The European Commission’s Expert Group on Automatic Exchange of Financial Account Information for Direct Taxation Purposes published a report in March echoing European banks’ concerns about the implementation calendar of the new Directive.
It calls on the Council and Member States to start exchanging information with a transitional period of two years during which financial institutions and tax administrations would dialogue and seek to reach a fully operational system.
The new measures are enshrined in a revised version of the Directive on Administrative Cooperation (Directive 2014/107/EU as regards to mandatory automatic exchange of information in the field of taxation) was adopted last December and will enter into force on 1 January 2016, with the first exchange of information foreseen for 2017.
The initiative is aligned on an OECD model known as the Common Reporting Standard (CRS). It will require banks to systematically provide their tax authorities with information on their non-resident customers and will require tax administrations to exchange this information between each other with a view to ensuring effective taxation in the investors’ country of residence.
The expert group report provides governments with 11 recommendations on the implementation of the Directive. It emphasizes that banks will make significant investments in system upgrades and in adapting internal processes. To do so, they urgently need to know the details of the requirements. Indeed, an 18-month lead-time may be necessary to upgrade systems. Therefore, Member States are urged to adopt legislation and to issue detailed guidance well ahead of the 1 January 2016 deadline in order to ease compliance by financial institutions. In the light of the very tight deadlines and the related challenges, a soft landing period appears to be the only possible way forward.
The report is available on the EU Commission website.
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