ibfd special monitor - tax information sharing · 2012. 8. 30. · allow cooperation between...

International Bureau of Fiscal Documentation

IBFD special monitor - Tax Information Sharing

15 November 2009

Since 1938, the International Bureau of Fiscal Documentation (IBFD) has documented the

progression of cross-border taxation. One of the more recent progressions has been the

developments in transparency and exchange of information regarding tax matters. Much of this

activity has been driven by governments’ desire to secure their tax bases during tough economic

times as well as the OECD’s advocacy of a threshold to distinguish between jurisdictions which have

implemented standards for information sharing and those which have not.1

Many States have addressed the new interest in bank secrecy through a multiple step approach.

States have created tough new legislation on offshore withholding, signed bilateral agreements to

allow cooperation between States, and, in some cases, initiated amnesty or voluntary disclosure

programs to encourage cooperation from account holders. The practical result has been the creation

of new legislation regarding information sharing, voluntary disclosure programs, and the mass

passage of tax information exchange agreements. Whether or not the era of bank secrecy is at an

end, the playing field has been permanently altered and a new set of rules is being quickly

implemented.

As an academic institute and curator of the world’s largest holding of international tax materials, the

IBFD has endeavoured to document these changes. The role of our researchers has been covering

and analyzing the passage of new information disclosure legislation as well as the corresponding

implementation of disclosure programs by State’s tax administrations. Our main documentary task,

however, was the worldwide collection of the various protocols, treaties, and information exchange

agreements.

Through the attached appendices, please find coverage of the changes that have taken place around

the world over the past two years. New legislation and cooperation is announced daily and we will

strive to keep our databases up to date.

In Appendix I, we present examples of legislation enacted by countries to curb tax secrecy and

offshore withholding. It will take several years to understand the economic consequences of these

laws and their effectiveness to encourage fiscal transparency. However, by capturing and

documenting these legislative changes now, they can be preserved and become part of the

foundation to more fully understand and implement effective legislative measures.

Appendix II includes highlights and descriptions of State’s voluntary disclosure programs. These

programs were designed to encourage immediate compliance before the passage of new legislation

1 See attached Jeffrey Owens “Moving Towards Better Transparency and Exchange of Information on Tax

Matters” Bulletin for International Taxation, November 2009

or stiffer penalties. As many of these programs begin to expire, we will be able to weigh the success

of different state’s programs and hopefully conclude which measures yielded more success.

Appendix III lists the Tax Information Exchange Agreements recently included in our database. A Tax

Information Exchange Agreements (TIEAs) is generally based on a model agreement developed by

the OECD Global Forum Working Group on Effective Exchange of Information. Over 168 TIEAs have

been signed by various States, most within recent months. The IBFD Tax Treaties Unit has obtained,

electronically formatted, and incorporated all of these agreements in our database which already

includes over 6,000 tax related treaties. These agreements, which the IBFD has completely

catalogued, will form the newly established network of information sharing.

These research activities will become part of our holdings at the IBFD Tax Library and will be

available for students and academics to use as tools in future tax research. Additionally, the IBFD

commercially offers these resources to the tax community which includes our extensive tax treaty

database.

Bulletin for International Taxation___________________________

Moving Towards Better Transparency and Exchange of Information on Tax Matters

Jeffrey Owens- Director of the Centre for Tax Policy Administration, OECD.

Date: 28 October 2009

In this short contribution, Jeffrey Owens, Director of the OECD's Centre for Tax Policy

Administration, gives his thoughts on developments on transparency and the exchange of

information regarding tax matters. In this respect, he emphasizes the role of the OECD's Global

Forum and the recent conclusion of exchange of information and other agreements by a number of

jurisdictions that are intended to promote transparency and cooperation in the tax field.

Over the past ten months, there has been a revolution in the tax world. More than a decade of work

led by the OECD, together with the political leadership of the G20, has permitted unprecedented

progress towards better transparency and exchange of information.

For too long it has been possible for a taxpayer to hide income and assets from the tax authorities by

taking advantage of bank secrecy or other impediments to information exchange. This will no longer

be the case. Cooperation between tax administrations is now becoming the rule. The threshold of

tolerance for tax evasion has dropped to zero. And in the context of the current crisis, governments

need tax revenue and citizens need to be reassured that the tax burden is being fairly shared.

Over the last year, all 87 jurisdictions covered by the OECD's Global Forum assessment have

endorsed and committed to implement the standards. Many jurisdictions are also concluding

agreements to exchange information which meet this standard.

The OECD has been leading this work for more than a decade. It created the Global Forum to ensure

that both OECD Member countries and interested non-OECD countries could have input into the

process. This approach has proved right, as is demonstrated by the growing number of jurisdictions

involved in the OECD's work. Eighty-seven jurisdictions were assessed by the Global Forum in 2009,

as reflected in the annual assessment released on 31 August 2009. [1] The new standards on

transparency and exchange of information are now clearly defined and universally accepted.

At the time of the G20 summit in London on 2 April 2009, the OECD's Secretary-General issued a

Progress Report based on the Global Forum's ongoing assessment. This set an initial threshold of 12

agreements that meet the standard to distinguish between those jurisdictions which have

substantially implemented the standards and those which have not. The Report is updated regularly

to reflect the progress made. [2]

An increasing number of jurisdictions are already considered to have substantially implemented the

OECD's standards, although there are some issues about the quality and economic relevance of

some of these agreements.

Since its creation in 2000, the Global Forum has offered an open, international platform to promote

the exchange of information. It has created standards that are now internationally agreed. It has also

collected data on the implementation of such standards in more than 80 jurisdictions and published

this information in annual reports since 2006.

