The OECD (Organisation for Economic Co-operation and Development) drew up the Tax Information Exchange Agreement (TIEA) to enable high tax countries to request information from foreign banks regarding clients who are suspected of holding funds away from their country’s banking system. Many people may be worries about the possible existence of a TIEA between your country of residence and an offshore banking country.
The first important fact to know is that the country making the TIEA request must have evidence which links an offshore account to a tax resident of the requesting country. This actually means there must be evidence linking the offshore bank to the onshore account of the tax resident. Such evidence is for instance: transfers, frequent debit card usage, corporation documents, banking forms or access to an offshore bank’s website’s online banking page, etc.
Unnamed debit cards are much more difficult to track, especially if they are from non-tax havens and coded as gift cards. It is also important not to use an offshore issued card at the same shops and ATMs on a regular basis, as this could indicate that the card holder is not an overseas visitor, but a local tax resident. If a pattern is established, this can be grounds for a TIEA request, as the ATM will record the card’s country of issue.
It is also important to note that a TIEA request shall cost to the requesting country. For this reason, countries may be more careful who they choose to investigate. This payment requirement is the main reason for the comparatively small number of requests, according to the tax justice network. The number of TIEA requests is typically less than 100 per year, even in popular tax havens.
Recent significant changes have taken place, affecting requests for information that are made with little information or evidence to support this request, metaphorically known as fishing expeditions. The main difference is that now the country receiving the request should provide any evidence, regardless of whether it seems to be tax related or not. Of course, the country receiving the request must also adhere to its own rules and regulations.
Privacy, preparation and discretion are essential factors to avoid a TIEA request.