EU and Andorra sign deal on automatic exchange of tax data

On 12 February 2016, the European Union and Andorra signed an agreement aimed at improving tax compliance by private savers.

The agreement will contribute to efforts to clamp down on tax evasion, by requiring the EU member states and Andorra to exchange information automatically.

This will allow their tax administrations improved cross-border access to information on the financial accounts of each other's residents.

"Tax instruments can only work effectively where they do not leave loopholes that can be used by tax planners to avoid taxation", said Jeroen Dijsselbloem, minister for finance of the Netherlands and president of the Council. "This agreement will enable remaining gaps in the exchange of information for taxation purposes to be filled in, and will maintain consistency in the applicable rules."

Upgrade

The agreement upgrades a 2004 agreement that ensured that Andorra applied measures equivalent to those in an EU directive on the taxation of savings income. The aim is to extend the automatic exchange of information on financial accounts in order to prevent taxpayers from hiding capital representing income or assets for which tax has not been paid.

The text was signed in Brussels:

on behalf of the EU, by Jeroen Dijsselbloem, president of the Council;

on behalf of Andorra, by Jordi Cinca Mateos, minister for finance.

The signature took place in the presence of Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, who also signed the document.

The Council adopted a decision on 12 February 2016 to authorise the signature on behalf of the EU.

The EU and the OECD

The agreement ensures that Andorra applies strengthened measures that are equivalent to measures in force in the EU. However, whereas the 2004 agreement was based on the EU's taxation savings directive, that directive has now been repealed. Directive 2003/48/EC was repealed on 10 November 2015 in order to eliminate an overlap with directive 2014/107/EU, which includes strengthened provisions to prevent tax evasion.

The agreement also complies with the automatic exchange of financial account information promoted by a 2014 OECD global standard.

The EU signed similar agreements with Switzerland on 27 May 2015, Liechtenstein on 28 October 2015, and San Marino on 8 December 2015. It approved the conclusion of the agreements with Switzerland and Liechtenstein on 8 December 2015.

Coverage

The agreement sets out to limit the opportunities for taxpayers to avoid being reported to the tax authorities by shifting assets. 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 Andorra will be able to:

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  identify correctly and unequivocally the taxpayers concerned;
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  administer and enforce their tax laws in cross-border situations;
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  assess the likelihood of tax evasion being perpetrated;
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  avoid unnecessary further investigations.

The EU and Andorra must now ratify or approve the agreement in time to enable its entry into force. The parties will strive to enable entry into force on 1 January 2017.