On 28 October 2015, the European Union and Liechtenstein signed an agreement on the automatic exchange of financial account information aimed at improving international tax compliance.
The agreement represents an important step in ongoing efforts to clamp down on tax fraud and tax evasion. It upgrades a 2004 agreement that ensured that Liechtenstein applied measures equivalent to those in an EU directive on the taxation of savings income in the form of interest payments.
Under the agreement, the EU and Liechtenstein will automatically exchange information on the financial accounts of each other’s residents, starting in 2017 for information collected in 2016. The aim is to address situations where a taxpayer seeks to hide capital representing income or assets for which tax has not been paid.
The text was signed:
- on behalf of the European Union, by Pierre Gramegna, minister for finance of Luxembourg and president of the Council;
- on behalf of Liechtenstein, by Kurt Jaeger, head of the Liechtenstein mission to the EU.
The signature took place in the presence of Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, who also signed the document.
“I am glad that this agreement could be reached between the European Union and Liechtenstein, as it constitutes an important step towards a level playing field and greater tax transparency in Europe and beyond,” said Pierre Gramegna.
The agreement ensures that Liechtenstein applies strengthened measures that are equivalent to the EU legal framework in the field of automatic exchange of financial account information, as upgraded in December 2014. It also complies with the automatic exchange of financial account information promoted by a 2014 OECD global standard. The EU and Switzerland signed a similar agreement on 27 May 2015.
The agreement includes provisions intended to limit the opportunities for taxpayers to avoid being reported to the tax authorities by shifting assets or investing in products that are outside the scope of the agreement. Information to be exchanged concerns not only income such as interest and dividends, but also account balances and proceeds from the sale of financial assets.
Tax administrations in the member states and in Liechtenstein will be able to:
- identify correctly and unequivocally the taxpayers concerned;
- administer and enforce their tax laws in cross-border situations;
- assess the likelihood of tax evasion being perpetrated;
- avoid unnecessary further investigations.
The EU and Liechtenstein must now conclude the agreement in time to enable entry into force on 1 January 2016.
In a statement adopted along with the decision on the signing of the agreement, member states committed “to analyse the situation of Liechtenstein in the light of the measures provided for in this agreement and to take into account this agreement in their bilateral relations with Liechtenstein.”
Courtesy of the European Council