Framework of Sources of Exchange of Information in Tax Matters – An Overview

Tackling offshore tax evasion and tax avoidance and unearthing of unaccounted money stashed abroad have become a pressing concern for governments all around the world. The information and/or evidence of such tax avoidance/evasion and the underlying criminal activity is often located outside the territorial jurisdiction and thus this menace can be addressed only through bilateral and multilateral cooperation amongst tax and other authorities. India has played an important role in international forums in developing international consensus for such cooperation as per globally accepted norms and continuous monitoring of their adoption by every jurisdiction including offshore financial centres.

Initially, the international norms were to provide assistance to other countries only on satisfaction of the norms of “dual criminality”, i.e., in cases of drug trafficking, corruption, terrorist financing etc. which are criminal activities in both countries. However, at present the cooperation has extended to cases of tax evasion and avoidance and countries are obliged to exchange information requested as per provisions of tax treaties/agreements. The third stage of cooperation would be automatic exchange of financial account information without countries having to make requests for the same, thereby enabling the receiving country to verify whether such accounts indicate tax evaded money and to take necessary action. Despite a global consensus on coordinated action to tackle the problem of tax evasion and tax avoidance, foreign governments, particularly offshore financial centres, are most unlikely to provide information on the basis of just letters or on a plea regarding their moral obligations to prevent tax evasion. Among other factors, parting with information without a legal basis may be challenged in their own Courts and may be against their own public policy or public opinion of their citizens. Such information about money and assets hidden abroad and about undisclosed transactions entered into overseas, can be obtained only through “legal instruments” or treaties entered into between India and those countries.

Tax Treaties, which include, Double Taxation Avoidance Agreements (DTAA s), Tax Information Exchange Agreements (TIEAs), Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention) and SAARC Limited Multilateral Agreement (SAARC Agreement), are the legal instruments which provide a legal obligation on a reciprocal basis for providing various forms of administrative assistance, including Exchange of Information, Assistance in Collection of Taxes, Tax Examination Abroad, Joint Audit, Service of Documents etc. Through one or more of these tax treaties, India has exchange of information relationships with more than 130 countries/jurisdictions including well known offshore financial centres and these jurisdictions are legally committed to provide administrative assistance and are actually providing the same in cases where requests are made. Information and other forms of assistance can also be requested through Mutual Legal Assistance Treaties (MLAT s) through Ministry of Home Affairs, particularly with countries/jurisdictions with which there is no tax treaty. Information/evidence obtained through MLAT s can also supplement the information received under tax treaties when a criminal complaint is made for tax evasion on the basis of information received under tax treaties. Information can also be obtained through Egmont Group of Financial Intelligence Units (FIUs) which may be further supplemented by making further requests under tax treaties/ MLAT s.

Despite the existence of legal instruments for administrative assistance and the willingness of India’s treaty partners to provide information, these provisions are still underutilised, largely because tax officials are not fully aware of the provisions and need guidance for framing effective requests for information under appropriate legal instruments. The taxpayers, their advisers and the tax officers may also not be fully aware of the recent international developments in transparency including the global adoption of the new standards on automatic exchange of information, which will bring about a sea-change in India’s ability to receive and utilize information regarding Indians having financial accounts in offshore financial centres.

Thus there are nine major sources of EoI of various kinds relating to tax matters, which are summarised below:

1. EoI Article under the Model Conventions on Income and on Capital

2. Tax information Exchange Agreements [TIEAs]

3. Automatic Exchange of Information [AEoI] under The Multilateral Convention on Mutual Administrative Assistance in Tax Matters [CoMAA] alongwith Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information [MCAA]

4. EoI under Inter-Governmental Agreement [IGA] and Memorandum of Understanding (MoU) between India and USA to improve International Tax Compliance and to implement Foreign Account Tax Compliance Act [FAT CA] of the USA

