01/04/19

MALTA: Exchange of information for taxation purposes update.

As published on timesofmalta.com, Sunday 31^st March, 2019.

The United States’ Foreign Account Tax Compliance Act (FATCA), the European Union’s Directive on Administrative Cooperation (DAC) in the field of taxation – which also includes the Organisation for Economic Cooperation and Development’s Common Reporting Standard (CRS), and Double Tax Treaties and Tax Information Exchange Agreements – have one common feature, namely, to enable tax information to flow among tax authorities.

With the goal of combating tax evasion and avoidance, tax authorities have put international cooperation through the exchange of information at the core of their agenda. This may be confirmed by the number of developments which emerged in this area following the introduction of FATCA, especially in the European Union, where the DAC has been amended no less than five times since then.

Although tax information may be exchanged in three ways, namely upon request, spontaneously and automatically, these main developments, which are based in their majority on automatic exchange of information, also symbolise the shift towards such means of exchange, which ensures that predefined information may flow systematically without prior requests and at pre-established regular intervals.  Until a few years ago, no particular importance was attributed to the subject of exchange of information in the domestic scene as exchange of information was rarely witnessed at first hand by the majority of local practitioners. This, however, changed abruptly when FATCA was introduced in Malta almost five years ago.

This is because the move ushered in a new era in the exchange of information on a global level and, consequently, at a domestic level. In Malta, the subject has evolved from the introduction of the first Double Tax Treaty up to the latest development, namely the introduction of the Mandatory Disclosure Rules which will require certain intermediaries such as tax advisors, accountants and lawyers to report reportable cross-border arrangements to the competent authorities of all other EU Member States.

Other significant developments which happened in this area include the specification of the main considerations which are relevant in determining the compliance obligations under FATCA and CRS for individuals and entities alike, and also the more recent reporting requirements imposed on the Commissioner for Revenue to exchange advance cross-border rulings and advance pricing arrangements and on multinational groups having more than €750 million in revenues to compile and submit country-by-country reports.