GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF DIRECT TAXES
FOREIGN TAX & TAX RESEARCH DIVISION
FOREWORD
The CBDT had, in 2013, brought out a Manual to provide guidance to field officers on the scope and manner of exchange of tax-related information under the various tax treaties and agreements that India has entered into. Since then, there has been an increasing global consensus on the necessity of cooperation amongst countries to tackle the problem of offshore tax evasion and avoidance. Currently through our treaty network we have exchange of information relationship with more than 130 countries/jurisdictions, including well-known offshore financial centers. This extensive treaty reach, coupled with the existing international environment, presents a unique opportunity to our officers to seek and obtain information/evidence located outside India that may be necessary for tackling the problem of offshore tax evasion and avoidance as also unearthing of undisclosed money stashed abroad.
This Manual on Exchange of Information is a comprehensively revised and carefully put together document that provides detailed guidelines for framing requests for information under the provisions of tax treaties, as also guidelines for providing clarifications and feedback that would facilitate the receipt of information/evidence. Other forms of administrative assistance possible under the tax treaties, as well as assistance that can be sought under other legal instruments have been described in detail. Recent international developments in transparency including the global adoption of the new standards on automatic exchange of information have also been summarized in the Manual to give an overview of the future potential of our ability to receive and utilize information regarding Indians having financial accounts in offshore financial centers. The confidentiality that must permeate all forms of assistance obtained and provided under the treaties has been clearly brought out..
INTRODUCTION
1.1 Tackling offshore tax evasion and tax avoidance and unearthing of unaccounted money stashed abroad have become a pressing concern for governments all around the world. The information and/or evidence of such tax avoidance/evasion and the underlying criminal activity is often located outside the territorial jurisdiction and thus this menace can be addressed only through bilateral and multilateral cooperation amongst tax and other authorities. The Government of India has played an important role in international forums in developing international consensus for such cooperation as per globally accepted norms and continuous monitoring of their adoption by every jurisdiction including offshore financial centres.
1.2 Initially, the international norms were to provide assistance to other countries only on satisfaction of the norms of “dual criminality”, i.e., in cases of drug trafficking, corruption, terrorist financing etc. which are criminal activities in both countries. However, at present the cooperation has extended to cases of tax evasion and avoidance and countries are obliged to exchange information requested as per provisions of tax treaties/agreements. The third stage of cooperation would be automatic exchange of financial account information without countries having to make requests for the same, thereby enabling the receiving country to verify whether such accounts indicate tax evaded money and to take necessary action.#
# Adapted from the speech of Hon’ble Finance Minister in the Lok Sabha replying on the debate on “Black Money” on 19.11.2014
1.3 Despite a global consensus on coordinated action to tackle the problem of tax evasion and tax avoidance, foreign governments, particularly offshore financial centres, are most unlikely to provide information on the basis of just letters or on a plea regarding their moral obligations to prevent tax evasion. Among other factors, parting with information without a legal basis may be challenged in their own Courts and may be against their own public policy or public opinion of their citizens. Such information about money and assets hidden abroad and about undisclosed transactions entered into overseas, can be obtained only through “legal instruments” or treaties entered into between India and those countries.
1.4 Tax Treaties, which include, Double Taxation Avoidance Agreements (DTAAs), Tax Information Exchange Agreements (TIEAs), Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention) and SAARC Limited Multilateral Agreement (SAARC Agreement), are the legal instruments which provide a legal obligation on a reciprocal basis for providing various forms of administrative assistance, including Exchange of Information, Assistance in Collection of Taxes, Tax Examination Abroad, Joint Audit, Service of Documents etc. Through one or more of these tax treaties, India has exchange of information relationships with more than 130 countries/jurisdictions including well known offshore financial centres and these jurisdictions are legally committed to provide administrative assistance and are actually providing the same in cases where requests are made.
1.5 Information and other forms of assistance can also be requested through Mutual Legal Assistance Treaties (MLATs) through Ministry of Home Affairs, particularly with countries/jurisdictions with which there is no tax treaty. Information/evidence obtained through MLATs can also supplement the information received under tax treaties when a criminal complaint is made for tax evasion on the basis of information received under tax treaties. Information can also be obtained through Egmont Group of Financial Intelligence Units (FIUs) which may be further supplemented by making further requests under tax treaties/MLATs.
1.6 Despite the existence of legal instruments for administrative assistance and the willingness of our treaty partners to provide information, these provisions are still underutilized, largely because officers of the tax department are not fully aware of the provisions and need guidance for framing effective requests for information under appropriate legal instruments. The officers may also not be fully aware of the recent international developments in transparency including the global adoption of the new standards on automatic exchange of information, which will bring about a sea-change in our ability to receive and utilize information regarding Indians having financial accounts in offshore financial centres. This revised edition of the Manual on Exchange of Information seeks to bridge that gap with the hope that in all appropriate cases request for administrative assistance will be made to our treaty partners with a view to tackle the problem of offshore tax evasion and avoidance.
1.7 At the same time, treaty obligations are reciprocal and accordingly wherever a request for assistance is received from a treaty partner, the same must be given highest priority and all efforts should be made to provide high quality and timely response. The Manual also contains instructions for providing administrative assistance to our treaty partners which should be followed scrupulously by the officers concerned and should be strictly monitored by senior officers not only to fulfil our treaty obligations, but also for giving a moral authority to the Government of India to demand similar assistance from others, including offshore financial centres.
1.8 The content of this Manual on Exchange of Information has been organized in the following manner. After Introduction in the present Chapter, the legislative framework of Exchange of Information (EOI) and other forms of Administrative Assistance under India’s DTAAs and TIEAs have been explained in Chapter-II. Chapter-III provides the guidelines for making specific requests for Exchange of Information under the tax treaties. Chapter-IV provides the guidelines to be followed in case a request is received from our treaty partners. Chapter-V provides the guidelines for other forms of administrative assistance, including assistance in collection of taxes, spontaneous exchange of information, tax examination abroad, simultaneous examination, joint audits, service of documents and automatic exchange of information under the non-standard format. Chapter-VI briefly explains the procedure for making requests under other legal instruments such as MLATs and Egmont Group of FIUs. In Chapter-VII, the necessity to maintain strict confidentiality in all forms of Exchange of Information is explained. In Chapter-VIII, the related international developments in Exchange of Information including Foreign Accounts Tax Compliance Act (FATCA) of USA, the new global standards on automatic exchange of financial accounts information i.e. Common Reporting Standard (CRS) on Automatic Exchange of Information, work of Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum), Exchange of Information under the Project on Base Erosion and Profit Shifting (BEPS), Joint International Tax Shelter Information & Collaboration (JITSIC), as also the tax issues discussed in G20 meetings have been summarized. The Manual also contains important Case Laws on EOI, Glossary of Terms used and a summary of relevant information available on the Internet.
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