3 months to Doomsday: Offshore assets & Automatic exchange of information

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What is the “automatic exchange of financial information”

In order to increase tax transparency across the globe, the Organisation for Economic Co-operation and Development (OECD) adopted the Common Reporting Standard (CRS) on July 15, 2014. The CRS initiative calls on each participating jurisdiction to obtain information from financial institutions within their country and automatically exchange that information with other jurisdictions on an annual basis. The objective is to increase tax compliance by providing key information to the participating jurisdictions allowing them to identify whether their citizens accurately report their foreign assets and income. However, since the CRS is not constraining, 90 jurisdictions have also signed the Multilateral Competent Authority Agreement (MCAA) on automatic exchange of financial account information. The MCAA provides a mechanism to facilitate the exchange of information in accordance with the CRS. Such information to be disclosed includes the following :

  • The name, address, taxpayer identification number, date and place of birth of each account holder;
  • The account number;
  • The name and identifying number of the financial institution;
  • The account balance or value (including, in the case of a cash value insurance contract or annuity contract, the cash value or surrender value) as of the end of the relevant calendar year or the closure of the account;
  • The total gross amount of interest, dividends and other income generated with respect to the assets held in the account.

When will the exchange of information start : in 3 months for some, 15 for others

By signing the MCAA, the first signatory jurisdictions have pledged to work towards starting the exchanges of information by September 2017, while others are to follow by September 2018. The current list of the signatories of the MCAA includes the following jurisdictions :

Jurisdiction Intended first information exchange by :
September 2017 September 2018
Albania X
Andorra X
Anguilla X
Antigua and Barbuda X
Argentina X
Aruba X
Australia X
Austria X
Barbados X
Belgium X
Belize X
Bermuda X
Brazil X
British Virgin Islands X
Bulgaria X
Canada X
Cayman Islands X
Chile X
China (People’s Republic Of) X
Colombia X
Cook Islands X
Costa Rica X
Croatia X
Curaçao X
Cyprus X
Czech Republic X
Denmark X
Estonia X
Faroe Islands X
Finland X
France X
Germany X
Ghana X
Gibraltar X
Greece X
Greenland X
Grenada X
Guernsey X
Hungary X
Iceland X
India X
Indonesia X
Ireland X
Israel X
Isle of Man X
Italy X
Japan X
Jersey X
Korea X
Kuwait X
Latvia X
Lebanon X
Liechtenstein X
Lithuania X
Luxembourg X
Malaysia X
Malta X
Marshall Islands X
Mauritius X
Mexico X
Monaco X
Montserrat X
Nauru X
Netherlands X
New Zealand X
Niue X
Norway X
Pakistan X
Poland X
Portugal X
Romania X
Russian Federation X
Saint Kitts and Nevis X
Saint Lucia X
Saint Vincent and the Grenadines X
Samoa X
San Marino X
Saudi Arabia X
Seychelles X
Sint Maarten X
Slovak Republic X
Slovenia X
South Africa X
Spain X
Sweden X
Switzerland X
Turkey X
Turks & Caicos Islands X
United Kingdom X
Uruguay X

In addition to these signatories jurisdictions, the following jurisdictions committed to implementing the CRS in 2018, although they have not yet signed the MCAA :

  • Bahamas
  • Bahrain
  • Brunei Darussalam
  • Dominica
  • Macao (China)
  • Panama
  • Qatar
  • Singapore
  • Trinidad and Tobago
  • United Arab Emirates
  • Vanuatu

The implementation of the CRS is progressing rapidly : on May 5th, 2017, the OECD reported that over 1800 bilateral exchange relationships are currently in place between jurisdictions for the automatic exchange. As of now, 46 jurisdictions have already activated their exchange relationships with Canada as the receiving jurisdiction of the information on financial accounts.As of today, a total of 101 jurisdictions across the world have pledged to exchange financial information by the end of 2018.

 

Voluntary disclosure still available, but limited relief offered…

Consequently, in 3 months, the Canada Revenue Agency (CRA) will begin receiving substantial data on foreign accounts held by Canadians. This will most likely results in a dramatic increase of CRA audits targeting offshore assets. Canadians who have failed to report foreign accounts and income may want to amend their returns now under the Voluntary Disclosures Program to avoid accrued interests, civil penalties and criminal prosecution before it is too late. A disclosure will not be considered valid if the CRA determines it was ‘’not voluntary’’, which means that the taxpayer was aware of an audit conducted by the CRA or an enforcement action relating to the disclosure being initiated by the tax authorities. Therefore, the threat of CRA discovering hidden offshore accounts and assets results in a race against time to reveal non-compliance before it is too late. Furthermore, on May 29, 2017, the CRA announced that a revised Voluntary Disclosures Program policy will be introduced shortly, which will tighten the criteria for acceptance into the program and reduce the relief provided. Considering the upcoming changes to the program and the inevitable end of financial secrecy, taxpayers are pressured to disclose sooner than later. Click here for more information about the upcoming changes to the Voluntary Disclosures Program Click here for more information about filing a voluntary disclosure

Nicolas Simard

Nicolas Simard is a partner with Fasken Martineau's Tax group based in Montréal and may be reached at 514-397-5288 or at nsimard@fasken.com .

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  1. Pingback: Canada: Why now is the time to do a voluntary disclosure of foreign assets – IWPX – International Wealth Planning X-change

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