Exchange of tax information in the field of Money laundering prevention and data protection of taxpayers

Exchange of tax information in the field of Money laundering prevention and data protection of taxpayers

In response to the globalization of financial services, and to prevent Money laundering and tax fraud, since 2014 a new “Standard of exchange of information” has arisen. Said standard sets-out the manner in which the authorities of the countries that have adhered to this system exchange information on bank accounts, automatically and on an annual basis. The objective of said international standard is to fight against money laundering and tax evasion.

A year later, on 3 December 2015, Andorra signed a multilateral agreement on automatic exchange of Information (MCAA): a multilateral instrument that articulates the automatic exchange of Information of all States respecting the OECD standards. Further on, on 12 February 2016, the Principality of Andorra and the European Union signed an agreement on automatic exchange of tax information that entered into force on 1 January 2017 (EU Agreement).

The implementation of this standard has required, on the one hand, a database architecture agreed upon on a universal basis in order to gather all the relevant Information applicable to tax systems, and on the other hand, an international proceeding of automatic exchange of said information. Nevertheless, this progress can only be materialized through the coordination of each country’s proceeding, by way of setting up standardized systems of exchange of information and, fundamentally, from building a culture of cooperation at an international level.

In that respect, one must not forget that issues such as equity, legitimacy and tax Justice or the requirement to fulfill tax obligations that go beyond what is legally established have reached a social dimension. It is obvious that the public opinion is increasingly sensibilized regarding issues of tax evasion or aggressive tax planning. This has shown the importance of an adequate protection of the tax payer that faces such mechanism of exchange of information.

The regulation applies to tax payers that are residents in another country and that own a bank account in Andorra, accounts of a physical person and/or of a corporation/company (including trusts and foundations). The information that is exchanged include the name, the address, date of birth, bank account number, tax identification number, and encompasses all types of earnings, the income generated by sales or transmission of assets and the balance of the account.

During the years 2017 and 2018, Law 19/2016, that sets out the rules that are required to reach this undertaking of automatic exchange of information in the Principality of Andorra, was amended in order to extend the jurisdictions with which Andorra exchanges tax information. In 2019, Andorra exchanged Information with 73 countries and in 2020 this took place with 95 countries.

On this basis, it is necessary to emphasize the importance of the protection of the taxpayers’ rights involved by the automatic exchange of information, in particular from the perspective of data protection. Indeed, it is fundamental that the determination of these mechanisms of global exchange be accompanied by guarantees of the taxpayers’ positions through a rule that has the same hierarchy as the rules that set out the compulsory automatic exchange of information.

On 28 January 2019, the Principality of Andorra has been the twenty-fifth country to sign the Treaty 108+ of the European Council for data protection relating to data of personal character. In reality, 17 years have passed since the adoption of the first Andorran Law on protection of personal data (Law 15/2003, of 18 December). Nevertheless, there is a Bill of Law on the protection of personal data that updates the Law of 2003 and that has been under study at the Parliament since 27 November 2020.

In a nutshell, focusing on automatic exchange of information must not set aside the application of guaranties and rights of taxpayers, which are the subjects of said automatic exchange of Information and allow for a balance in the legal-tax interaction.

That being said, it must be considered that automatic exchange of information does not only suppose an “intrusion” for the taxpayer, but it must rather be perceived as a guarantee that helps reduce tax evasion and avoid risks of double taxation.

Clàudia Alonso

Augé Legal & Fiscal

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