How to comply with new rules for launch of automatic exchange of information on current accounts for non-residents

The season for automatic exchange of financial information, for tax purposes, of non-residents in Italy starts April 30. In fact, by that date, financial intermediaries must have sent the Italian Revenue Agency all information to implement the law of June 18 2015 n. 95 and Directive 2014/107/EU, which amended Directive 2011/16/EU on the automatic exchange of information in tax matters (in particular through the Common Reporting Standard – CRS).

This information will then be transmitted, by September 30 2017, to the authorities of the jurisdictions that adhere to the automatic exchange of information.

This exchange of information falls within the scope of international cooperation that is emphasized by both the OECD, through the CRS, and the United States with the signing of intergovernmental agreements for the implementation of the US legislation, Foreign Account Tax Compliance Act (FATCA).

In general the following personal data must be disclosed: name and surname, jurisdiction of residence, tax code identifying the country where the person resides, date and place of birth.

The financial data that must be exchanged are the account number, the name and tax code of the financial institution that is obliged to send data and the balance or the value of the account as at December 31 2016.

In the case of custody of financial assets, the gross revenues from portfolio management in addition to the balances must also be shared. The financial intermediary must also indicate the currency in which the data was collected.

It will be relevant to all the relationships with banks (i.e accounts, savings deposit and similar) in place after January 1 2016. For the relationship existing by December 31 2015, the law makes a difference between relevant accounts with a balance of $1,000,000 and not relevant when the balance is below that amount at the date above.

Depending on whether the account is relevant or not, there are higher or lower requirements regarding the verification to be carried out by the intermediary that has to send the required information.

Financial intermediaries will therefore be obliged to carry out and report on a type of tax due diligence on all accounts held by non-residents where the main duties consist of: a) verifying the truthfulness of the tax residence declared by the taxpayer who must show the residence certificates issued by the public institutions of the country in which he or she claims to be resident; b) the correct identification of the “Account Holder” who is the actual beneficiary regardless of the person who has the powers to manage the use of the sums in the account.

The regulation, among other things, provides that every year the actual account holder must be contacted at least once a year to verify the accuracy of the information required by the tax due diligence procedure. This must be done for at least 10 consecutive years from when the account is identified as an account subject to exchange of information on the basis of the rules described above.

From a look at the annexes to the legislation, today there are more than 90 states that have pledged to exchange information, with a division between those who will exchange information in 2017 (and therefore also for 2016) and those which have pledged to do so from 2018 which will cover information from 1 January 2017.

It should also be stressed that this regulation applies to both our citizens resident abroad for tax purposes and to foreign tax residents in Italy.

Di Stefano Mazzocchi e Roberto Viscomi