What is Automatic Exchange of Information (AEOI)

Tuesday, May 10 2016 05:19 PM

Following in Foreign Account Tax Compliance Act's implementation, the Automatic Exchange of Information (AEOI) draws up common rules for reporting clients assets and income to their residing tax authorities in order to prevent tax evasion.

Its objectives is to request Financial Institutions (FIs) to implement due diligence processes. FIs will have to :

  • Identify new and pre-existing account holders as well as entities under foreign control
  • Collect their tax residence
  • Provide the relevant tax authorities with information on client's assist, income payments and trade flows during the fiscal year. 

The Organization for Economic Co-operation and Development (OCED) proposed a framework based on FATCA Model 1 Intergovernmental Agreements. The reference document, titled "Standard of Automatic Exchange of Financial Account Information in Tax matters", includes :

  • The Model CAA ( "Competent Authority Agreement" ) which defines the principle of the AEOI intergovernmental agreements
  • The Common Reporting & due diligence Standard (CRS) which defines reporting obligations, due diligence and reporting exemptions. 

Here are articles detailing the development since 2014:

http://politheor.net/switzerlandeu-automatic-exchange-of-information-the-beginning-of-an-end-for-the-swiss-banking-industry/

http://www.dnaindia.com/money/report-india-to-sign-tax-agreement-with-us-for-sharing-of-information-2069753

http://www.channelnewsasia.com/news/specialreports/parliament/singapore-to-implement/1452040.html