Tax information exchange agreement (TIEA) is a platform for the exchange of information based on a specific request for tax, criminal, or civil matters investigation between 2 countries. The interchange of information on request is based on standard reporting methodologies. TIEAs are important components in Hong Kong to help curb tax evasion back at home. In this article, we take a deeper look at what is the tax information exchange agreement?
TIEA contains these provisions
- Provides the baseline for exchanging information which is foreseeably relevant to administering and enforcing domestic tax laws for the contracting parties.
- Information that is shared under TIEA is safeguarded through confidentiality obligations. Therefore, disclosure can only be made to courts or other judicial proceedings for the sole purpose of determining taxation issues under consideration.
- The information requested and shared does not have to solely relate to the resident of a contracting party.
- If the information requested is not available, the requested party is under no obligation to investigate. Consequently, there is no domestic interest for tax related reasons.
- The info to be shared is defined in very broad terms including banking details, ownership details, and trusts/companies/persons.
- In addition to exchanging information, a representative from one party may be granted permission to conduct tax examination such as checking records and holding interviews.
The difference between TIEA and double tax agreement
The tax information exchange agreement differs from double tax agreements (treaties) in the following ways.
- Tax information exchange agreement includes all taxes that are administered by authorities under consideration and covers both civil and criminal related issues. However, double tax agreements are solely between two tax agreements for the purpose of avoiding double taxation.
- TIEAs only provide for the exchange of information about a specific matter under investigation. However, the double tax protocols applications do not require an issue to be under investigation.
- Tax information exchange agreement do not involve allocating rights on international income.
Tax substance is THE answer
Objectives of TIEAs
While the number of Tax information exchange agreement has been growing from time to time, many people have been asking about their benefits. Some people have argued that tax evaders might simply move their cash from one tax haven to another. The following are the aims of TEAs.
- Improving standards of gathering info on taxpayers, promoting transparency as well as good governance.
- Promoting international financial sector stability and support the fight against crime.
- Helping compliant businesses address undue competition from others that do not pay taxes.
- Deterring tax evaders from offshore engagements
Some countries that have entered into Tax information exchange agreement’s with Hong Kong include Denmark, Faroe Islands, Greenland, Iceland, Norway, Sweden and the USA. Please note that Hong-Kong signed the CRS with United Kingdom and Japan (= data exchange between these countries).