Industry News

OECD issues model mandatory disclosure rules

Monday, 12 March, 2018

The OECD has issued new model disclosure rules that requires intermediaries to inform tax authorities of any schemes they put in place for their clients to avoid reporting under the OECD/G20 Common Reporting Standard (CRS) or prevent the identification of the beneficial owners of entities or trusts.

Speaking on the publication of the new rules last Friday, an OECD spokesman said that, 'With the automatic exchange of CRS information becoming a global reality this year, it is the right moment to get hold of those taxpayers and advisors that attempt to undermine the reporting on offshore assets and that try to play the new global tax transparency framework'.

The new rules follow the Bari Declaration, issued by G7 Finance Ministers, that asked the OECD to look at addressing arrangements designed to circumvent CRS. An initial consultation was launched by the OECD in December 2017, and STEP’s response to that consultation can be found below. Industry criticisms of the mandatory disclosure rules included that the definitions of the proposed hallmarks are too vague; further erosion of legal professional privilege; the introduction of retrospectivity; and that they quickly follow the introduction of CRS into force.

Following the consultation responses, the new rules have seemingly not changed significantly. Instead, the two major modifications appear to be the changing of the date for retrospective disclosure, from 15 July 2014 to 29 October 2014, and increasing the amount of time to disclose an avoidance arrangement or offshore structure, from 15 to 30 days. Legal professional privilege is addressed in the Q&A accompanying the rules, which state that 'the rules do not require an attorney, solicitor or other admitted legal representative to disclose any information that is protected by legal professional privilege or equivalent professional secrecy obligations, but only to the extent that an information request for the same information could be denied under Article 26 of the OECD Model Tax Convention and Article 21 of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters'.

The OECD says that the new rules do not affect a jurisdictions’ CRS legislation; rather, these are information-gathering tools that seek to bolster the integrity of CRS. Individual jurisdictions implementing these model rules would need to take into account domestic specificities in their own CRS legislation. These model disclosure rules will now be submitted to the G7 presidency for formal approval.

Sources

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