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International Cooperation and effective use of data
obtained under EOI – An Indian Perspective
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Why EOI ?
Legal Basis For EOI (India)
Inbound requests for EOI from Foreign Tax Authorities
Outbound requests for EOI to Foreign Tax Authorities
Automatic EOI
Spontaneous EOI
Security of information received under EOI
A presentation by
Mrs Nishi Singh, IRS
Member (P & V)
Central Board of Direct Taxes
Ministry of Finance
Government of India
Need for Exchange of Information
 Globalization and Liberalization
 Cross
border tax evasion and
Avoidance
 Information beyond barriers
 Implementation of domestic
laws becoming difficult
2
Legal basis for EOI
In India, EOI is effected through the following:
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Double
Taxation
Avoidance
Agreements/Conventions
(DTAAs/DTACs) (94 Countries)
Tax Information Exchange Agreements (19 Countries)
Multilateral Convention on Mutual Administrative Assistance in
Tax Matters (Multilateral Convention)
Mutual Legal Assistance Treaties (MLATs)- Information is
obtained through MLATs particularly with countries/jurisdictions
with which there is no tax treaty.
Egmont Group of Financial Intelligence Units (FIUs) Informal
network of FIUs established with a view to have international
cooperation including information exchange in the fight against
money laundering and financing of terrorism.
3
EOI Cell – A Brief Profile
• Established in 2012 in the Foreign Tax and Tax Research Division,
Ministry of Finance.
• All requests made to Foreign Tax Authorities and all requests
received from abroad channeled through EoI Cell
• Headed by Joint Secretary (FT&TR-I) and Joint Secretary (FT&TRII) as Competent Authority, both having separate territorial
jurisdiction.
• Participation in meetings for development of standards and
overseeing compliance with standards such as Working Party 10
of OECD, Global Forum of Transparency and Exchange of
Information for Tax Purposes
• Organisation of Programmes for sensitization and training
• Manual on Exchange of Information: issuance & upgradation
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Exchange of Information – A Two Way Process
Inbound
Request
Outbound
Request
5
Outbound EOI
EOI Request
4
Indian CA
Foreign CA
Makes
Reference to
Indian C.A.
8
Info
provided
to field 7
Collecting Information
3
FEEDBACK
Providing Information
6
Assessment Unit /
Investigation Unit/
Departmental
Appellate
Authority
1
Scrutiny/
Investigation
Suspicious
Transaction
Entity Y
Entity X
2
5
Outbound EOI – Process in India
• Request can be made by the Assessing Unit,
Investigation Unit or departmental Appellate
authority.
• Request to be made in a prescribed proforma.
• Several instructions and a manual issued for
assistance of field authorities.
• Request to be made through Competent
Authority
Checks at the CA’s Office
 Whether there is a legal instrument for exchange




of information in place
Does the information relate to taxes covered by the
EOI instrument
Does the information relate to tax years covered by
the EOI instrument
Is the information requested foreseeably relevant to
an ongoing tax examination, investigation or inquiry
Is the request detailed enough, i.e. sufficient
background information provided to understand the
request and the information is sufficient to identify a
taxpayer or group of taxpayers etc.
Outbound EOI – Increasing Trend
Year wise statistics of outbound EOI
Sl No
F.Y.
No of Outbound EOI
1
2013-14
888
2
2014-15
1,673
3
2015-16
1,376
4
2016-17 (upto
September)
330+
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Inbound EOI Requests
CA of a Treaty
partner send
request to India
CA of India receives
request letter and
check the contents
Information
available with EOI
Cell
DGIT(Systems)
IT Database
Assessing
Officer
Collect requested
information
Send to CA
EOI Cell prepares reply
letter with the
requested information
Investigation
Wing
Enquiry
from
taxpayer
DGIT(Intelligence
& Criminal
Investigation)
Enquiry
from
information
holder
Send information to
requesting country
CA approves letter
and signs letter
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Forwarding the Request for Gathering
of Information
• Simple Information like copies of Tax returns and
current address which can be accessed by the
central database
– Head of database division known as DGIT (Systems)
• Field enquiries needed
– Head of Investigation having territorial jurisdiction
known as DGIT (Inv)
• Jurisdiction uncertain
– Member (Inv), for coordinated action by two or more
DGIT(Inv)s
Availability and Collection of Information
Information
Requested
Sources
Collection of
Information
Ownership of legal
entities
Banks and Financial
Institutions
Summons
Accounting
Other
Organisations, RoC
Survey
Banking
Taxpayer, or ARs
Search
Timelines
• Standard timeline – 90 Days!