5. SAARC Limited Multilateral Agreement [SAARC Agreement]

6. Mutual Legal Assistance Treaties [MLAT s]

7. The Egmont Group Financial Intelligence Units (FIUs)

8. Joint International Tax Shelter Information & Collaboration – JITSIC

9. EoI under Base Erosion and Profit Shifting [BEPS] Project.

Brief outline of nine major sources of EoI of various kinds, is as under: In this article, we aim to introduce to the readers various sources of EoI amongst various authorities and various countries. Each one of the above are discussed below in brief:

(a) 1928 Model developed by the League of Nations provided for provision of Information on request and for Automatic EoI relating to Specific Categories such as Immovable properties etc. In the London and Mexico draft models of 1946, a Draft Agreement on Administrative Co-operation was included. Both the Obligation and Form of Information Exchange were narrowed during the formalisation of OECD Model after World War-II by removing the obligation for Automatic Exchange of Information. The Draft OECD Model was first developed in 1963 which contained Article on EoI. Until 8th Edition released in 2010, Article 26 of the OECD Model Convention contained the pre-updated version of Article 26. On 17th July, 2012 Update to Article 26 and its commentary was approved by OECD Council which extensively revised the commentary on Article 26. There are three forms of EoI (On Request, Automatic and Spontaneous). Para 9 of the Commentary on Article 26 provides that all three forms of EoI are covered by the Article.

In the update, in para 2 of Article 26 the following sentence was added: “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.” Many of India’s DTAA s signed before July 2012 have been amended in recent past by way of Protocols to incorporate the updated EoI Article. Most of the India’s DTAA s signed before July 2012 contain pre-updated Article 26 and DTAA s signed after July 2012 contain updated Article 26. (b) OE CD Model Convention – Text of Article 26 – Exchange of Information Text of the updated Article 26 of the OECD Model Convention is reproduced below for ready reference: 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. 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. 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). 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. 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.” 2. Tax information Exchange Agreements [TIEAs] The Model TIEA was released in April 2002, containing Two Models of Bilateral Agreements. The Model TIEA covered only EoI on Request. A large No. of bilateral agreements have been based on Model TIEA. In June 2015, OECD approved a Model Protocol to the TIEA for the purpose of allowing Automatic and Spontaneous exchange of information under a TIEA. India has so far signed 16 TIEAs with countries with whom India has not signed a Comprehensive DTAA , namely: Argentine, Bahrain, Belize, Gibralter, Principality of Liechtenstein, Liberia, Macao SAR, Monaco, Bahamas,

Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey and Maldives.

The Model TIEA contains the following Articles:

3. The Multilateral Convention on Mutual Administrative Assistance in Tax Matters [Co- MAA]

The CoMAA was developed jointly by the OECD and the Council of Europe in 1988 and amended by Protocol in 2010. The CoMAA was amended to align it to the international standard on exchange of information on request and to open it to all countries. The amended Convention was opened for signature on 1st June 2011.

The CoMAA has now taken an increasing importance with the G20’s recent call for automatic exchange of information to become the new international tax standard of exchange of information.

As of 27-11-2015, 77 countries, including India have signed the CoMAA and it has been extended to 15 jurisdictions pursuant to Article 29 of The CoMAA. This represents a wide range of countries including all G20 countries, all BRICS, almost all OECD countries, major financial centres and a growing number of developing countries.

India signed the CoMAA on 26-1-2012 which was notified on 28-8-2012 and which entered into force wef 1-6-2012.

a. Relevance of the CoMAA

•  Designed to facilitate international co-operation among tax authorities to improve their ability to tackle tax evasion and avoidance and ensure full implementation of their national tax laws, while respecting the fundamental rights of taxpayers.
•  Most comprehensive multilateral instrument available for tax cooperation and exchange of information.
• Provides for all possible forms of administrative cooperation between states in the assessment and collection of taxes.
• Co-operation includes automatic exchange of information, simultaneous tax examinations and international assistance in the collection of tax debts.

b.Benefits of the CoMAA

Scope of the Convention is broad: it covers a wide range of taxes and goes beyond exchange of information on request.

