In response to the global trend in tax transparency and international co-operation, Malta has already concluded three Agreements on Exchange of Information in Tax Matters.
1.Malta participation in exchange of information initiative
The first one, with Bermuda, was signed on 24th November 2011 (L.N. 120 of 2013) and it was followed by Bahamas (18th January 2012, L.N. 26 of 2013) and Gibraltar (24th January 2012, L.N. 208 of 2012). All agreements are based on the OECD Model (TIEA) with little or no alterations, thus in case of doubts it is possible to refer to the OECD’s Commentary on TIEA, issued in 2002. TIEA was developed by the OECD Global Forum Working Group on Effective Exchange of Information, consisted of representatives from OECD Member countries as well as delegates from Aruba, Bermuda, Bahrain, Cayman Islands, Cyprus, Isle of Man, Malta, Mauritius, the Netherlands Antilles, the Seychelles and San Marino.
Worth mentioning is that double tax treaties concluded by Malta contain the “Exchange of information” provision (usually Article 26 or 27). Although both, the treaties and TIEAs, regulate co-operation in the field of tax information, they differ regarding the scope and applicability. The advantage of TIEAs is that they can be concluded without the regular double tax agreement with the particular state and they provide for procedural steps creating a framework for competent authorities from contracting states (incl. time thresholds). Double tax treaties on the other hand do not limit the scope of exchange to the exchange upon request – their general wording allows to exchange information also automatically, spontaneously and by any other way implemented by the states.
2.Scope and limitations
Malta agreements embrace exchange of information in tax matters upon request and therefore do not impose any obligation of automatic exchange. The scope of an exchange is limited to data which is “foreseeably relevant to the administration and enforcement of the domestic laws” and to taxes “covered by the Agreement” (either “taxes every kind” or listed). The standard of foreseeable relevance aims at the widest possible extent of information and, in the same time, at excluding fishing expeditions or requesting information which is unlikely to be relevant to the tax affairs of a given taxpayer. Moreover, the requested state is not obliged to provide information which is beyond its reach – namely, not held by the authorities or not in the possession or control of persons who are within its territorial jurisdiction. It must be noted, that said obligation is not restricted by the nationality or the residence of the person to whom the information relates.
Any doubts or difficulties regarding the implementation of agreements may be solved by the competent authorities by mutual agreement.
3.Exchange of information upon request
Exchange of information is obligatory, thus the correct request triggers administrative proceedings in requested state. Information should be given “as promptly as possible”; however, to ensure that the request will be answered, the 90-days threshold is set (the exception was made for Gibraltar). Therefore, if within 90 days as of the receipt the requested state was unable to provide the information, it should explain to the applicant reasons for its inability.
The request itself should provide some data necessary to provide the information and to demonstrate the foreseeable relevance. Therefore, Agreements contain a list of data which should be delivered by the applicant; among others, the identity of the person under examination or investigation, the tax purpose for which the information is sought, to the extent known the name and address of any person believed to be in possession of the requested information; lists in particular agreements slightly differ, however the objection of TIEA remains. It should be noted that the applicant should indicate that it has pursued all means “available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties”. As a result, exchange of information procedure should not supersede or replace procedural steps normally taken by the authorities of the applicant state within its jurisdiction.
Since the exchange of information obligation should not be unlimited and absolute, agreements provide for declining options. The requested state may refuse to provide requested data, if it constitutes information that the applicant would not be able to obtain under its own laws for purposes of the administration or enforcement of its own tax laws. Moreover, the competent authority of the requested state may decline to assist where the request is not made in conformity with the agreement. Furthermore, there is no obligation to exchange information which encompasses information subject to legal privilege, or to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, as well as information which disclosure would be contrary to public policy. In certain cases, the agreements with Bermuda and Gibraltar free the requested state from disclosing information which would reveal confidential communications between a client and an attorney, solicitor or other admitted legal representative.
4.Tax examination abroad
The agreements implement special procedure for cross-border examinations, where representatives of the competent authority from one state are allowed to carry out some administrative procedures within the territory of the other state. Although this procedure is limited to interviewing individuals and examination of records, both with the written consent of the person concerned, it significantly modifies exclusivity rule and is an important step towards international administrative co-operation in tax matters.
