Information Exchange — International Tax Information Exchange

International exchange of information in tax matters refers to the structured sharing of tax-relevant data between national tax authorities of different countries. It forms the operational core of global tax transparency and enables tax administrations to identify, examine, and enforce tax obligations abroad. The exchange takes place on the basis of bilateral or multilateral agreements and encompasses three modes: automatic exchange, exchange on request, and spontaneous exchange.

The most important multilateral instrument is the OECD's Convention on Mutual Administrative Assistance in Tax Matters (MAC) and the Common Reporting Standard (CRS) built upon it. These are supplemented by US FATCA Intergovernmental Agreements (IGAs), bilateral double taxation treaties with information exchange clauses, and specific Tax Information Exchange Agreements (TIEAs). Within the EU, the Directive on Administrative Cooperation (DAC) in its various iterations governs information exchange among member states.

Automatic Exchange of Information (AEOI) has become the dominant model: financial institutions report account information to their national tax authority, which systematically transmits it to the tax authorities of the account holders' countries of residence. Over 120 jurisdictions now participate in CRS exchange, creating near-comprehensive global coverage.

The exchange of information in tax matters has a long history beginning with the OECD's first Model Convention for the Avoidance of Double Taxation (1963), which limited exchange to on-request cases. A first multilateral basis was created by the Strasbourg Convention on Mutual Administrative Assistance of 1988, later comprehensively modernized by the OECD/Council of Europe Protocol of 2010.

The decisive paradigm shift was triggered by FATCA: the US law of 2010 compelled foreign financial institutions to report on American account holders under threat of severe withholding tax penalties. In response, the OECD developed the Common Reporting Standard (CRS) on a G20 mandate, adopted in 2014 and operational since 2017. Simultaneously, the EU progressively expanded the Directive on Administrative Cooperation (DAC): DAC2 (financial account data), DAC3 (tax rulings), DAC4 (CbCR), DAC5 (access to anti-money laundering information), DAC6 (tax arrangements), DAC7 (platform data), and DAC8 (crypto-assets) extended automatic exchange to ever-new categories of information.

International information exchange affects the following actors and types of information:

• Financial institutions: Banks, custodians, investment funds, insurers — reporting account balances, interest, dividends, and proceeds from disposals
• Multinational enterprises: Groups above the revenue threshold report profit, tax, and employment data by country (CbCR)
• Tax authorities (senders): Transmit information on non-resident taxpayers to competent authorities of residence states
• Tax authorities (recipients): Analyze received data and reconcile it with tax returns
• Digital platform operators: Report income of sellers and service providers on their platforms (DAC7)
• Crypto-asset service providers: Report transactions and holdings of users (DAC8, OECD CARF)
• Tax ruling information: Tax authorities automatically exchange advance pricing agreements and rulings (DAC3)

Core obligations in the area of international information exchange:

• Due diligence review: Financial institutions must classify account holders by tax residence (self-certification under FATCA/CRS)
• Annual reporting: Submission of account data to the national tax authority by prescribed deadlines
• Onward transmission by tax authorities: Automatic forwarding of received data to tax authorities of residence states
• Responding to requests: Tax authorities must respond to information requests from other states within defined timeframes (Art. 26 OECD MTC)
• Confidentiality: Exchanged information is subject to strict secrecy rules and may only be used for tax purposes
• Reciprocity: Participating states must be capable of providing equivalent information in return
• Technical standards: Compliance with the OECD Common Transmission System (CTS) and the XML schema for data transmission

2 corrections:
- OECD CARF introduction date wrong: 2022, not 2021
- Official URL inaccessible (HTTP 403)
1 update:
- CRS participant count outdated: over 120 instead of over 100 jurisdictions
1 clarification.
2 notes.