On the 1st of January 2016 a new phase began in the execution of the so-called automatic data exchange directive (Council Directive 2011/16/EU on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (hereinafter: Directive)).

 

This Directive makes it possible for the authorities of the member states to be informed about information which is connected to financial assets located in an other state. From this year’s January on due to the data exchange obligation, the account operating institutions have to report the existence of the accounts in a foreign country. This means that the banks (and other financial institutions) begin to collect the data of the account owners whose tax residence is in an other country, in order to report them. The reporting obligation affects personal and company accounts as well, and it is not restricted to the existence of the account; it also includes the amount kept on the account. Due to the aforesaid, the tax authority will know about the accounts in an other EU member state, whether it is a company or a private account.

 

Beyond these, it is to be noted that the directive defines the term “accounts not subject to data reporting”, so there is no reporting obligation regarding several kinds of accounts. According to this provision (if they meet the requirements of the directive) for example legacy accounts, some pension accounts, some investment-purpose insurance accounts, technical clearing accounts are out of the Directive’s scope.

 

In practice this also can mean, that those who dispose of accounts in other EU member states, have a greater chance of getting into the tax authority’s scope. Obviously the mere existence of a foreign account does not mean that the respective tax obligations have not been fulfilled, however it is to be expected that those who have accounts in an other country, will be treated with distinguished attention, and probably they should expect tax audits from the authority with a greater chance than the average, because according to the authority’s opinion a foreign account by itself means a bigger tax risk.