Automatic Exchange Of Information (AEOI)

Automatic Exchange Of Information (AEOI)

Subject: Economy

Context:

India gets the 4th set of Swiss bank account details of its nationals and organisations as part of an annual information exchange–AEOI 2022.

Details:

• Switzerland has shared particulars of nearly 34 lakh financial accounts with 101 countries (with the 74 of these 101 countries, the information exchange was reciprocal).
• The information shared about Swiss bank account holders includes their name, address, country of residence, and tax identification number, among other details.
•  It aims to bring in transparency and restrict money laundering.

Concept:

Automatic Exchange Of Information (AEOI):

• Automatic Exchange of Information (AEOI) provides for the exchange of non-resident financial account information with the tax authorities in the account holder’s country of residence. It reduces the possibility of tax evasion.
• AEOI is the exchange of information between countries without having to request it.
• The guidelines and parameters for the AEOI are set by the Paris-based international body, the Organisation for Economic Co-operation and Development (OECD).
  • In 2014, the OECD developed the Common Reporting Standard (CRS) which allows every country to obtain data from Financial Institutions (FIs) and “automatically” exchange it with countries with which AEOI agreements are in order every year.
  • According to the OECD’s guidelines, no details of the quantum of funds or the names of account holders are to be published.
• The annual exercise of AEOI exchange is strictly meant for “tax only” purposes.
• The information is kept under the custody of and for action by the Central Board of Direct Taxes (CBDT).
• India presently shares bulk financial and banking information with 78 countries and receives the same from 107 countries.
• CBDT set up a network of Foreign Asset Investigation Units (FAIUs) in 14 of its investigation wings, to which the information of that region which has reached India via the AEOI route is transmitted in a secure manner.
  • It is the FAIUs that do the follow-up probe of the FI data, and to begin with, investigate whether the taxpayer has declared the foreign bank account/s in tax returns or not.
• India and Switzerland have entered into an Automatic Exchange Of Information (AEOI) agreement in January 2018. 
  • The first such exchange with India took place in 2019.