The Practicalities: what is a TIEA?
A Tax Information Exchange Agreement (TIEA) is a bilateral agreement that has been negotiated and signed between two countries to establish a formal regime for the exchange of information relating to civil and criminal tax matters.
How does the BVI enter into a TIEA?
- The BVI either approaches a country, or is approached directly by a country, to enter discussions to conclude a TIEA.
- TIEAs are negotiated on the BVI’s behalf by a team of officials from the International Finance Centre, the Ministry of Finance, the Inland Revenue Department and the Attorney General’s Office, with ongoing representation from the Financial Services Commission. Once the agreements are agreed in draft form, they are considered at official level for approval by the BVI Cabinet.
- Once the relevant constitutional arrangements and approval processes have taken place in both countries, a ceremony takes place where the formal agreements are signed by representatives of the respective countries. These agreements, however, must go through the legislative processes of the signing jurisdictions to be brought into effect.
- After the legislative processes are complete, the agreements usually come into effect immediately in respect of criminal tax matters and at the beginning of the next taxable period for civil tax matters, which is 1 January of any tax year for the BVI.
- In the BVI, a TIEA is brought into effect in accordance with the provisions of the Mutual Legal Assistance (Tax Matters) Act, 2003 by issuing an Order made by the Minister of Finance. Information requests can only be processed once the TIEA comes into force and they cannot be made retroactive.
What a TIEA is not
- Tax information exchange under a TIEA is by request only and there are strict criteria to ensure no fishing expeditions are being carried out. Information is not given automatically under a TIEA. Every TIEA has a set of guidelines and criteria which must be adhered to by the TIEA jurisdiction submitting a request for information. It is therefore important that the industry familiarizes itself with the provisions of TIEAs, especially those relating to the conditions that must be satisfied before assistance can be provided.
- In addition to the actual TIEA, the BVI has negotiated with some countries a Memoranda of Understanding, which explicitly state that countries will not engage in fishing expeditions or request information that is unlikely to be relevant to the tax affairs of a given taxpayer. In the case of other countries, such statements may be contained in either text of the TIEA itself or in a formal letter that is exchanged upon the signing of the TIEA.
- A country cannot arbitrarily request information. Request must be specific; the nature of information being sought, and a description of the specific evidence being sought must be outlined in the request.
How will Information be requested?
- Information requests are sent to the Competent Authorities of the respective countries.
- The Financial Secretary is the BVIs Competent Authority, but he or she may designate any person or authority to perform the functions of the Authority, (usually for the BVI, this person will be the Commissioner of Inland Revenue).
- The country requesting information must provide to the Competent Authority the reasons why the information is being requested and why it is relevant to the requesting country’s inquiry.
- The country must also provide to the BVI Competent Authority a statement that they have pursued all means available in their own country to obtain the information they are requesting.
- How will information be provided?
- The BVI has in some cases up to 60 days* to confirm receipt of a request for information. In other cases, the applicable standard is that of a reasonable period (which is determined in accordance with the nature and urgency of the request, but which generally accords with the period of 60 days).
- If for any reason the BVI is unable to provide the information requested in 90 days*, it is required to write to the requesting country explaining why it is unable to obtain and provide the information, or the obstacles encountered. As in the nature of every information exchange regime, every effort is required to be expended to provide the necessary assistance requested.
- The BVI can refuse to provide information on the following grounds: if it deems that the information is not made in conformity with the Agreement; if it deems that the country has not pursued all means available in its own country to obtain the information; or where the information requested is contrary to the BVIs public policy. The BVI must, however, write to the country explaining why it is refusing or is unable to do so.
*This is the standard time frame but may vary according to the specific agreement.
Who must comply when the Competent Authority or designate requests information?
- When the BVI receives a request for information and the Competent Authority has determined that it is a legitimate request to which it will respond, it may require any person to provide such information as may be specified in a notice.
- The information provided to the Competent Authority of the country requesting the information must be kept confidential and cannot be disclosed to other persons, entities or authorities without the express written consent of the BVI Competent Authority.
- A TIEA does not impose on the BVI the obligation to obtain or provide information which would reveal confidential communications between a client and an attorney. Information held with the intention of furthering an offence is not subject to legal privilege, however.
- Can an information request from the Competent Authority be declined?
- The Competent Authority under the law may apply to the Magistrate for a search warrant to comply with a request for information.
- A person who fails to comply with the notice of the Competent Authority would be committing an offence and may be liable on summary conviction to a fine not exceeding $5,000 or imprisonment not exceeding two years or both
What recourses do individuals served with notices have?
A person or authority upon whom a notice is served to produce documents or information is free to seek legal advice as regards the person’s or authority’s obligations or liabilities or rights.
Can matters on the request for information be disclosed?
The particulars of and all matters relating to a request for information shall be treated as confidential and shall not be disclosed to other persons. Contravention of this confidential obligation is an offence for which an offender may be liable on summary conviction to a fine not exceeding $10,000 or imprisonment not exceeding two years or both.
What is BVI’s experience with TIEAs to date?
|BVI has signed TIEAs with the following countries: