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Comments on the Imminent Automatic Exchange of Banking Information between Andorra and Spain

David Raso's picture
Published: 03/12/16 - Country: Spain

The Principality of Andorra is about to implement with an internal law the amending Protocol to Directive 2003/48 / EC with the European Community on the taxation of savings income. The modification of the agreement implies in practice the application of the new global standard for the automatic exchange of financial account information approved within the OECD (the so-called CRS).

In this vein, on 28 July 2016, the Principality of Andorra has already ratified the Multilateral Agreement of the Council of Europe and the OECD on mutual administrative assistance in tax matters. This Agreement also includes the global standard for the automatic exchange of financial account information.

This has come as no surprise since other European markets such as Switzerland, Liechtenstein, San Marino or Monaco have also acceded to the new Directive with regard to the automatic exchange of financial and tax information.

The object and scope of the future Andorran law will regulate the automatic exchange of tax information between the Principality of Andorra and other States (EU and OECD countries) within the framework of the following international agreements:

  • The Agreement in the EU and the Principality of Andorra signed on 12 February 2016.
  • Other international agreements or agreements providing for the automatic exchange of financial account information between other States and the Principality of Andorra in accordance with the common OECD standard on communication and due diligence standards for information on Andorran financial accounts.

The information to be made available by the Government of Andorra to the tax authorities of the European States (Spain and the remaining 27 member states) can be summarized in the following list of data:

  • Current account number
  • Tax identification number
  • The name and surname
  • The address and date of birth of taxpayers resident abroad with an account in Andorra
  • Type of income (interest, dividends and income attributed to certain insurance contracts, among others)
  • Income derived from the sale or transfer of assets and the balance of their accounts.

It is important to emphasize that the norm covers both natural persons and legal persons (among others, therefore, companies, foundations and even figures such as trusts).

Andorran financial institutions will be obliged to identify the effective beneficiary of the account, the linked passive structures, as well as the identity of the persons who hold them.

This automatic exchange of information means that Andorran financial institutions will be obliged to provide the Andorran Ministry of Finance with bank or financial documentation and, later automatically, it will transmit it annually to the tax authorities of the member states, including Spain .

The automatic exchange of information in Andorra will be applicable on a general basis as of January 1, 2017 despite the fact that banking information with fiscal significance and effects 2017 will not be made available until June 2018.

A specific regime may be approved for preexisting accounts depending on whether or not they exceed US $ 1,000,000 owned by individuals. The former would be subject to automatic exchange of information from June 2018, but the latter would only be in effect as of June 2019. And in relation to pre-existing accounts owned by companies, only if they exceed US $ 250,000 do they appear to be subject to exchange Of automatic information from June 2018.

The information will automatically reach the AEAT without the need for even its request, which is obviously worrying a lot of those taxpayers who have not yet regularized their tax situation in Andorra (basically the holders of financial assets abroad: accounts Deposits, investment funds, etc., which did not benefit from the tax amnesty, or which simply have not submitted the annual declaration of assets and rights abroad through the corresponding Models 720).

It is therefore advisable to carry out an immediate analysis on the possibilities of regularization of the individual situation of each owner who is in that situation.

In conclusion, in view of the imminent regulatory changes that will make the Spanish tax inspection automatically and fully aware of the ownership and fiscal data relating to the assets deposited in Andorra as of January 1, 2017, it is extremely important To analyze the casuistry of each affected in relation to their banking assets in the Principality to proceed with a correct regularization prior to any previous action of the Spanish tax authorities in order to avoid the corresponding regularization, the application of important sanctions and even the possible Adoption of criminal measures.

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David Raso's picture

Mr. Raso likes to get involved in his clients’ tax issues in order to have an overall view and understand them better. He always tries to think beyond the specific problem to be able to provide the client with a global solution that not only solves the main issue but also helps to improve the client’s general situation.

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