Banking conference at EY: Exchange of information between EU tax authorities at the heart of discussion

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Luxembourg, 27 January 2011

After months of discussion and international pressure, the Member States of the European Union reached an agreement recently on the exchange of information between tax authorities - a crucial issue for the future of the financial industry and some 7,000 direct jobs in Private Banking in Luxembourg.

The exchange of information on request is becoming the benchmark in a globalized economic market.

The request for an exchange of information could be based either on the double tax treaties or on the (proposed) directive on administrative cooperation in the field of taxation, once entered into force.

The (proposed) directive on administrative cooperation in the field of taxation should come into force as from 1 January 2013. This will cover the exchange of information on request (which may relate to 2011), spontaneous exchange of information and, from 2015, automatic exchange of information between Member states.

With respect to the exchange of information on request, the directive contains conditions similar to those of the OECD Model and will in principle prevail over double tax treaties between Member States.

As regards to the automatic exchange of information, the directive adopts a progressive approach.
Initially, from 2015, the agreement is limited to five categories of income. Each Member State provides the information it has at its disposal to the other Member States in at least three of these categories.
By 1 July 2017 the Commission will present a report and, if necessary, a proposal; and the Council will consider the possibility to expand the number of categories from five to eight and may withdraw the availability condition.

The EY banking conference which took place in Munsbach yesterday gathered a panel of banking specialists from EY Luxembourg and Mr Rüdiger Jung, member of the Executive Committee of the ABBL as guest speaker.

  • How tax transparency improvement underpins changes occurring in the global wealth management industry was explained in the introductory comments.
  • The  new requirements on exchange of tax information according to double taxation treaties were explained.
    The Luxembourg law of 31 March 2010 approved five new double tax treaties and 15 protocols to existing double tax treaties. All of them comply with the OECD standard as to the exchange of information, defined in Article 26 of the OECD Model Double Taxation treaty.
    The OECD standard does not imply automatic exchange of information, but on request only. The standard intends to provide for exchange of information in tax matters to the widest possible extent, but, at the same time, to clarify that Contracting States are not at liberty to engage in “fishing expeditions”. Paragraph 5 of Article 26 provides that bank secrecy cannot be an obstacle to exchange of information for tax purposes.
  • The provisions of the Directive on Administrative Cooperation in Tax Matters were then outlined.
  • It highlighted action steps to enable compliance and sustainable business development.

Posted on 7 February 2011