It is this decade of technical work, which has provided the basis for the unprecedented progress

towards more transparency that can be seen over the last ten months, i.e.:

– all 87 countries surveyed by the Global Forum have now endorsed the standards and agreed

to implement them;

– all OECD Member countries now accept the standards as reflected in the OECD and UN

Model Tax Conventions and are active in terms of implementation;

– there are no countries remaining on the OECD list of uncooperative jurisdictions;

– significant financial centres, such as Hong Kong and Singapore, have proposed legislation to

implement the internationally agreed tax standards and have begun the process of updating

their treaty network. Macau passed such legislation in August 2009;

– in Latin America, considerable progress involving Chile, Costa Rica, Guatemala and Uruguay

can been seen, with all of these countries taking actions that will enable them to implement

the standards; and

– over 100 tax information exchange agreements (TIEAs) have now been signed and many

more are under negotiation, with Caribbean, European and Pacific island countries.

More information on this progress can be found in the 2009 Assessment Report, which was issued to

coincide with the Global Forum held in Mexico on 1 and 2 September 2009.

The universal acceptance of the standards must now be followed by their effective implementation

and operation.

This was the main focus of the fifth Global Forum meeting in Mexico in September 2009. At this

meeting, 178 participants from over 70 jurisdictions and international organizations:

– established a robust peer review mechanism;

– expanded the number of participating countries, including developing countries;

– put in place new governance structures and new work methods; and

– explored mechanisms to speed up the negotiations of agreements.

Obtaining agreements on these conclusions [3] reveals that the participating jurisdictions have a

clear commitment to advance in this area.

To conclude, there are many important and significant tasks that lie ahead of the Global Forum, but

the author is confident that the challenges can be met. This has been done in the past. In this

respect, the work of the Sub-Group on Level Playing Field Issues, the Joint Ad-Hoc Group on

Accounts and the Working Group on Exchange of Information have all established a legacy of

confidence and cooperation on which the reformulated Forum can rely.

1. Available at www.oecd.org/document/23/0,3343,en_2649_33745_43555607_1_1_1_1,00.html.

2. The results are available at www.oecd.org/dataoecd/50/0/43606256.pdf.

3. Details are available at www.oecd.org/ctp.

The views expressed in this article are those of the author and do not necessarily reflect those of the OECD or its

Member countries. The author can be contacted at [email protected].

© Copyright 2009 IBFD All rights reserved


Appendix I: Tax Information Disclosure Legislation

Appendix I contains examples of recently enacted legislation to regulate the disclosure of taxpayer

information for both individuals and corporations. The measures range from creation of new

disclosure events to the identity and responsibilities of disclosing parties. The IBFD will closely

monitor the effects of this legislation to determine its effectiveness from tax evasion and tax

fraud.

Australia

The Assistant Treasurer has proposed in the Tax Laws Amendment Bill 2009 (Confidentiality of

Taxpayer Information)and explanatory materials to implement the single and consolidated

framework outlined in the Treasury discussion paper released in 2006, to govern the protection and

disclosure of taxpayer information received by the Australian Taxation Office in the course of

administering the taxation laws.

The proposed legislation will standardize taxation secrecy and disclosure provisions across 18

taxation Acts to address inconsistencies and ambiguities with the current provisions.

In addition to standardizing existing taxation secrecy and disclosure provisions, the new framework

also makes it clear that the future disclosure of taxpayer information should only be permitted

where the public benefit from the disclosure outweighs taxpayer privacy.

Other key features of the new framework include that:

– it maintains current levels of disclosures that can be made by the ATO to other government

agencies;

– it introduces some new disclosure provisions, where the public benefit outweighs taxpayer

privacy;

– it includes clear rules to govern the on-disclosure of taxpayer information provided by the

ATO to another agency or entity;

– it clarifies that there is no prohibition on the disclosure of taxpayer information that is

lawfully available to the public; and

– it provides that a taxpayer's consent can not in and of itself authorize the disclosure of their

information.

European Union

On 25 June 2009, the Commission announced that it has sent a reasoned opinion (the second stage

of the infringement procedure of Art. 226 of the EC Treaty) to Belgium, Greece, Ireland,

Luxembourg, Poland and Portugal for failure to implement the latest Accounting Directive (Directive

2006/46/EEC), which increases the maximum thresholds that Member States may apply in

determining which companies may be exempted from certain disclosure requirements. In addition,

the Directive extends the disclosure requirements for companies on material transactions with

related parties, such as key management members and spouses of board members, and on

arrangements that do not appear in the balance sheet, such as transactions or agreements which

companies may have with entities. Finally, the Directive obliges to disclose an annual corporate

governance statement as a specific and clearly identifiable section of the annual report.

After the implementation of the Directive non-listed European companies will also have to provide

more information to the investors and other citizens about risks they are facing. The burden for

small and medium-sized companies will, however, be reduced by exempting them from certain

reporting requirements.

The Directive had to be implemented by 5 September 2008. If Belgium, Ireland, Greece,

Luxembourg, Poland and Portugal do not implement the Directive in the next two months, the

Commission may decide to refer the matter to the ECJ.

France

The Ministry of Finance issued an order (arrêté ministériel) on 7 October 2009 (published in the

Journal Officiel of the same date) compelling with immediate effect French banks to disclose, in an

appended document to the annual financial results, a list of their establishments operating in

jurisdictions reputed to be tax havens (i.e. territories without a tax information exchange agreement

with France). The disclosure shall include "a description of the nature of the activities operated by

those undertakings" and also "the company name, the percentage of assets, the voting rights and

the juridical form". This obligation covers branches, subsidiaries, and all kinds of "controlling

shareholdings".

Italy

On 24 September 2009, the Italian Tax Authorities issued Ministerial Circular No. 42/E (the Circular)

aimed at clarifying the new information to be reported in a specific section (the Archivio) of the

Central Tax Register (Anagrafe Tributaria).

The Anagrafe Tributaria is a system aimed at collecting and processing tax information, and it is

based on various electronic archives compiled by different information centres. It gathers and

classifies data included in tax returns as well as data derived from any subsequent audits.

Pursuant to Art.7 Para. 6 of Presidential Decree No. 605 dated 29 September 1973, Italian financial

institutions act as information centres. Accordingly, banks, credit institutes, post offices and other

financial intermediaries are required to disclose to the Archivio all the information related to

taxpayer's bank transactions.

