated by the G20 to
monitor and review implementation of the standard.
The OECD is expected to deliver a detailed Commentary on the new standard, as well as technical
solutions to implement the actual information exchanges, during a meeting of G20 finance
ministers in September 2014.
*Find more at OECD
THANK YOU

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EXCHANGE OF INFORMATION AND

COLLABORATION ACROSS BORDERS

THE EXISTING NETWORK OF INTERNATIONAL LEGAL INSTRUMENTS

Overview & historical developments

III. THE RECENT DEVELOPMENTS

The BEPS Action Plan

I. THE EXISTING NETWORK OF

INTERNATIONAL LEGAL INSTRUMENTS

INTERNATIONAL LEGAL INSTRUMENTS

INTERNATIONAL LEGAL INSTRUMENTS

INTERNATIONAL LEGAL INSTRUMENTS

Banking information should be available for all account-holders.

INTERNATIONAL LEGAL INSTRUMENTS

Competent authorities should have the power to obtain and provide

INTERNATIONAL LEGAL INSTRUMENTS

EOI mechanisms should provide for effective exchange of information.

The jurisdictions network of information exchange mechanisms should cover all

The jurisdictions mechanisms for exchange of information should have

The exchange of information mechanisms should respect the rights and

The jurisdiction should provide information under its network of agreements in

INTERNATIONAL LEGAL INSTRUMENTS

The OECD commentary: [t]he standard of foreseeable relevance is intended to provide

INTERNATIONAL LEGAL INSTRUMENTS

2. Any information received under paragraph 1 by a Contracting State shall be treated as

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3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on

INTERNATIONAL LEGAL INSTRUMENTS

4. If information is requested by a Contracting State in accordance with this Article, the

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5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting

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1. The preference in the collection of taxes is given to multilateral cooperation:

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2. The difficulties of implementation of the necessary rules:

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Assistance under Art 27 not restricted by Arts 1 and 2.

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Why do we need TIEAs?

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Even after the 2004 amendments, the Directive was slow/inefficient.

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The new Council Directive 2011/16/EU:

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