In the continuous international focus on combatting cross-border fraud and evasion, the Council of the European Union (EU) recently made another step forward. On October 14, 2014, at a meeting of the Economic and Financial Affairs Council, the EU agreed on the wording of a draft amendment to Directive 2011/16/EU, which regards the automatic exchange of information between tax authorities of EU member states. The draft amendment for Directive 2011/16/EU expands that Directive and makes it applicable to interest, dividends, and other types of income, as well as account balances and sales proceeds from financial assets that are within the scope of the mandatory and automatic exchange of information.
Currently, Directive 2011/16/EU, that has been in force since 2013, already provides EU member states with a framework for mutual assistance between EU member states for employment, director’s fees, pension funds, and immovable property on the condition that such information is available. Under the new rules, Tax Authorities of EU member states have the obligation to automatically exchange information on all relevant income, such as dividends, interest, and other types of income. Under this amendment, a greater transparency is achieved, resulting in the relevant tax authorities having significantly more insight in income and assets that are residing outside their country. This amendment follows the previous EU push to end all bank secrecy rules in the EU.
The amendment of Directive 2011/16/EU is expected to be adopted at an upcoming Council meeting without further discussion. Once the Directive has been finalized in all official languages, it needs to be adopted unanimously by the Council, after consulting the European Parliament. The amendment of Directive 2011/16/EU is scheduled to be effective as of January 1, 2017. Austria requested to implement the changes as of January 1, 2018, which was the original timetable for the aforementioned amendment of Directive 2011/16/EU.
The aforementioned changes may have a significant impact on your company and may also have a significant impact on the audits that the local tax authorities may enact. As a taxpayer, you may have to defend and substantiate your position upon audit. It is advisable to preemptively review your international position on dividend, interest, and the like to populate your audit file. If you require any assistance, Ryan International Tax specialists are happy to discuss the impact on and the possibilities for your company.