•  Provides for other forms of assistance such as: spontaneous exchanges of information, simultaneous examinations, performance of tax examinations abroad, service of documents, assistance in recovery of tax claims and measures of conservancy and automatic exchange of information.
• Facilitates joint audits.
• Includes extensive safeguards to protect the confidentiality of the information exchanged.

c. Chapter III Section I – Article 4 to 5 relevant for EoI

The text of the same are given below for ready reference. Article 4 – General Provision

 “1. The Parties shall exchange any information, in particular as provided in this section, that is foreseeably relevant for the administration or enforcement of their domestic laws concerning the taxes covered by this Convention.

2. Deleted.

3. Any Party may, by a declaration addressed to one of the Depositaries, indicate that, according to its internal legislation, its authorities may inform its resident or national before transmitting information concerning him, in conformity with Articles 5 and 7.

Article 5 – Exchange of Information on Request

“1. At the request of the applicant State, the requested State shall provide the applicant State with any information referred to in Article 4 which concerns particular persons or transactions.

2. If the information available in the tax files of the requested State is not sufficient to enable it to comply with the request for information, that State shall take all relevant measures to provide the applicant State with the information requested.”

d. The CoMAA and Automatic Exchange of Information

Article 6 of the CoMAA provides for AEoI. It is an ideal instrument to implement AEoI swiftly and multilaterally. To implement Article 6, an administrative agreement between the competent authorities of two or more interested Parties to the Convention is required. It would address issues such as the procedure to be adopted and the information that will be exchanged automatically.

Sharing of information with other law enforcement authorities to counteract corruption, money laundering and terrorism financing is permissible subject to certain conditions; information received by a Party may be used for other purposes when

(i) such information may be used for such other purposes under the laws of the supplying Party and (ii) the competent authority of that Party authorises such use.

e. Main benefits of Automatic Exchange

• AE oI can provide timely information on non-compliance where tax has been evaded either on an investment return or the underlying capital sum.
• Help detect cases of non-compliance even where tax administrations have had no previous indications of non-compliance.
• Has deterrent effects, increasing voluntary compliance and encouraging taxpayers to report all relevant information.
• Help in educating taxpayers in their reporting obligations, increase tax revenues and thus lead to fairness – ensuring that all taxpayers pay their fair share of tax in the right place at the right time.
• Possibility to integrate the information received automatically with their own systems such that income tax returns can be prefilled.

f. Chapter III Section I – Article 6 to 10 relevant for AEoI

The text of the same are given below for ready reference. Article 6 – Automatic Exchange of Information

“With respect to categories of cases and in accordance with procedures which they shall determine by mutual agreement, two or more Parties shall automatically exchange the information referred to in Article 4.”

Article 7 – Spontaneous Exchange of Information

“1. A Party shall, without prior request, forward to another Party information of which it has knowledge in the following circumstances:

a. the first-mentioned Party has grounds for supposing that there may be a loss of tax in the other Party; b. a person liable to tax obtains a reduction in or an exemption from tax in the first mentioned Party which would give rise to an increase in tax or to liability to tax in the other Party; c. business dealings between a person liable to tax in a Party and a person liable to tax in another Party are conducted through one or more countries in such a way that a saving in tax may result in one or the other Party or in both; d. a Party has grounds for supposing that a saving of tax may result from artificial transfers of profits within groups of enterprises; e. information forwarded to the first-mentioned Party by the other Party has enabled information to be obtained which may be relevant in assessing liability to tax in the latter Party.

2. Each Party shall take such measures and implement such procedures as are necessary to ensure that information described in paragraph 1 will be made available for transmission to another Party.”

Article 8 – Simultaneous Tax Examinations

“1. At the request of one of them, two or more Parties shall consult together for the purposes of determining cases and procedures for simultaneous tax examinations. Each Party involved shall decide whether or not it wishes to participate in a particular simultaneous tax examination. 2. For the purposes of this Convention, a simultaneous tax examination means an arrangement between two or more Parties to examine simultaneously, each in its own territory, the tax affairs of a person or persons in which they have a common or related interest, with a view to exchanging any relevant information which they so obtain.”Article 9 – Tax Examinations Abroad

“1. At the request of the competent authority of the applicant State, the competent authority of the requested State may allow representatives of the competent authority of the applicant State to be present at the appropriate part of a tax examination in the requested State.