Specific instructions on such disclosure procedure are included in the Ministerial Circular No. 18//E

dated 4 April 2007.

Pursuant to Art. 7 Para. 7 of Presidential Decree No. 605 dated 29 September 1973, foreign branches

and/or foreign offices of Italian financial institutions are subject to the same reporting obligations as

Italian operators.

As clarified by the Circular, the information included in the Archivio and reported by the foreign

branches/offices of Italian financial institutions may became relevant in respect to investigations,

aimed at disclosing assets held abroad by Italian taxpayers and not properly disclosed by the

taxpayers, in violation of the specific provision contained in the Law Decree no. 167 dated 28 June

1990 as converted into Law No. 227 dated 4 August 1990 (known as Monitoraggio Fiscale).

Netherlands

The State Secretary of Finance in a press release of 6 April 2009, indicated that individuals, who do

not declare their income pursuant to the tax amnesty programme, would have to pay a penalty of at

least 300% of the additional tax due or tax evaded upon discovery of unreported foreign bank

accounts.

The Ministry of Finance issued a second press release on 6 April 2009 to clarify that, at this stage, it

is only a proposal, i.e. the Secretary wants to increase the penalty from 100% to 300%.

OECD

The heads and deputy heads of revenue bodies from over 34 economies met in Paris, France on

2829 May 2009 for the fifth meeting of the OECD's Forum on Tax Administration (FTA). As a result of

the discussions, and building on the outcomes from the FTA meeting in Cape Town of 2008, the FTA

agreed to continue:

– Improving the tax administration, taxpayer services and tax compliance – both nationally

and internationally: In this regard, the revenue bodies were determined to improve taxpayer

services and will undertake further work to share information and expertise to enable

revenue bodies to prevent, detect and respond to noncompliance, including in relation to

offshore arrangements.

– Promoting strong corporate governance in the area of tax: The FTA administrations will

continue to engage with business and with the agencies responsible for the development of

corporate governance codes and guidelines with a view to ensuring tax compliance.

– Supporting tax administrations in developing economies: The revenue bodies will increase

their understanding of the needs of developing countries in the area of tax administration

and share relevant products, experience and expertise.

Also, two reports were issued at this meeting:

– the first is related to Building Transparent Compliance by Banks; while

– the second report deals with Engaging with High Net Worth Individuals (HNWI) on Tax

Compliance.

In the report on building transparent compliance by banks, the FTA acknowledges that it can be

difficult for revenue bodies to understand the complex financial products and transactions used by

banks, and to distinguish those which carry a tax risk due to the complex structured finance

transactions. In this regard, the revenue bodies recognized the need to develop the necessary skills

to better understand complex financial products and differentiate those that should be regarded as

aggressive from a tax perspective. The report states that revenue bodies should develop response

strategies that improve transparency and compliance.

In the report related to HNWI, the FTA also recognized that the HNWI segment is of particular

interest for tax administrations because of the:

– complexity of their affairs and the large numbers of entities they may control;

– amounts of tax revenue at stake;

– opportunity to undertake aggressive tax planning; and

– impact on overall integrity of tax system.

This report acknowledges that in order to improve compliance, tax administrations could consider:

– changing the structure of their operations to effectively focus resources and rely on

international cooperation, at both a strategic and operational level, and

– sharing information and expertise between tax administrations, particularly on cross-border

dealings.

It was also suggested that tax administrations should also strive to provide maximum guidance on

voluntary disclosure rules and programmes, whilst dealing firmly with those who commit tax evasion

and fail to come forward before intervention by the authorities.

Portugal

Significant anti-tax fraud and evasion measures have recently been enacted for the disclosure of

transfers of funds to tax havens

Law 94/2009, published on the 1 September 2009, and already in force, establishes that credit and

financial institutions must report to the Portuguese Tax Authorities (PTA) any transfer of funds of

more than EUR 12,500 to entities located in tax havens (as defined), unless the transfer is already

reportable under a different legislation. This measure applies to transfers made in 2009, which

should be reported before the end of July 2010.

The respective standard form was published on 18 September 2009. Reportable information

includes:

– the identification of the bank accounts;

– the tax number of the account-holder (taxpayer);

– the amount of the deposits, the balance of the accounts at 31 December;

– the reason for the transfer; and

– the country of destination.

The standard form must be filed electronically before the end of July of the following year.

Bank secrecy further curtailed

Law 94/2009 also establishes that the PTA is now allowed to override bank secrecy provsions

without the agreement of the account-holder (taxpayer) in these additional cases:

– the taxpayer did not file a tax return which was legally obliged;

– the PTA needs to analyse documents supporting the accounting records of taxpayers subject

to personal or corporate income tax;

– the taxpayer benefits from a privileged tax regime, and it is necessary to control the

required application criteria; and

– the requirements to perform a tax assessment based on indirect methods are met.

The PTA's decision has to be duly supported, and must be notified to the taxpayer within 30 days.

Personal income tax special rate – unjustified wealth increases

Further, Law 94/2009:

– establishes a special rate of 60%, which now applies to unjustified wealth increases of more

than EUR 100,000; the burden of proof is shifted to the taxpayer, who has to justify the

wealth increase; and

– requires taxpayers subject to personal income tax to declare in their income tax return the

existence and identification of bank accounts or securities portfolios deposited with non-

resident financial institutions.

Granting of credit disallowed to non-cooperating tax havens or to unknown ultimate beneficial

owners

Ruling 7/2009, of the Bank of Portugal (BoP), published in the Official Gazette of the 1 September

2009, and in force as from 2 September 2009, forbids the granting of credit to entities located in a

non-cooperating tax havens or when the ultimate beneficial owner is unknown.

The Ruling defines as "tax haven" a jurisdiction that characterizes itself for attracting a significant

volume of activity with non-residents, due to:

– less demanding regimes for the authorization of banking and supervisory activities;

– special regime of bank secrecy;

– existence of tax advantages;

– different legislation for residents and non-residents; or

– facilitation in the creation of special purpose vehicles.

