2.

1 REVISION OF
ARTICLE 26 AND ITS
COMMENTARY
EOI Seminar Jakarta November 2012
 Article 26 OECD Model Tax
Convention Exchange of Information

Article 26(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 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 2.1 and 2.

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 Article 26 OECD Model Tax Convention
Exchange of Information

Article 26(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 ...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 other purposes under the laws of both States and
the competent authority of the supplying State authorises
such use.

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 Why Update Article 26 and its Commentary?

Regular reviews and updates are required to take

into account recent developments and to reflect
current country practices
2005 update: addition of paragraphs 4 and 5 to clarify
that a request cannot be denied on the basis of domestic
tax interest or bank secrecy
2012 update: released by OECD on 18 July 2012
Consensus of all members, no reservations or observations
http://www.oecd.org/ctp/eoi

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 2012 Update: Highlights

Change to the text of Article 26 (was formerly included as

optional text in paragraph 12.3 of the Commentary)
Article 26(2) was amended to allow information received for tax
purposes to be used for non-tax purposes provided:
Such use is allowed under the laws of both States and
The competent authority of the supplying State authorizes such use
Consistent with treaty policy of a growing number of countries
Supports a whole of government approach and is directly linked
with the OECDs work in connection with the Oslo Dialogue

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 2012 Update: Highlights

Clarifications to the Commentary

Identification of taxpayers
Language describing the application of Article 26 to a
group of taxpayers (para 5.2 and new examples in 8(h) and
8.1(a))
Clarifications on the meaning of foreseeably
relevant and fishing expeditions (paras 5, 5.1, 5.2
and new examples in 8(e)-(h) and 8.1)
Optional language providing for default standard
time limits (paras 10-10.6)

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 Identification of taxpayer

New paragraph 5.1 clarifies a request for

information does not constitute a fishing expedition
solely because it does not provide the name or
address (or both) of the taxpayer under examination
or investigation.
In cases in which the requesting state does not
provide the name or address (or both) of the
taxpayer, it must include other information
sufficient to identify the taxpayer
 2012 Update: Highlights

Clarification to the Commentary, cont.

Clarifying that confidentiality rules also apply to the
Competent Authority letter requesting the information
(para 11)
Clarifying that in the case of a breach of tax
confidentiality by the requesting State the requested
State may suspend assistance (para 11)
Clarifying the applicability of reciprocity in situations
in which a Contracting State applies measures not
normally foreseen in its domestic law or practice (para 15)

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 Group Requests

Standard of foreseeable relevance can be met in respect of a

group of taxpayers that are not individually identified
3 requirements:
Detailed description of the group and the facts and circumstances that led
to the request;
An explanation of the applicable law and why there is reason to believe
that the taxpayers in the group have been non-compliant with that law
supported by a clear factual basis
A showing that the requested information would assist in determining
compliance by the taxpayers in the group
Usually, although not necessarily, a third party will have actively
contributed to the non-compliance of the taxpayers in the group

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 Group Requests - examples

Financial service provider example (paragraph 8(h) of

the Commentary)
Financial product marketed using misleading information regarding
the tax liability in the residence State R
Product requires opening an account in State S
State R has already discovered several resident taxpayer that invested
in the product and all failed to report the income
State R makes a valid request to State S for the names of all residents
of State R that have an account in State S and have invested in the
product

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 Group Requests - examples

Commentary also describes a situation where more

information would be needed to demonstrate
foreseeable relevance (see example in paragraph
8.1(a))
merely describes the provision of financial services to
non-residents and mentions the possibility of non-
compliance by non-resident customers with tax
obligations in the country of residence

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 Foreseeably Relevant and
Fishing Expeditions

Additional guidance is provided in the Commentary

Standard requires at the time the request is made there is a
reasonable possibility that the information will be relevant
Requesting State determines foreseeable relevance of the request
(but explanation must be provided)
Identification of the taxpayer does not always require a name and
address
Group requests can meet the standard of foreseeable relevance
Fishing expedition is a speculative request that has no apparent
nexus to an open inquiry or investigation
New example are provided in paragraphs 8 and 8.1

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 Default Standard Time Limits

Optional language set out in paragraph 10.4 of the

Commentary
Default 2 months/6 months to provide information but
competent authorities may agree to different periods
Exchange still in accordance with Article 26 if the
information is provided after the time limits

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 Confidentiality

Confidentiality is of upmost importance to tax

administrations and taxpayers
Commentary clarifies that
confidentiality rules cover competent authority letters,
including the letter requesting the information
In the case of a breach of confidentiality, the other State
may suspend assistance until proper assurances are
provided

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 Reciprocity

Reciprocity applies in situations in situations in

which a Contracting State applies measures not
normally foreseen in its domestic law or practice.

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