2. If the request is acceded to, the competent authority of the requested State shall, as soon as possible, notify the competent authority of the applicant State about the time and place of the examination, the authority or official designated to carry out the examination and the procedures and conditions required by the requested State for the conduct of the examination. All decisions with respect to the conduct of the tax examination shall be made by the requested State.

3. A Party may inform one of the Depositaries of its intention not to accept, as a general rule, such requests as are referred to in paragraph 1. Such a declaration may be made or withdrawn at any time.”

Article 10 – Conflicting Information

“If a Party receives from another Party information about a person’s tax affairs which appears to it to conflict with information in its possession, it shall so advise the Party which has provided the information.”

g. Confidentiality of Information Exchanged under Co- MAA and Protection of taxpayers’ rights

• The CoMAA has strict rules to protect the confidentiality of the information exchanged.
• Provides that information shall be treated as secret and protected in the receiving State in the same manner as information obtained under its domestic laws.
• If personal data are provided, the Party receiving them shall treat them in compliance not only with its own domestic law, but also with the safeguards that may be required to ensure data protection under the domestic law of the supplying Party.

h. Articles of Model CoMAA

The outline of the contents of the Model CoMAA is as under:

i. Standard for Automatic Exchange of Financial Account information in Tax Matters [Standard] For facilitating the AEoI amongst various countries, OECD has developed a Standard. The Standard sets out

The full version of the Standard, as approved by the Council of the OECD on 15 July 2014, also includes the Commentaries on the Model CAA and the CRS, and following seven annexes to the Standard:

1. M ultilateral Model CAA; 2. N onreciprocal Model CAA; 3. CRS schema and user guide; 4. Example questionnaire with respect to confidentiality and data safeguards; 5. Wider Approach to the CRS; 6. Declaration on Automatic Exchange of Information in Tax Matters; and 7. Recommendation on the Standard.

j. Confidentiality of the Information Exchanged

The Standard contains specific rules on the confidentiality of the information exchanged and the underlying international legal exchange instruments already contain safeguards in this regard.

• Where the Standard is not met (whether in law or in practice), countries will not exchange information automatically.
• To facilitate the decision making by Global Forum members as to which jurisdictions they will automatically exchange information with, the Global Forum AEOI Group is undertaking high level assessments of the confidentiality and data safeguards of jurisdictions committed to AEOI. Centralising this work in the Global Forum will further assist jurisdictions in speedily implementing AEOI, by reducing the need for each jurisdiction to conduct its own assessment of the information security practices of each of the many jurisdictions committed to implementing AEOI. The process is now underway with the first batch of around 50 assessments due to be finalised by the end of 2015 and the assessments with respect to the remaining committed jurisdictions due to be finalised by mid-2016.

k. Implementation of Standard at domestic level

• No particular timelines in the Standard.
• Implementation at co-ordinated timelines would bring benefits for both business and governments.
• Over 95 jurisdictions have already publicly committed to implement the Standard, either through the signing of the Multilateral Competent Authority Agreement, the G20 or the Global Forum commitment process, with first exchanges of information to occur in 2017 or 2018.

 l. Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information [MCAA]The Agreement contains 8 sections and 6 Annexes as follows:

4. EoI under IGA re FATCA

FATCA is a USA law which seeks to facilitate flow of financial information. FAT CA requires Indian banks to reveal account information of persons connected to the USA. Indian financial institutions in India, i.e. an insurance company, bank, or mutual fund, would be required to report all FAT CA-related information to Indian governmental agencies, which would then report these information to Internal Revenue Service (IRS). Indian Financial Institutions must report account numbers, balances, names, addresses, and U.S. identification numbers. There is punitive 30% withholding tax on any financial institution that fails to report.

