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International exchange of information in tax matters – rapid developments (Part 1.)

International exchange of information in tax matters - rapid developments.

Many of you are asking us – what is actually the exchange of information and tax reporting? 

It can be said that exchange of information in tax matters had started in 1919 with works of League of Nations. It continued  in 1963 with OECD Models of double taxation convention. Then, it speeded up from 1998 onwards with the publication of the OECD Report against harmful tax competition. 

Following the financial crisis of 2008, it took real acceleration with signature of vast number of tax exchange of information agreements (TIEA) with tax havens around the world. At the same time, USA enacted Foreign Account Tax Compliance  (FATCA) in 2010 thus (started) getting information about Americans with their bank accounts abroad. 

As other countries also wanted to receive the same financial and tax information about their citizens and residents as well, since 2013, a shift towards international automatic exchange of information has started to emerge as a new global standard, e.g. Common Reporting Standards (CRS).  

This unprecedented development has been further coupled with OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters (CMAT/MCMAAT), European Union initiatives mirrored in its numerous directives and other initiatives such as G8 and G20 groups.

The above huge tax information exchange developments are, on one hand, defended by developed countries arguing by the need to curb tax evasion and aggressive tax avoidance of companies and wealthy (HNW) individuals and thus the need for global tax transparency in todays global world.  

On the other hand, however, the rights of involved parties, i.e. taxpayers are being gradually eroded, e.g. right to privacy in financial matters has been considerably diminished.

In my opinion, the only viable, truly workable and long-term solution to tax evasion and aggressive tax avoidance is in decreasing of taxes which are simply too high, in particular in the developed countries where often effective combined tax rate and social contributions are as high as 50% or even more in some jurisdictions.   

When you are considering doing business or living abroad, you must comply with both, the new country domestic, but also international tax laws.   

We are here for you to help you to orientate and navigate you in the maze of tax reporting rules regarding the exchange of information so that you can protect yourself, your privacy, hence take an informed decision, e.g. in which country to set up your foreign company and open a bank account and in which country do not, and go where you will be treated the best. Contact us 24/7. 


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