On 11 December 2017 the OECD released a consultation document asking for input from stakeholders on the design of model mandatory disclosure rules. These rules would set out disclosure obligations for promoters and service providers who involved in designing, marketing or implementing arrangements aimed at avoiding obligations under the common reporting standard or involving offshore structures.
These intermediaries would be required to disclose to the tax authorities information about their schemes including the identity of any user or beneficial owner and this information would then be made available to other tax authorities under relevant exchange agreements.
The common reporting standard (CRS) for automatic exchange of financial account information aims to restrict the possibility for taxpayers to hide income and assets offshore. However it has been found that some intermediaries are marketing avoidance schemes that aim to circumvent the CRS reporting obligations. The consultation document therefore aims to combat such avoidance schemes.
The OECD has issued the consultation document in response to a call from the G7 Finance Ministers in the Bali Declaration of 13 May 2017. They asked the OECD to begin discussing ways to deal with schemes to avoid CRS obligations or schemes under which beneficial owners could use non-transparent structures as a shelter for their income and assets.
The model disclosure requirements as set out in the consultation document cover the hallmarks of a disclosable scheme; the intermediaries that would be subject to the requirements; the point of time at which the disclosure obligation crystallizes; the information to be reported; and the penalties for non-compliance with the rules.
The hallmark for CRS avoidance arrangements covers an arrangement where it is reasonable to conclude that it has been designed or marketed to circumvent the CRS or has the effect of circumventing the CRS. This general criterion is supplemented by more specific hallmarks.
The hallmark for offshore structures covers passive offshore vehicles held through opaque ownership structures. This hallmark would also capture offshore structures such as real estate holding structures that are not normally expected to be subject to CRS reporting requirements. The test for an opaque ownership structure looks at whether the ownership structure obscures or disguises the identity of the beneficial owner. The rules target specific tax planning techniques that could achieve that outcome such as the schemes involving undisclosed nominees.
The information reporting requirements aim to capture the information about a scheme that will be the most relevant for tax administrations in their risk assessment. The information will help tax administrations to determine the jurisdictions with which the information should be exchanged under the relevant information exchange agreement.
The deadline for input from stakeholders is 15 January 2018.