India signed a Model 1 (reciprocal) IGA with the U.S which is notified vide Notification No. 77/2015 dated 30- 9-2015. For effective implementation of FAT CA, Rules 115G to 115H has been notified vide Notification no. 62/2015 dated 7-8-2015. The IGA would require Indian financial institutions to report information on U.S. account holders to India’s CBDT, which would then share the information with the U.S. IRS. The agreement would provide the IRS, access to details of all offshore accounts and assets beyond a threshold limit held by American citizens in India, while a reciprocal arrangement would be offered for Indian tax authorities as well.

a. Articles of India-USA IGAThe contents of the Agreement are as follows:

• The Standard consists of a fully reciprocal automatic exchange system from which US specificities have been removed.
• It is based on residence and unlike FAT CA does not refer to citizenship.
• Terms, concepts and approaches have been standardised allowing countries to use the system without having to negotiate individual annexes.
• Unlike FAT CA, the Standard does not provide for thresholds for pre-existing individual accounts, but it includes a residence address test building on the EU Savings Directive.
• It also provides for a simplified indicia search for such accounts.
• It has special rules dealing with certain investment entities where they are based in jurisdictions that do not participate in automatic exchange under the Standard. 5. SAARC Limited Multilateral Agreement SAARC Limited Multilateral Agreement (SAARC Agreement) is a multilateral agreement amongst SAARC countries and has been in force since 1st April, 2011. It has provisions for a wide range of administrative assistance including EoI on a reciprocal basis. SAARC comprises of 7 countries i.e. Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. The text of Article 5 of the SAARC Agreement, relating to EoI is given below for ready reference.

“Article 5 – Exchange of Information1. The Competent Authorities of the Member States shall exchange such information, including documents and public documents or certified copies thereof, as is necessary for carrying out the provisions of this Agreement or of the domestic laws of the Member States concerning taxes covered by this agreement insofar as the taxation thereunder is not contrary to the Agreement. Any information received by a Member State shall be treated as secret in the same manner as information obtained under the domestic laws of that Member 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, or the determination of appeals in relation to the taxes covered by the agreement. 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.

2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Member State the obligation: (a) to carry out administrative measures at variance with the laws and administrative practices of that or of the other Member State; (b) to supply information, including documents and public documents or certified copies thereof, which are not obtainable under the laws or in the normal course of the administration of that or of the other Member 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).”

6. Mutual Legal Assistance Treaties [MLATs]

The MLAT s are legal instruments through which the Contracting States agree to provide each other with the

widest measures of mutual legal assistance in criminal matters emanating out of proceedings under direct taxes and not for other tax enquiries. India has a MLAT with 39 countries enabling assistance from countries with which there is no tax treaty such as Hong Kong.

The scope of cooperation is different in various MLAT s but is normally quite wide and may include the following:

• Provision of information, documents and other records
• Taking of evidence and obtaining of statements of persons
• Location and identification of persons and objects Execution of requests for search and seizure
• Measures to locate, restrain and forfeit the proceeds and instruments of crime
• Facilitating the personal appearance of the persons giving evidence
• Service of documents including judicial documents
• Delivery of property, including lending of exhibits
• Other assistance consistent with the objects of the MLAT which is not inconsistent with the law of the requested State (catch all provision).

7. The Egmont Group Financial Intelligence Units (FIUs)

The Egmont Group is an informal network of FIUs established with a view to have international cooperation including information exchange in the fight against money laundering and financing of terrorism. As on 1st May, 2015, FIUs of 147 countries are part of the Egmont Group. The FIUs of the Group exchange information in accordance with Egmont Principles for Information Exchange and Operational Guidance for FIUs, which is available on the Internet.

The tax authorities may request information available with FIUs of other countries through FIU-IND (the Indian FIU) using the information exchange mechanism of the Egmont Group.

MoU between FIU and CBDT

On 20th September, 2013, a Memorandum of Understanding (MoU) was entered into between FIU and CBDT in which it has been provided that if CBDT requires information from a foreign FIU, a request will be made to FIU-IND in Egmont prescribed proforma in electronic format and CBDT shall abide by the conditions that may be imposed by the foreign FIU on the use of information provided by the foreign FIU.