The Ruling also defines as "non-cooperating tax haven" one where the respective domestic law has

limitations on the provision of information to the BoP, for the purposes of prudential supervision

(particularly the identification of the ultimate beneficial owner of the entities to which credit is

granted).

This Ruling applies to credit institutions and financial dealers resident for tax purposes in Portugal, as

well as to Portuguese branches of non-resident credit institutions.

The entities to which the Ruling applies should provide to the BoP a statement issued by the

competent prudential supervisory authorities of the tax havens in which it is intended to carry out

credit operations, to ensure that those jurisdictions will not prevent the provision of the information

mentioned above; otherwise, that jurisdiction will be categorized as a "non-cooperating

jurisdiction".

South Africa

New reportable arrangements legislation enters into force

Reportable arrangements legislation came into force in 2005 and provided for the reporting of two

classes of arrangements:

– those that resulted in a tax benefit and were subject to an agreement that provided for the

variation of interest, fees, etc. if their actual tax benefits differed from the anticipated tax

benefits; and

– those related to certain hybrid debt and equity instruments.

New reportable arrangements legislation, which is contained in Sec. 80M to 80T of the Income Tax

Act 1962, entered into force on 1 April 2008.

Reportable arrangements

The new reportable arrangements legislation is generally triggered where an arrangement gives rise

to a tax benefit and:

– provides for interest, fees, etc. that are partly or wholly dependent on the assumptions

relating to the tax treatment of that arrangement (other than a change in law);

– has any of the characteristics of, or characteristics which are substantially similar to, the

indicators of a lack of commercial substance in terms of the general anti-avoidance rule;

– is or will be disclosed by any participant as a financial liability for the purposes of General

Accepted Accounting Practice (although not for income tax purposes);

– does not result in a reasonable expectation of a pre-tax profit for any participant; or

– results in a reasonable expectation of a pre-tax profit for any participant that is less than the

value of those tax benefits to that participant on a present-value basis.

Specific reporting of hybrid equity and debt instruments is retained, but the 5-year redemption

threshold has been extended to 10 years.

The Minister of Finance's authority to include or exclude arrangements for disclosure by way of

regulation has also been retained.

Excluded arrangements

The new reportable arrangements legislation provides an exclusion for any arrangement where the

tax benefit from the arrangement:

– does not exceed ZAR 1 million; or

– is not the main, or one of the main, purpose of the arrangement.

The exclusions for arrangements that are unlikely to be tax-driven (e.g. the most basic versions of

loans, leases, share transactions and collective investment scheme investments) have been retained.

Responsibility for reporting

The responsibility for disclosing a reportable arrangement is principally placed on its promoter.

In the absence of a resident promoter, the responsibility falls on all participants unless that

participant has written confirmation that the required disclosure has been made by another

participant.

Disclosure must be made within 60 days of funds flowing, or liabilities being incurred, in terms of the

arrangement.

Penalty for non-disclosure

A penalty of ZAR 1 million is imposed for non-disclosure, which may be reduced where:

– there are extenuating circumstances and the non-disclosure is remedied within a reasonable

time; or

– the penalty is disproportionate in relation to the tax benefit from the arrangement.

United States

Legislation was introduced on 27 October 2009 into the tax- writing committees of the US House of

Representatives (the House Ways and Means Committee) and the US Senate (the Senate Finance

Committee) to prevent tax avoidance by means of offshore financial accounts. The legislation is

entitled the Foreign Account Tax Compliance Act of 2009 and was introduced as H.R. 3933 and S.

1934. According to the press release, the bill would require foreign financial institutions, foreign

trusts, and foreign corporations to provide information about their US account holders, grantors,

and owners. According to estimates, the bill would prevent US individuals from evading USD 8.5

billion in US taxes over the next 10 years.

The bill proposes increasing the disclosure requirements for foreign accounts as well as

implementing new underpayment penalties and extending the related statutes of limitations. The

bill would increase disclosure requirements in acquiring or forming a foreign entity and also increase

the reporting requirements for passive foreign investment companies (PFICs) and financial

institutions. The bill further addresses the proper beneficiaries with respect to foreign trusts and

creates new reporting requirements and penalties for foreign trusts. Further, the bill also will

provide that dividend equivalent payments received by foreign persons on notional principal

contracts would be treated as dividends subject to US withholding tax. The proposal to codify the

economic substance doctrine, which was included in an earlier version of a similar bill, is reportedly

not included in the current legislation.

The US Joint Committee on Taxation, a nonpartisan committee of the United States Congress, has

released a technical explanation of the Act. As well, the White House released a statement from the

President commending the proposed legislation.

Additionally, the US Treasury Department released a statement from US Treasury Secretary Timothy

Geithner applauding the bill stating that the "legislation fits well into the (US) Administration's dual-

track strategy of improving our domestic tax laws while increasing global cooperation on tax

information exchange to help narrow the tax gap and create the fairer tax system we need."

If approved by the tax-writing committees, the legislation will be reported to the full House of

Representatives and full Senate for consideration.


Appendix II: Voluntary Disclosure

Appendix II contains summaries of the various methods of voluntary disclosure and other tax

amnesty enacted by major powers over the recent years. Some countries such as Latvia and

Germany have permanently enacted legislation to encourage the disclosure of unreported or

underreported assets. The summaries below have all been enacted, due in a large part, to the

opening of transparency and information sharing with offshore jurisdictions.

Italy

Scope

Effective 15 September 2009, qualified Italian taxpayers that are fiscally resident in Italy are allowed

to regularize funds and qualified assets that are held abroad as of 31 December 2008 and that have

not been declared to the Italian Tax Authorities (ITA).

The benefit of the Italian voluntary disclosure program (the Amnesty) are granted only if the eligible

taxpayer has failed to comply with the reporting obligation and has not received formal notice of a

tax or criminal procedure at the time of the filing of the confidential return

Eligible Persons

The amnesty is open to Italian resident:

• Individuals;

• Non-commercial entities; and

• Non-commercial partnerships or similar entities (the Resident Eligible Person)2.

