Mossack Fonseca on Cyprus, Luxembourg & Seychelles: Largely Compliant―OECD

mossack fonseca

At the October 29-30, 2015 meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes (part of the OECD), Cyprus, Luxembourg and the Seychelles were lauded for making significant changes to their legal frameworks and practices, each earning an overall rating of “largely compliant”. To achieve a “largely compliant” rating, a jurisdiction can only be deemed by peer reviewers as having (at most) minor shortcomings in the implementation of the 10 essential elements that are rated.

The brief primer below provides an overview of the methods, standards and rating paradigm used by the Global Forum.

Peer Reviews

Peer Reviews are conducted by an assessment team composed of 2 expert assessors provided by peer jurisdictions and co-ordinated by a member of the Global Forum Secretariat. The assessment team’s report is presented to the 30 member Peer Review Group (PRG) and, once approved (by means of consensus) it becomes a report of the PRG which will then be submitted for adoption by the Global Forum.

The Global Forum’s Standards & Rating Paradigm

The Peer Reviews happen in two Phases:

  • Phase 1 is a review of each jurisdiction’s legal and regulatory framework for transparency and the exchange of information for tax purposes
  • Phase 2 involves a survey of the practical implementation of the standards.

The Global Forum breaks down the standards of transparency and exchange of information into 10 essential elements under three broad categories: (A) availability of information; (B) access to information; and (C) exchanging information.

The Global Forum’s 10 Essential Elements of Transparency and Exchange of Information for Tax Purposes:

AVAILABILITY OF INFORMATION

  • A.1. Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.
  • A.2. Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.
  • A.3. Banking information should be available for all account-holders.

 ACCESS TO INFORMATION

  • B.1. Competent authorities should have the power to obtain and provide information that is the subject of a request under an EOI agreement from any person within their territorial jurisdiction who is in possession or control of such information.
  • B.2. The rights and safeguards that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.

 EXCHANGING INFORMATION

  • C.1. EOI mechanisms should provide for effective exchange of information.
  • C.2. The jurisdictions’ network of information exchange mechanisms should cover all relevant partners.
  • C.3. The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
  • C.4. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.
  • C.5. The jurisdiction should provide information under its network of agreements in a timely manner.