Exchange of Information
Exchange of Information
International tax transparency relies on robust frameworks for exchanging taxpayer information between jurisdictions. These mechanisms range from automatic bulk exchanges to targeted on-request procedures, and are central to combating tax evasion and ensuring compliance.
Overview
The global exchange of information landscape has expanded significantly since the adoption of the OECD Standard for Automatic Exchange of Financial Account Information. Tax authorities now have access to cross-border data through multiple channels, each with distinct scope, triggers, and legal bases.
Understanding which framework applies — and what obligations it imposes on intermediaries and taxpayers — is essential for international tax advisory work.
CRS — Common Reporting Standard
The Common Reporting Standard is the OECD-developed global standard for automatic exchange of financial account information. Financial institutions identify accounts held by tax residents of participating jurisdictions and report them to their local tax authority, which then exchanges the data with the account holder's jurisdiction of tax residence.
Reporting Entities
Banks, custodians, investment funds, and certain insurance companies are required to perform due diligence and report.
Reportable Information
Account balances, interest, dividends, gross proceeds from sales, and other financial income.
Due Diligence
Financial institutions must identify the tax residence of account holders using self-certifications and documentary evidence.
DAC6 / DAC7
The EU Directive on Administrative Cooperation has been progressively expanded to cover mandatory disclosure of cross-border arrangements (DAC6) and reporting by digital platform operators (DAC7).
DAC6 — Mandatory Disclosure
Intermediaries (and in some cases taxpayers) must report cross-border arrangements that meet one or more hallmarks, such as arrangements involving transfer pricing, conduit structures, or confidentiality conditions.
DAC7 — Digital Platforms
Platform operators must report income earned by sellers using their platforms, covering rental of immovable property, personal services, sale of goods, and vehicle rental.
Hallmarks and Main Benefit Test
DAC6 uses hallmarks (categories A through E) combined with a main benefit test to determine whether an arrangement is reportable.
FATCA
The US Foreign Account Tax Compliance Act requires foreign financial institutions (FFIs) to report information about financial accounts held by US persons to the IRS. Non-compliant institutions face a 30% withholding tax on US-source payments.
FATCA operates through intergovernmental agreements (IGAs) — either Model 1 (FFIs report to their local tax authority, which exchanges with the IRS) or Model 2 (FFIs report directly to the IRS with consent of their local government).
Spontaneous and On-Request Exchange
Article 26 of the OECD Model Tax Convention provides the legal basis for exchange of information upon request between treaty partners. A requesting state must demonstrate "foreseeable relevance" — the information must be relevant to the administration or enforcement of the treaty or domestic tax law.
Spontaneous exchange occurs when a tax authority, during the course of its own proceedings, discovers information that may be relevant to another jurisdiction and transmits it without a prior request.
Compliance note
DAC6 reporting obligations apply to intermediaries — ensure compliance timelines are tracked for all reportable arrangements.