What does the Automatic Exchange of Information entail?

What does the Automatic Exchange of Information (AEOI) entail?

To improve tax transparency between countries and identify taxpayers who are attempting to hide their assets abroad, in 2014, the OECD and G20 Finance Ministers defined a standard for the automatic annual exchange of information on financial accounts held by non-fiscal residents at financial institutions in signatory countries. Previously, this information was in practice only forwarded at the request of a tax authority as part of an administrative assistance procedure.

This scheme has been incorporated into the French national legislation and entered into force in France on 1st January 2016. It affects both new accounts opened from that date and pre-existing ones.

Under this scheme, French financial institutions (and French branches of financial institutions based abroad) must determine the residence(s) for tax purposes of their account holders, collect their tax identification number(s) where necessary and transmit to the French tax authorities, via a specific annual declaration, the information collected on their customers who are fiscal residents in other countries participating in the automatic exchange of information and who have opened a financial account at their institution. This includes both natural persons and legal entities. The French tax authorities then transmit this information to the various tax authorities of the partner countries concerned.

What information do financial institutions provide?

These exchanges of information cover financial accounts in the broadest sense: bank accounts, life insurance policies, capital bonds and investment in funds. 

The information to be provided, for a natural person, includes account references, name, address, date and place of birth, country (countries) of residence for tax purposes and tax identification number(s) of the account holder, account balances, interest, dividends and other income paid into accounts, total proceeds from the sale or redemption of financial assets and surrender values for life insurance policies and capital bonds. The declaration relating to information for a given year must be sent by the financial institution to the French tax authorities before 31 July of the following year.

What are the obligations for account holders? 

To enable financial institutions to reliably identify the holders of financial accounts opened since 1st January 2016, the holders of these accounts are required, since 30 December 2017, to complete and sign a “self-certification” form containing the information required to identify their tax residence and, where applicable, their tax identification number (or those of the natural persons who control them). In the absence of this self-certification, financial institutions are no longer (since 30 December 2017) authorised to open an account. In the event of a change in circumstances that might affect the validity of the self-certification provided, account holders must provide a new self-certification form. 

For accounts opened since 1st January 2016, financial institutions have to provide the tax authorities with a list of account holders who have not supplied them with their tax residence information and tax numbers.

Customers will be considered eligible to be reported on this list intended for the tax authorities 30 days after receipt of the financial institution’s second request.Failure by account holders to provide their tax residence information and tax number is punishable by a fine of €1,500. 

N.B. Exempting provisions are provided for under the implementation of the US Foreign Account Tax Compliance Act (FATCA) for the automatic exchange of information with the United States.