Italian resident individuals that are engaged in a trade or business and Italian resident professionals

are eligible to enter, but commercial entities (that is, corporations or commercial partnerships) can’t

directly benefit from it3. A Resident Eligible Person can enter the Amnesty only if he has failed to

comply with one or more of the foreign asset reporting requirements4. A Resident Eligible Person

that holds foreign assets through a pass-through entity that is a conduit (i.e. that is, a revocable trust

in which the settlor has, de facto, the power to dispose of, and benefit from, the assets formally held

by the trust) may benefit from the Amnesty.

The Amnesty can also be entered into by the heirs of a decedent person if the decedent was an

Italian resident at the time that the foreign asset reporting requirements were violated.

2 For purposes of the amnesty, nonresident individuals that have transferred their residency to a low-tax jurisdiction may opt to be

deemed Italian residents.

3 Some controlled foreign corporations can access the amnesty, but the benefits of the amnesty are transferred to the corporations’

Italian resident shareholders.

4 A taxpayer who has made a filing omission or an incomplete filing but has complied with foreign asset reporting obligations

cannot use the amnesty.

Assets Covered

The assets covered by the amnesty are foreign assets held as of 31 December 2008, and they vary

according to whether they are being repatriated in Italy or regularized and left offshore.

Foreign assets that can be repatriated, regardless of whether the issuer is an Italian resident, include

cash, stocks, and similar financial instruments listed, no listed, or over the counter; bonds;

investment fund units; and insurance policies. Also loans granted by an Italian Eligible Person to a

non-resident can be repatriated.

Foreign assets that can be regularized include all assets that can be repatriated and offshore real

estate properties, boats, and jewellery, provided the assets have the potential to produce foreign-

source income taxable in Italy.

No asset can be regularized if it is located in a country or jurisdiction that does not exchange

information with the Italian tax authorities5. For purposes of the amnesty, the country where the

foreign asset is held is the country where the asset was on 5 August 2009.

If the foreign assets held as of 31 December 2008, have been sold or disposed of before the

amnesty, the taxpayer can repatriate (or regularize) the consideration received for the foreign assets

or the assets purchased with such consideration.

Procedure

To complete the repatriation of qualified undisclosed foreign assets, the Resident Eligible Person

must file a confidential statement with an Italian financial intermediary and pay the 5 percent tax

(the Extraordinary Tax).

The statement must include a description of the value of the undisclosed foreign assets held as of 31

December 2008, and the mandate to the financial intermediary to receive the foreign assets in a

dedicated secret account and to pay the Extraordinary Tax due.

The taxpayer must also transfer the foreign assets to the secret account. There is no official guidance

on how to calculate the value of the assets reported in the confidential statement.

The repatriation may also be completed by carrying the foreign assets across the Italian border. In

such a case the taxpayer must report that transfer to the Italian customs authority.

The repatriation is complete, and the Resident Eligible Person can benefit from the Amnesty, on the

date when the intermediary acquires the formal custody of the foreign assets and pays the

5 Before the latest amendments, for a foreign asset to be eligible for regularization it had to be located either in an EU member state

or in a European Economic Area member state, provided that state exchanges information with the Italian tax administration. Real

estate property located in a non-EU member state or in an EEA member state that does not exchange information could not be part

of the amnesty, as that property cannot be physically repatriated or regularized. However, under recently approved amendments all

the foreign assets held offshore can be regularized provided that the foreign country exchanges information with the Italian tax

administration. Under the legislation in force a real estate property located in the U.S. (provided all the other conditions for the

amnesty are met) can be regularized.

extraordinary tax due, regardless of whether the transfer of assets within the Italian territory occurs

later.

The assets deposited with the intermediary are held in secret accounts and the details are not

reported to the Italian tax authority.

The income produced by the repatriated assets between 1 January 2009, and the filing of the

confidential statement is, in principle, subject to tax and must be reported on the taxpayer’s annual

tax return.

The regularization procedure is similar to the repatriation procedure. Besides filing the confidential

statement, the taxpayer must comply with other requirements, depending on the type of foreign

assets to be regularized.

The financial intermediary, as the withholding agent, must include in its annual return the total of

the repatriated or regularized assets held in its accounts. Data on the owners of the assets are not

included in the annual return. The financial intermediary must report to the tax authorities the

regularized assets, along with information on the beneficiary of those assets. No report need be filed

for repatriated assets.

The repatriation triggers no automatic reporting obligation for the financial intermediary, whereas

the regularization triggers it for the intermediary to report to the Italian tax authority the details of

the transaction. The assets that have been repatriated are deposited with the intermediary in special

accounts. The intermediary does not report the details of those accounts to the Italian tax

authorities.

Malta

Malta’s Minister of Finance in Malta, Hon. Dr. Tonio Fenech, has announced in September 2009 that

there would be an amnesty for tax payers who had fallen behind in their tax payments. Amongst the

main reasons for the introduction of such a measure was an attempt by the Government to recover

amounts due also in light of a forecasted drop in taxes due including income taxes in the coming

year.

Requirements

The amnesty shall therefore apply to tax payers who had arrears in their income tax payments. Tax

payers with arrears in payments dating back to 1998, would benefit from a 90 percent reduction on

the interest and fines which would usually be due. On the other hand, tax payers with arrears dating

to before 1997, and therefore before the systems at the Inland Revenue Department were not

computerised, would be entitled to pay 75 percent of the balance due.

Defaulters would be informed of the scheme in a letter which would list the amounts they owed and

what they would be paying if they took up the said Amnesty. Applicants have until 15th

January 2010

to apply for the scheme. The scheme is voluntary but applicants would be required to drop any

objections or claims they might have.

Turkey

On 22 November 2008, Law No. 5811 on "The inclusion of assets into the national economy"

introduced a preferential tax regime for foreign income and capital and assets which might be

qualified as a tax amnesty. The main purpose of the law was to encourage legitimization of domestic

and foreign capital and income.

