Mauritius poised to implement reporting for automatic exchange of tax information
The Standard was approved by the OECD Council on 15 July 2014 and was formally presented to G20 Finance Ministers at their latest meeting on 20-21 September 2014. (Image: C20 Australia Organization)
Mauritius is at the cusp of compliance with ever more stringent tax norms, with the impending implementation of the Common Reporting Standard for automatic exchange of tax information confirmed by the island authorities recently.
This measure is in line with the proposed new global Common Reporting Standard for automatic exchange of tax information in a multilateral context, recently proposed by the Paris-based Organisation for Economic Co-operation and Development (OECD).
The island economy confirmed on September 18, its commitment to implement the Common Reporting Standard for automatic exchange of tax information and said that it is already taking the required steps to implement the new global standard for automatic exchange of tax information.
This standard, which has been endorsed by the G20 Finance Ministers, largely builds on the US Foreign Accounts Tax Compliance Act (FATCA).
The Mauritian government and the US government signed on December 27, 2013 a Tax Information Exchange Agreement (TIEA) and an Inter-governmental Agreement (IGA) for the implementation of the FATCA between the two countries.
It can be recalled that Mauritius is the first African country to have signed an Intergovernmental Agreement with the USA to implement the FATCA.
The objective of the FATCA, enacted in March 2010 by the US authorities, is to identify US persons behind foreign financial holdings and communicate their corresponding investment information, namely names, addresses, account numbers, account balances and incomes derived from such investments to the US Inland Revenue Service (IRS).
On 21 July 2014, the OECD released the full version of the Standard for Automatic Exchange of Financial Account Information in Tax Matters.
The Standard calls on governments to obtain detailed account information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis.
The Standard was approved by the OECD Council on 15 July 2014 and was formally presented to G20 Finance Ministers at their next meeting, held on 20-21 September 2014.
The Standard provides for annual automatic exchange between governments of financial account information, including balances, interest, dividends, and sales proceeds from financial assets, reported to governments by financial institutions and covering accounts held by individuals and entities, including trusts and foundations.
It sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.
On 22 September 2014, the Global Forum on Transparency and Exchange of Information for Tax Purposes delivered a roadmap to the G20 Development Working Group which is for developing country participation in the new OECD Standard on the automatic exchange of financial account information.
Effectively, this roadmap is an important part of the efforts to curb multinational tax avoidance and offshore tax evasion in developing countries.
It may be noted that, in context of the low-tax jurisdiction offered by the island economy to global businesses, Mauritius has been struggling against allegations of being a tax haven.
Unfortunately, this is especially true for India-directed investments routed through the island economy, with the government of the Asian emerging economy claiming that the Indo-Mauritius tax treaty is being exploited by investors for round-tripping and treaty shopping.
Earlier this year, Mauritius decided to provide automatic exchange of tax related information with India to give greater credence to the island economy’s assertions that it has sound systems and processes in place to prevent misuse of its low-tax regulations by investors seeking to by-pass economic substance requirements.
In this context, Mauritian Prime Minister Navin Ramgoolam had entered into an agreement with India in May 2014 to provide greater information exchange on tax-related matters, while adding that Mauritius would not allow anybody to abuse or misuse its jurisdiction for any illicit activities.