OECD Publishes Global Standard for Automatic Exchange of Information to Prevent Tax Avoidance (with YouTube musical selection)

The Organization for Economic Cooperation and Development ("OECD") published a new global standard for the automatic exchange of financial information to prevent tax avoidance. In developing the standard, the OECD worked with G20 countries and in cooperation with the European Union.

The standard, which is closely modeled after the FATCA Model 1(A) Intergovernmental Agreement ("IGA") developed by the United States, consists of two components: (a) the Common Reporting and Due Diligence Standard ("CRS") and (b) a Model Competent Authority Agreement. The CRS contains reporting and due diligence rules that are quite similar to Annexes I and II of the FATCA Model 1 IGA. The Model Competent Authority Agreement contains detailed rules on the exchange of the information. As with FATCA, the financial institutions required to report under the new OECD standard would include not only banks and custodians, but also brokers, certain collective investment vehicles and certain insurance companies, and the information required to be reported includes all kinds of investment income as well as account balances and sales proceeds from financial assets. Reportable accounts include accounts held by individuals and entities (which include trusts and foundations), and the standard requires financial institutions to look through passive entities to report on the relevant controlling interests.

The OECD is developing detailed commentary to help in the consistent application of the standard, as well as information on certain "technical solutions." Such commentary and technical solutions are expected to be published by the OECD by mid-2014.

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