• Basic information from database - 15 days
• Enquiries involved
– Nodal officer to submit report within 30 days of
receipt of request in his office
• Complex cases
– Interim report within 30 days
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•
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Information collected so far
Difficulties in collecting information
Further efforts to be made
Likely date for full information
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Automatic Exchange of Information
(AEOI)
• Global consensus for exchange of information on
automatic basis as per uniform standards
• Uniform standards modeled on FATCA and developed by
OECD in collaboration with non-OECD G20 countries
including India
• Endorsed by G20 as expected new international standard
• Indian PM’s Speech at G20 Leaders’ Summit in Brisbane
“India supports the new global standard on automatic
exchange of information, which would be instrumental in
getting information about unaccounted money hoarded
abroad and enable its eventual repatriation.”
AEOI (Contd.)
• A contracting state regularly provides standardized
information about various categories of income
(interest, dividends, royalties, etc.) related to
residents of the other contracting state.
• Information provided is usually sourced from
information returns stipulated in the domestic law of
the first mentioned state.
• Information gathering to meet the international
commitment
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AEOI (contd.)
• India along with 44 other countries (early adopters) have also
committed to implement the standards on an agreed date
• September, 2017
New accounts (both individuals and entity) opened after
1.1.2016
Pre-existing (as on 1.1.2016) individual high value accounts
(balance more than USD 1,000,000)
• September, 2018 (or September, 2017 if systems are in place)
Pre-existing (as on 1.1.2016) individual low value and entity
accounts
• Necessary legislative changes have been made through Finance
(No. 2) Act, 2014, by amending section 285BA of the Income-tax
Act, 1961, and necessary rules and guidelines are being formulated
in consultation with financial institutions.
AEOI (contd.)
• Designed with Broad Scope
– Financial Information to be reported would include all types
of investment income (including interest, dividends,
income from certain insurance contracts etc.) and would
also include account balances and sales proceeds from
financial assets
– Reporting Financial Institutions include not only banks and
custodians but also brokers, certain collective investment
vehicles (e.g. mutual funds) and certain insurance
companies
– Reportable accounts include accounts held by individuals
and entities (including trusts and foundations) and the
standards include a requirement to look through passive
entities to report on individuals that ultimately control these
entities
Spontaneous Exchange of Information
• Provide
information
on
a
spontaneous basis
• Effective tool to prevent global tax
evasion and avoidance
• Reciprocal assistance can be
expected
Spontaneous Exchange of Information
India
Info sent
Country X
spontaneously
Scrutiny
or search
Taxable Info on
a Non-resident
B of Country X.
Eg. Commission
paid for technical
services
Taxpayer A
Tax Return
verified /
Actions taken
for nondeclaration
Non Resident
Taxpayer B
Confidentiality
Need for confidentiality
• Commitments to the citizen that no
information sharing with countries that do not
protect confidentiality of the information.
• Integral part of Taxpayers Charter in many
countries.
• Offshore Financial Centres sharing information
on the condition that due confidentiality shall
be maintained.
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Confidentiality under Tax Treaties
• Article 26(2) of OECD Model DTAA
• Article 8 of Model TIEA
• Information is to be treated as secret in same manner
as information obtained under domestic laws of
receiving State
• Use and purpose and disclosure limited to persons or
authorities involved in
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–
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–
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Assessment
Collection
Enforcement
Prosecution
Determination of appeals
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Domestic Provisions for Confidentiality
• Section 138 read with notifications prohibits,
subject to certain exceptions, disclosure of any
information contained in any statement,
return furnished, or accounts or documents
produced under the Act
• Section 280 provides for punishment of
imprisonment upto six months and fine for
contravention of section 138
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Confidentiality – Right to Information Act
• Commentary on OECD Model Convention:
information may not be disclosed under
domestic information disclosure laws
• The domestic Right to Information Act is not
applicable to the information received in
confidence from foreign Government – explicit
exemption.
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Information received under EOI – Indian Experience
• Information regarding 628 entities having bank account
in a foreign bank under spontaneous EOI
– Undisclosed income of INR 81.86 Billion
– Penalty for concealment of INR 12.82 Billion
– 164 Prosecution proceedings initiated
• Information in 700 cases arising out of EOI requests on
the basis of information in public domain
– Undisclosed deposits of INR 50 Billion in foreign accounts
detected
– 55 prosecution proceedings initiated
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Thank you
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