The most important features of the amnesty are summarized below:

Eligible assets

The following assets of individuals and companies were eligible for the amnesty:

– foreign assets such as cash, foreign currency, gold, securities and other capital market

instruments transferred to Turkey;

– immovable property owned abroad, which was declared and recorded in Turkey; and

– non-registered domestic movable and immovable assets, which were upon legitimization

invested and recorded as capital.

Foreign assets and immovable property

Foreign assets of individuals and companies acquired before 1 October 2008 and held abroad had to

be declared at their market value. The declaration had to be done by 28 February 2009 before

banks, intermediary institutions or tax offices. The assets had to be transferred to Turkey and

deposited with a bank or intermediary institution within a month after the declaration date. In the

case of immovable property, its value was only declared, registered in the books and taxed at the

relevant rate.

A one-off tax at 2% was levied on the market value of the assets transferred, provided that they

were duly documented and recorded. This tax was not deductible from any taxable income and

could not be credited against any other tax.

Domestic assets

Individual income taxpayers and corporate income taxpayers had to declare their domestic non-

registered movable and immovable assets at their market value to tax offices by 28 February 2009.

The movable assets had to be deposited with a bank or an intermediary institution. The assets had

to be recorded in the books and capitalized within 6 months after the declaration date.

A one-off tax at 5% was levied on the market value of the assets legitimized. This tax was not

deductible from any taxable income and could not be credited against any other tax.

For both the foreign assets transferred and the domestic assets legitimized, no tax examinations will

be held and no additional tax charges be accrued for tax periods before 1 January 2008. It should be

mentioned that although the proposed draft law set the amnesty covering all kinds of criminal

investigations, there had been strong opposition in the public, and also in the parliament, that the

amnesty would unacceptably legitimize money laundering crimes.

Amnesty for foreign income

In addition, the following foreign-source income derived by resident individuals and companies were

exempt from personal income tax and corporate income tax, provided that the income was

transferred to Turkey by 31 May 2009:

– capital gains derived from the disposal of shares and participations in foreign companies;

– foreign-source dividends; and

– business income from foreign permanent establishments of Turkish companies and

individuals.

Liquidation gains derived from abroad by resident individuals and companies were also exempt, if

transferred to Turkey by 31 October 2009.

According to the Explanatory Memorandum to the Law, referring to the worldwide financial crisis

felt already in 2008, the desired effects pursued by the amnesty were (1) to attract financial sources

for investments necessary to alleviate the productivity, employment and inflation problems in

Turkey; (2) to maintain the dynamic economy due to the continuous growth of the Turkish economy

for the past years, (3) to secure an important financial source for tackling the effects of the global

financial crisis with minimum damages, and (4) to strengthen the capital structures of enterprises.

In Turkish tax history, between 1923 and 2004, 37 tax amnesties have been introduced in the form

of a full or partial waiver of taxes, interest or penalties. The average indicates that tax amnesties

have been introduced every two years by the Governments as a measure for higher tax revenues.

Such a frequency, however, puts forth the success of the tax amnesties under criticism. In Turkish

tax literature, such tax amnesties have always been criticized in terms of equality principle, and the

ability to pay principle thereof, set under the Turkish Constitution. Furthermore, historically,

attention must be paid on the somewhat paradox practice of introducing tax amnesties every two

years coupled with frequent additional one-off taxes introduced to tackle budgetary deficits.

The Ministry of Finance announced the total amount of declared funds during the negotiations

conducted in the Parliamentary Budgetary Commission on the proposal for extension of the

amnesty. Accordingly, the total declared funds amounted to TRL 14.8.billion, 72% (TRL 10.7 billion)

of which was foreign assets, while the domestic ones were TRL 4.1. billion. The accrued taxes

amounted to TL 419.1 million (TRL 215 million for foreign and TRL 204 million for domestic assets),

TRL 206.6 million of which have been collected. The Ministry of Finance has expressed that the level

of legitimization of foreign assets was considerably below the expectations, compared to that level

for domestic assets.

United Kingdom

HMRC have published details of their New Disclosure Opportunity (NDO). The NDO applies to

individuals with unpaid taxes in connection with offshore accounts and assets. A disclosure

opportunity window will be opened between 1 September 2009 and 12 March 2010.

Individuals who take advantage of the NDO will face a tax penalty of 10% of the unpaid tax. Those

who do not do so will face a penalty of at least 30%, plus the risk of criminal prosecution, if

subsequently discovered by HMRC.

HMRC have declared that there will be no more of such disclosure opportunities once the NDO

comes to an end.

Special provisions apply for certain individuals who did not take advantage of the Offshore

Disclosure Facility (ODF) (the precursor to the NDO, which was in place during 2007), despite having

been invited to do so by HMRC. Should such inividuals now wish to take advantage of the NDO, the

tax penalty is 20%.

United States

A. Voluntary Disclosure Program

The US Internal Revenue Service (IRS) has published the texts of three internal memoranda

addressed to the Commissioner and Industry Directors of the Large and Mid-size Business Division

(LMSD), the Commissioner and Examination Area Directors of the Small Business / Self Employed

Division (SBSE), and the Criminal Investigation (CI) Directors of Field Operations. The memoranda

and accompanying press release set out a new policy to encourage voluntary disclosure of offshore

bank accounts. Through the memoranda, the IRS has revoked the Last Chance Compliance Initiative

(LCCI) and commenced a new penalty procedure in lieu of other applicable penalties.

All three memoranda are dated 23 March 2009 and have the following subject lines: (i) Emphasis on

and Proper Development of Offshore Examination Cases, Managerial Review, and Revocation of Last

Chance Compliance Initiative; (ii) Authorization to Apply Penalty Framework to Voluntary Disclosure

Requests Regarding Unreported Offshore Accounts and Entities; and (iii) Routing of Voluntary

Disclosure Cases.

The new penalty framework will be in effect from 23 March 2009 to 23 September 2009 and apply

only to voluntary disclosure requests. The new penalty provisions for offshore issues of taxpayers

seeking voluntary disclosures will be:

– The IRS will assess all taxes and interest due for the past 6 years and require filing or

amending all returns, including any relevant information returns and TD Form 90.22-1, the

Report of Foreign Bank and Financial Accounts (FBAR).

