The Organisation for Economic Co-operation and Development (OECD) has suggested exploring the scope of the Common Reporting Standard (CRS) to include real estate under the automatic exchange of information (AEOI) among countries on a voluntary basis.
Following a request from the G20 India Presidency, the OECD submitted an updated report on July 17 that examines the current state of tax transparency concerning foreign-owned real estate. “It also explores how recent advancements in other tax transparency frameworks, such as the OECD/G20 CRS, and broader policy developments, such as the Financial Action Task Force (FTF)’s work on beneficial ownership, could inform possible improvements to tax transparency in the area of real estate on a voluntary basis,” OECD said.
On Tuesday, a G20 Chair Summary issued after the two-day meeting of Finance Ministers and Central Bank Governors (FMCBG) at Gandhinagar noted the OECD Report on Enhancing International Tax Transparency on Real Estate and the Global Forum Report on Facilitating the Use of Tax-Treaty-Exchanged Information for Non-Tax Purposes.
At present, the OECD’s AEOI framework provides for sharing of financial account details among signatory countries to check tax evasion.
India has been pressing for enhanced tax transparency in overseas real estate holding by assesses as well as the use of tax-treaty-enabled information for non-tax purposes to curb tax evasion and illicit financial flows.
Several studies show that cross-border real estate holdings are on the rise. However, tax authorities often lack visibility into tax-relevant aspects of foreign real estate holdings of their residents and there are indications that this raises tax compliance risks. In addition, aspects of the real estate sector have been identified as a risk area by the FATF.
The report suggests that, in the short term, interested countries could make significant progress at limited cost by exchanging information that is readily available on the basis of existing international legal and operational gateways for the exchange of information.
In the long-term, a model could be based on a more novel direct access-based model, building on the ongoing trend, in particular in the anti-money laundering and financial regulatory space, towards the interconnection of digitalised ownership registers accessible to designated relevant government agencies on a real-time basis, OECD said.
On the sharing of information from tax to non-tax authorities, which can include information exchanged under international tax agreements, OECD said in another report that, this could be achieved through the implementation of co-operation agreements. Such agreements could be between competent authorities for exchange of information for tax purposes, and between tax and non-tax authorities at the domestic level.
The numbers of jurisdictions participating in AEOI and the amount of information exchanged continue to increase; in 2022, information on over 123 million financial accounts worldwide, covering total assets of above euros 12 trillion, was exchanged automatically, OECD said