Exchange of tax information with other countries - good to know!

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On April 30, 2019, the Act of April 4, 2019 amending the Act on the exchange of tax information with other countries and certain other acts entered into force, which introduced significant changes to the mutual exchange of this information between countries. The amendment unifies the rules and procedure for the exchange of tax information, the obligations of financial institutions with regard to the automatic exchange of information, and sets out the rules of control in this respect. What an entrepreneur should know about the new regulations and what is the exchange of tax information? Read the article!

Tax information exchange - agreement between the head of KAS and the authorities of other countries

The amendment significantly extended the powers of representatives of competent state authorities in connection with the exchange of tax information. Currently, the head of the National Revenue Administration (KAS), in order to exchange tax information, may conclude agreements with the competent authority of another Member State regarding the presence of authorized representatives of this authority at the headquarters of tax authorities and their presence in the course of proceedings for the provision of tax information, tax proceedings and other activities control. The head of KAS may conclude an agreement with the competent authorities of another EU country, on the basis of which his representative will be able to stay at the seat of the authorities in a given country and be present in the course of proceedings conducted by the authority of that country.

Where the tax information requested by a competent authority of a Member State is included in the file, the representatives of that authority shall receive copies of the documents containing that information.

Authorized representatives of the competent authority of a Member State, present in the course of the proceedings on the basis of which the exchange of tax information, tax proceedings or in the course of inspection activities takes place, may, under the concluded agreement:

  • ask questions to the witness and the party as part of the evidence taken from the witness or the party;

  • review and record documents and other evidence related to the case.

KAS representatives may not only be present in the course of proceedings conducted by an authority of another state, but also - ask questions to witnesses, and review and record documents and other evidence. KAS representatives may perform the above activities to the extent that the exchange of tax information is carried out.

Taking evidence to obtain tax information

Proceedings for the provision of tax information shall be initiated by the request of the competent authority of the Member State.

A novelty introduced by the analyzed amendment is the possibility of taking evidence in the course of the proceedings in order to obtain the tax information covered by the application. According to the amendment, the provisions of the Tax Ordinance will apply accordingly. The amendment introduces the possibility of taking evidence in the course of proceedings for providing tax information.

Regulations relating to trusts

In order to adapt the regulation to international practice, the amendment introduced a definition of trust, referring to the understanding of this concept in the Act on Counteracting Money Laundering and Terrorism Financing.

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A trust is a legal relationship governed by foreign law, resulting from a legal event, contract or arrangement, including a set of such events or legal acts, on the basis of which ownership or possession of property values ​​is transferred to the trustee for the purpose of fiduciary administration and making these values ​​available to beneficiaries. this ratio. The amendment introduces a definition of a trust - a trust relationship aimed at the protection and management of property. The definition of a trust was introduced into the Act because the amendment identifies a trust as a financial institution. The trust that is such an institution is a resident of:

  • a participating country in which it resides for tax purposes - if it provides information to that country in relation to reportable accounts maintained by it;

  • the country of residence of at least one of the trustees of this trust - in other cases.

The trust has the status of a reporting institution and therefore has additional obligations under the Act, including the due diligence procedure and the identification of reportable accounts. A trust within the meaning of the amendment is also the holder of an account maintained by the reporting financial institution. This means that it is subject to regulations that oblige it to recognize it as an entity for the purposes of the automatic exchange of tax information.

Declarations of tax residence

At the request of the Reporting Financial Institution, the Account Holder and Controlling Person are required to submit tax residency declarations and provide documents required under due diligence procedures.

When submitting a request to submit a declaration of tax residence, the Reporting Financial Institution may initially complete this declaration on the basis of information in its possession or information obtained from the account holder, including in the course of the procedure of opening a financial account, with the exception of information about the country of residence.

The scope of information provided in the declaration of tax residence includes, in the case of the account holder who is a natural person:

  • surname, first name or names as well as date and place of birth;

  • current address of residence;

  • country or countries of tax residence;

  • TIN for each country of tax residence, and in its absence - information about this circumstance and the reasons for its occurrence;

  • ID number and series.

On the other hand, in the case of an account holder who is an "entity" within the meaning of the Information Exchange Act:

  • name;

  • current address of the registered office;

  • the information referred to in point 1 lit. c and d;

  • the status and type of account holder as an NFE, Active NFE, or Passive NFE;

  • the surname, first name or names of the Controlling Persons of the Account Holder who are Reportable Persons;

  • in the case of the controlling person:

- the information referred to in point 1;

- name of the controlled entity or entities.

After the amendment, declarations on tax residence are submitted under pain of criminal liability for providing data that is inconsistent with the facts. The following clause was added to the declaration: "I am aware of the criminal liability for making a false declaration".

Amendments to the Fiscal Penal Code

In connection with the amendment to the Fiscal Penal Code, new types of prohibited acts have been added. The amendment introduces fiscal penal liability for some violations of the Act on the exchange of tax information with other countries. A fine of up to 180 daily rates shall be imposed on anyone who, acting on behalf or in the interest of the reporting financial institution, contrary to the provisions of the Act of March 9, 2017 on the exchange of tax information with other countries, fails to fulfill the obligation to:

  • the application of due diligence policies and procedures and reporting procedures;

  • recording activities undertaken as part of due diligence procedures;

  • gather the documentation required under due diligence procedures;

  • remove the irregularities indicated as a result of the control referred to in Art. 70 paragraph. 4 of this act.

In the case of a minor, the perpetrator is liable to a fine for a tax offense.

On the other hand, anyone who, acting on behalf or in the interest of the taxpayer, contrary to the provisions of the Act of March 9, 2017 on the exchange of tax information with other countries, submits false information for the purposes of information about entities belonging to the group of "entities" within the meaning of this Act, fines up to 240 daily rates.

In the event of a minor offense, the perpetrator of this offense is subject to a fine for a tax offense.