What “surprises” are waiting for the automatic exchange of information?

While the UAE is on its way to becoming part of Multilateral Competition involving administrative assistance in tax matters, and Monaco announces a list of countries with which information is being shared, Sovos Compliance LLC, a company dealing with software issues in taxation, announces its predictions about the technical side of the exchange.

In May and June 2017, 29 jurisdictions that request information from CRS from their financial institutions expect technical problems. According to Sovos, most of the reports that are submitted to the tax authorities over the next two months may not be accepted and sent for re-submission and editing. It is likely that it will take several attempts for all the information to be approved and accepted by the tax authorities.

This kind of predictions are not made from scratch, Sovos is based on the experience of presenting data in the framework of FATCA last year. Especially for Sovos, the Aberdeed Group conducted a series of studies that showed that only 44% of the reports were in compliance with the requirements. Guided by this information, Sovos believes that about 40% of the reports will have accurate and complete information.

Sovos identifies the following factors that support the assumptions:

- A huge number of data. It is assumed that it at least five times the amount of data that is transmitted in the framework of CRS on request.
- Insufficient support among countries.
- Different degrees of regulation in different countries of the world, announced its requirements for submitting additional data. For example, the tax authorities of India require that the statements include the date of birth of the parents of the account holder.
- High level of subjectivity in relation to the development of requirements for data to be exchanged.
- The uneven level of technical equipment of various financial institutions. For example, small banks may not have enough resources to submit data on time, which implies fines for violating the law.

Very soon, 52 countries should conduct the first automatic exchange. It will soon be seen how accurately the company Sovos has made its predictions.