– Assessment of either an accuracy-related penalty or a delinquency penalty on all of the past

6 years.

– In lieu of other applicable penalties that may apply, a 20% penalty on the amount in the

foreign bank account in the year with the highest aggregate account or asset value.

– The reduction of the 20% penalty to 5% if the taxpayer did not open the account, there was

no account activity while the taxpayer controlled the account, and all taxes have been paid

on the funds in the account.

As noted above, effective 23 March 2009, the IRS will discontinue the Last Chance Compliance

Initiative (LCCI). Taxpayers who have currently open LCCI examinations may still resolve their cases

under the LCCI if they respond to the IRS examiner within 15 days from the date of their prior

notification.

The memoranda also amend the processing of voluntary disclosure applications and stress the

prioritization of examinations involving offshore transactions and need for managerial oversight. The

new process is that all applications for voluntary disclosure requests will still be examined first by the

CI unit but then centrally processed by the Philadelphia Offshore Identification Unit (POIU). The

memorandum in this case directs agents to Internal Revenue Manual Section 9.5.11.9 for questions

pertaining to taxpayer eligibility for the programme.

B. Extension

The US Internal Revenue Service (IRS) has announced a one-time extension of the deadline for the

special voluntary disclosure. The new deadline is 15 October 2009. Taxpayers originally had until 23

September 2009 to apply for the program. The announcement states there will be no further

extensions.


Appendix III: Bringing tax transparency in line with OECD standards

Since 2008, the number of information exchange agreements has exponentially increased as

jurisdictions around the world reshape their treaty policy to conform with OECD standards on

information exchange. Over 200 such agreements have been signed in only the past two years.

The role of the IBFD in this regard is the documentation and organization of these agreements.

The IBFD Tax Treaties Unit is composed of several researchers who are in the process of obtaining,

formatting, and cataloguing these agreements in order to make them available to both the

academic community as well as our subscribers. The following appendix is coordinated with the

format of the OECD progress reports and is intended to demonstrate the volume of activity that

has occurred over the past two years. The IBFD has obtained the texts of all of these agreements

which are available on the IBFD’s Tax Treaty Database.