In response to the global trend in tax transparency and international co-operation, Malta has already concluded three Agreements on Exchange of Information in Tax Matters.
1.Malta participation in exchange of information initiative
The first one, with Bermuda, was signed on 24th November 2011 (L.N. 120 of 2013) and it was followed by Bahamas (18th January 2012, L.N. 26 of 2013) and Gibraltar (24th January 2012, L.N. 208 of 2012). All agreements are based on the OECD Model (TIEA) with little or no alterations, thus in case of doubts it is possible to refer to the OECD’s Commentary on TIEA, issued in 2002. TIEA was developed by the OECD Global Forum Working Group on Effective Exchange of Information, consisted of representatives from OECD Member countries as well as delegates from Aruba, Bermuda, Bahrain, Cayman Islands, Cyprus, Isle of Man, Malta, Mauritius, the Netherlands Antilles, the Seychelles and San Marino.
Worth mentioning is that double tax treaties concluded by Malta contain the “Exchange of information” provision (usually Article 26 or 27). Although both, the treaties and TIEAs, regulate co-operation in the field of tax information, they differ regarding the scope and applicability. The advantage of TIEAs is that they can be concluded without the regular double tax agreement with the particular state and they provide for procedural steps creating a framework for competent authorities from contracting states (incl. time thresholds). Double tax treaties on the other hand do not limit the scope of exchange to the exchange upon request – their general wording allows to exchange information also automatically, spontaneously and by any other way implemented by the states.
2.Scope and limitations
Malta agreements embrace exchange of information in tax matters upon request and therefore do not impose any obligation of automatic exchange. The scope of an exchange is limited to data which is “foreseeably relevant to the administration and enforcement of the domestic laws” and to taxes “covered by the Agreement” (either “taxes every kind” or listed). The standard of foreseeable relevance aims at the widest possible extent of information and, in the same time, at excluding fishing expeditions or requesting information which is unlikely to be relevant to the tax affairs of a given taxpayer. Moreover, the requested state is not obliged to provide information which is beyond its reach – namely, not held by the authorities or not in the possession or control of persons who are within its territorial jurisdiction. It must be noted, that said obligation is not restricted by the nationality or the residence of the person to whom the information relates.
Any doubts or difficulties regarding the implementation of agreements may be solved by the competent authorities by mutual agreement.
3.Exchange of information upon request
Exchange of information is obligatory, thus the correct request triggers administrative proceedings in requested state. Information should be given “as promptly as possible”; however, to ensure that the request will be answered, the 90-days threshold is set (the exception was made for Gibraltar). Therefore, if within 90 days as of the receipt the requested state was unable to provide the information, it should explain to the applicant reasons for its inability.
The request itself should provide some data necessary to provide the information and to demonstrate the foreseeable relevance. Therefore, Agreements contain a list of data which should be delivered by the applicant; among others, the identity of the person under examination or investigation, the tax purpose for which the information is sought, to the extent known the name and address of any person believed to be in possession of the requested information; lists in particular agreements slightly differ, however the objection of TIEA remains. It should be noted that the applicant should indicate that it has pursued all means “available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties”. As a result, exchange of information procedure should not supersede or replace procedural steps normally taken by the authorities of the applicant state within its jurisdiction.
Since the exchange of information obligation should not be unlimited and absolute, agreements provide for declining options. The requested state may refuse to provide requested data, if it constitutes information that the applicant would not be able to obtain under its own laws for purposes of the administration or enforcement of its own tax laws. Moreover, the competent authority of the requested state may decline to assist where the request is not made in conformity with the agreement. Furthermore, there is no obligation to exchange information which encompasses information subject to legal privilege, or to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, as well as information which disclosure would be contrary to public policy. In certain cases, the agreements with Bermuda and Gibraltar free the requested state from disclosing information which would reveal confidential communications between a client and an attorney, solicitor or other admitted legal representative.
4.Tax examination abroad
The agreements implement special procedure for cross-border examinations, where representatives of the competent authority from one state are allowed to carry out some administrative procedures within the territory of the other state. Although this procedure is limited to interviewing individuals and examination of records, both with the written consent of the person concerned, it significantly modifies exclusivity rule and is an important step towards international administrative co-operation in tax matters.