India, Switzerland Automatic Exchange of Financial Account Information kicks in

Automatic Exchange of Information (AEOI) Regime between Switzerland and India kicked off from September 1, 2019. Under this mechanism, India will start receiving information on all financial accounts held by Indian residents in Switzerland, for the year 2018. Central Board of Direct Taxes (CBDT) has hailed this move as a significant step in the government’s fight against black money and end of “Swiss bank secrecy” era.

About Automatic Exchange of Information (AEOI)

It is the exchange of information between countries without having to request it. It aims to reduce global tax evasion.  It is to be carried out under Common Reporting Standard (CRS).

CRS is agreed global standard for it which has been approved by Organisation for Economic Co-operation and Development (OECD) in 2014. It is global reporting standard for such exchange of information, which takes care of aspects such as confidentiality rules and data safeguards.

India-Switzerland AEOI: Both countries had signed joint declaration on the introduction of the AEOI in tax matters on a reciprocal basis in November 2016. Under it-

• Both countries intend to start collecting data in accordance with global AEOI standard in 2018 and to exchange it from 2019 onwards.
• Both jurisdictions will inform each other of any relevant developments in respect to implementation of OECD CRS in their respective domestic laws.
• Each jurisdiction will confirm that it has informed other jurisdiction about the modalities made available to persons making voluntary disclosure of their financial assets for smooth transition to system of automatic exchange of information.

Significance of AEOI

It is likely to shed more light on wealth stashed away by Indians in Swiss bank accounts, for so long governed by strict local rules of secrecy. Through this mechanism, banking details of Indians with accounts in banks in Switzerland will be available to tax authorities (mainly CBDT) in India. Indian tax authorities will receive information in respect of all financial accounts held by Indian residents in Switzerland of calendar year 2018. It will also include details for accounts closed in 2018 will also be available. It should be noted that under this mechanism, India will not receive information on bank accounts prior to 2018.

Month: Current Affairs - September, 2019