Andorra

- Exchange of Information

Agreement between Andorra

and Argentina



and Austria



and Belgium



and France



and Liechtenstein



and Monaco



and Netherlands



and San Marino

Anguilla


Agreement between Anguilla

and Denmark



and Ireland



and Netherlands



and United Kingdom

Antigua and Barbuda


Agreement between Antigua

and Barbuda and Australia



and Barbuda and Denmark



and Barbuda and Netherlands



and Barbuda and United

States

Argentina


Agreement between Argentina

and Andorra


Agreement between Argentina

and Monaco

Aruba


Agreement between Aruba

and Bermuda



and British Virgin Islands



and Denmark



and Faroe Islands



and Finland



and Greenland



and Iceland



and Netherlands Antilles



and Norway



and Spain



and St. Kitts and Nevis



and St. Vincent and the

Grenadines



and Sweden



and United States

Australia


Agreement between Australia

and Antigua and Barbuda



and Bermuda






and Cook Islands



and Gibraltar



and Guernsey



and Isle of Man



and Jersey




Austria


Agreement between Austria

and Andorra



and Gibraltar



and Monaco




Grenadines

Bahamas


Agreement between Bahamas

and Monaco



and San Marino



and United Kingdom



and United States

Belgium


Agreement between Belgium

and Andorra

Bermuda


Agreement between Bermuda

and Aruba



and Australia



and Denmark



and Faroe Islands



and Finland



and Germany



and France



and Netherlands



and Greenland



and Iceland



and Ireland



and Mexico



and Netherlands



and Antilles



and New Zealand



and Norway



and Sweden



and United Kingdom

British Virgin Islands


Agreement between British

Virgin Islands and Aruba



Virgin Islands and Australia



Virgin Islands and Denmark



Virgin Islands and Faroe

Islands



Virgin Islands and Finland



Virgin Islands and France



Virgin Islands and Greenland



Virgin Islands and Netherlands

Antilles



Virgin Islands and New

Zealand



Virgin Islands and Norway



Virgin Islands and Iceland



Virgin Islands and Netherland



Virgin Islands and Sweden



Virgin Islands and United

Kingdom



Virgin Islands and United

States

Canada


Agreement between Canada


Cayman Islands


Agreement between Cayman

Islands and Denmark



Islands and Faroe Islands



Islands and Finland



Islands and France



Islands and Greenland



Islands and Iceland



Islands and Ireland



Islands and Netherlands



Islands and New Zealand



Islands and Norway



Islands and Sweden



Islands and United States

Cook Islands


Agreement between Cook

Islands and Australia


Agreement between Cook

Islands and New Zealand

Denmark


Agreement between Denmark

and Anguilla



and Antigua and Barbuda



and Aruba



and Bermuda






and Gibraltar



and Guernsey



and Isle of Man



and Jersey






and St. Kitts and Nevis




Grenadines



and Turks and Caicos



and Cayman Islands

Faroe Islands


Agreement between Faroe

Islands and Aruba



Islands and Bermuda



Islands and British Virgin

Islands



Islands and Gibraltar



Islands and Isle of Man



Islands and Netherlands

Antilles



Islands and San Marino



Islands and Cayman Islands

Finland


Agreement between Finland

and Aruba



and Bermuda






and Gibraltar



and Guernsey



and Isle of Man



and Jersey






and Cayman Islands

France


Agreement between France

and Andorra



and Bermuda






and Cayman Islands



and Gibraltar



and Guernsey



and Isle of Man



and Jersey



and Liechtenstein



and San Marino




Germany


Agreement between Germany

and Bermuda



and Gibraltar



and Guernsey



and Isle of Man



and Jersey



and Liechtenstein

Gibraltar


Agreement between Gibraltar

and Australia



and Austria



and Denmark



and Faroe Islands



and Finland



and France



and Germany



and Greenland



and Ireland



and New Zealand



and Portugal



and United Kingdom



and United States

Greenland


Agreement between

Greenland and Aruba


Agreement between

Greenland and Bermuda


Agreement between

Greenland and British Virgin

Islands


Agreement between

Greenland and Cayman Islands


Agreement between

Greenland and Gibraltar


Agreement between

Greenland and Guernsey


Agreement between

Greenland and Isle of Man


Agreement between

Greenland and Jersey


Agreement between

Greenland and Netherlands

Antilles


Agreement between

Greenland and San Marino

Guernsey


Agreement between Guernsey

and Australia



and Denmark



and Finland



and France



and Germany



and Greenland



and Iceland



and Ireland



and New Zealand



and Norway



and Sweden



and the Faroe Islands



and the Netherlands



and United Kingdom



and United States

Iceland


Agreement between Iceland

and Aruba



and Bermuda






and Cayman Islands



and Guernsey



and Isle of Man



and Jersey




Ireland


Agreement between Ireland

and Anguilla



and Bermuda



and Cayman Islands



and Gibraltar



and Guernsey



and Isle of Man



and Jersey



and Liechtenstein




Isle of Man


Agreement between Isle of

Man and Australia



Man and Denmark



Man and Faroe Islands



Man and Finland



Man and France



Man and Germany



Man and Greenland



Man and Iceland



Man and Ireland



Man and New Zealand



Man and Norway



Man and Sweden



Man and the Netherlands



Man and United Kingdom



Man and United States

Jersey


Agreement between Jersey

and Australia



and Denmark



and Finland



and France



and Germany



and Greenland



and Iceland



and Ireland



and New Zealand



and Norway



and Sweden



and the Faroe Islands



and the Netherlands



and United Kingdom



and United States

Liechtenstein


Agreement between

Liechtenstein and Andorra


Agreement between

Liechtenstein and France


Agreement between

Liechtenstein and Germany


Agreement between

Liechtenstein and Ireland


Agreement between

Liechtenstein and Monaco


Agreement between

Liechtenstein and St. Vincent

and the Grenadines


Agreement between

Liechtenstein and United

Kingdom


Agreement between

Liechtenstein and United

States

Mexico


Agreement between Mexico

and Bermuda


Agreement between Mexico


Monaco


Agreement between Monaco

and Andorra



and Argentina



and Austria



and Bahamas



and Belgium



and Liechtenstein



and Samoa



and San Marino



and United States

Netherlands


Agreement between

Netherlands and Andorra


Agreement between

Netherlands and Anguilla


Agreement between

Netherlands and Antigua and

Barbuda


Agreement between

Netherlands and Bermuda


Agreement between

Netherlands and British Virgin

Islands


Agreement between

Netherlands and Cayman

Islands


Agreement between

Netherlands and Guernsey Isle

of Man


Agreement between

Netherlands and Jersey


Agreement between

Netherlands and Samoa


Agreement between

Netherlands and St Kitts and

Nevis


Agreement between

Netherlands and St. Vincent

and the Grenadines


Agreement between

Netherlands and Turks and

Caicos

Netherlands Antilles


Agreement between

Netherlands Antilles and

Aruba


Agreement between


Australia


Agreement between


British Virgin Islands


Agreement between


Bermuda


Agreement between


Canada


Agreement between


Denmark


Agreement between

Netherlands Antilles and Faroe

Islands


Agreement between


Finland


Agreement between


Greenland


Agreement between


Iceland


Agreement between


Mexico


Agreement between

Netherlands Antilles and New

Zealand


Agreement between


Norway


Agreement between

Netherlands Antilles and Spain


Agreement between

Netherlands Antilles and St.

Kitts and Nevis


Agreement between


Sweden


Agreement between


United States

New Zealand


Agreement between New

Zealand and Bermuda



Zealand and British Virgin

Islands



Zealand and Cayman Islands



Zealand and Cook Islands



Zealand and Gibraltar



Zealand and Guernsey



Zealand and Isle of Man



Zealand and Jersey



Zealand and Netherlands

Antilles

Norway


Agreement between Norway

and Aruba



and Bermuda






and Guernsey



and Isle of Man



and Jersey






and Cayman Island

Portugal


Agreement between Portugal

and Gibraltar

Samoa


Agreement between Samoa

and Monaco



and Netherlands



and San Marino

San Marino


Agreement between San

Marino and Andorra



Marino and Bahamas



Marino and Faroe Islands



Marino and France



Marino and Greenland



Marino and Monaco



Marino and Samoa

Spain


Agreement between Spain and

Aruba


Agreement between Spain and

Netherlands Antilles

St. Kitts and Nevis


Agreement between St. Kitts

and Nevis and Aruba



and Nevis and Denmark



and Nevis and Netherlands



and Nevis and Netherlands

Antilles

St. Vincent and the

Grenadines


Agreement between St.

Vincent and the Grenadines

and Aruba




and Austria




and Denmark




and Liechtenstein




and Netherlands

Sweden


Agreement between Sweden

and Aruba



and Bermuda






and Cayman Islands



and Guernsey



and Isle of Man



and Jersey




The Faroe Islands


Agreement between the Faroe

Islands and Guernsey


Agreement between the Faroe

Islands and Jersey

Turks and Caicos


Agreement between Turks and

Caicos and Denmark



Caicos and France



Caicos and Ireland



Caicos and Netherlands



Caicos and United Kingdom

United Kingdom


Agreement between United

Kingdom and Anguilla



Kingdom and Bahamas



Kingdom and Bermuda



Kingdom and British Virgin

Islands



Kingdom and Gibraltar



Kingdom and Guernsey



Kingdom and Isle of Man



Kingdom and Jersey



Kingdom and Liechtenstein



Kingdom and Turks and Caicos

United States



States and Antigua and

Barbuda



States and Aruba



States and Bahamas



States and British Virgin

Islands



States and Cayman Islands



States and Gibraltar



States and Guernsey



States and Isle of Man



States and Jersey



States and Liechtenstein



States and Monaco



States and Netherlands

Antilles

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