Financial Resource

Article by Miguel Carlos

Are you wondering what Tax Information Exchange Agreements are? Tax information exchange agreement or TIEA for short is an agreement among parties to be able to transfer domestic tax information. It actually has no benefits to private third party involved in the agreement. The governments are the ones or the only party getting the benefits, in fact. An arrangement of such an existence would affect financial secrecy. It was considered an important feature by some offshore investors. Any expert in investments and offshore banking wouldn’t suggest their clients to do business in a country with TIEA implemented. TIEAs aim to encourage cooperation on tax matters on the international stage thanks to the transportation of information exchanges.

Those Tax Information Exchange Agreements were implemented to help prevent harmful tax practices. A lack of effective exchange of information is one of the main factors in determining harmful tax practices, according to Organization for the Economic Co-Operation and Development or OECD for short. Such an agreement represents the standard of effective exchange of information, for the purposes of their initiative on harmful tax practices.

The Organization for the Economic Co-Operation and Development even has developed a manual along with a tool kit for the automated process of information exchange between countries. The Organization for the Economic Co-Operation and Development even have a working group that targets in developing legal instruments that would be used in establishing effective exchanging of information. It also has listed countries which are deemed to be uncooperative such as Andorra, Liechtenstein, and Monaco, whom the Organization for the Economic Co-Operation and Development’s Committee on Fiscal Affairs has listed as uncooperative tax havens. Recently, the OECD was forcing tax haven which are characterized by countries to favor for greater transparency and exchange on information. Both Hong Kong and Singapore are among the countries that are devoted to such and arrangements with OECD countries. Both of those countries were categorized as a tax haven country by some offshore specialists. So for individuals this could only mean less privacy and less space to move around. Tax haven countries happen to be great places for an internet-based business, one could own a monetized website, and then create an offshore account in a tax haven country, and you have it, a tax free income. However, such a strategy would soon be neglected, as the information on exchange agreement would be implemented and then rapidly propagate. So for your own convenience, offshore investment as a tax avoiding strategy that shouldn’t be relied on, instead try to contact a well known CPA or tax consultants for a legal and better tax minimizing strategy.

Hopefully, you have a better understanding of Tax Information Exchange Agreements now.

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