8. Joint International Tax Shelter Information & Collaboration – JITSIC

The original Joint International Tax Shelter Information Centre was created in 2004 as a joint revenue authority initiative of Australia, Canada, the United Kingdom and the United States to counter abusive tax schemes and tax avoidance structures. Later on, Japan, Germany, South Korea, France and China joined the JITSIC. The Competent Authorities of these countries exchange information through the legal instrument of DTAA s including sharing expertise relating to the identification and understanding of abusive tax arrangements. Under the JITSIC framework, the Competent Authorities are able to put the various international pieces together to examine complex cross border transactions, such as non-commercial capital and finance arrangements, aggressive transfer pricing strategies and foreign tax credit generation schemes. Similarly, structures involving tax havens and trust structures in connection with high net wealth individuals also came under JITSIC scrutiny.

Recognising that the information exchanges should not be limited to the original JITSIC member countries, on a call from G20, the Forum on Tax Administration A) of the OECD in its 9th Meeting in Dublin on 24th October, 2014, determined that the composition of JITSIC would be expanded and remodeled with a greater focus on collaboration. Reflecting this change, the taskforce was renamed as the Joint International Tax Shelter Information & Collaboration (still called JITSIC) with an emphasis on collaboration on information exchange and a de-emphasis on the need for exchange to occur through central hubs. The JITSIC Network is open to all FTA members on a voluntary basis and integrates existing JITSIC cooperation procedures among tax administrators within the larger FTA network. India has joined the JITSIC Network and Joint Secretary (FT&TR-I) has been appointed as the Single Point of Contact for India.

9. EoI under BEPS Project

Base Erosion and Profit Shifting refers to strategies adopted by taxpayers having cross-border operations to exploit gaps and mismatches in tax rules of different jurisdictions which enable them to shift profits outside the jurisdiction where the economic activities giving rise to profits areperformed and where value is created. At the request of G20 Finance Ministers, in July 2013 the OECD, working with G20 countries, launched an Action Plan on BEPS, identifying 15 specific actions needed in order to equip governments with the domestic and international instruments to address this challenge.

A number of recommendations for combating BEPS envisage enhanced cooperation amongst the tax administrations and exchange of information as per the provisions of the existing network of tax treaties, including the following:

a. Automatic Exchange of Country by Country [CbC] Reports – Action 13

Action 13 of the BEPS Action Plan relates to a three-tiered standardised approach to transfer-pricing documentation comprising:

• a master file of information relating to the global operations of the MNE Group, which will be filed by all MNE group members,
• a local file referring specifically to material transactions of the local taxpayer, and
• a CbC report of information relating to the global allocation of the MNE group’s income and taxes paid, alongwith certain indicators of economic activity. While the master file and local file will be filed by the taxpayer in the local jurisdiction, the CbC report will be filed in the country where the MNE is resident and will be transmitted on an automatic basis to the jurisdictions in which the MNE operates through a multilateral instrument modelled on the basis of MCAA, maintaining confidentiality and data safeguarding standards.

b. Spontaneous Exchange of Rulings – Action 5

Action 5 of the BEPS Project relates to countering harmful tax practices more effectively taking into account transparency and substance. To address this, the taxpayer specific rulings related to tax regimes resulting in BEPS need to be mandatorily exchanged on a spontaneous basis. Taxpayer-specific rulings for this purpose would include both pre-transaction, including advance tax rulings or clearances and advance pricing agreements, and post transaction.

c. Exchange of Mandatory Disclosure Regimes – Action 12 Under

Action 12, modular rules for mandatory disclosure of aggressive or abusive transactions, arrangements, or structures would be recommended to enable tax administrators to receive information about tax planning strategies at an early stage so as to respond quickly to tax risks either through timely and informed changes to legislation and regulations or through improved risk assessment and compliance programmes (targeted audits). Under these rules, the “international tax schemes” would also be disclosed and the same may be shared by tax administrators using the mechanism of EoI

This Article gives only a brief overview of the framework of the Exchange of Information in Tax matters. The subject is receiving increasing attention of the Governments and Tax Administrations of various countries. It is very important for the taxpayers & their advisors to gain an in-depth understanding of the evolving subject. Therefore, the reader needs to study the relevant Agreements / MOUs / Protocols / Standards in greater detail.