The Federal Board of Revenue (FBR) has proposed common reporting standards for financial institutions for automatic exchange of information including banking information with OECD member countries under bilateral agreement/multilateral convention, including agreements of avoidance of double taxation and prevention of fiscal evasion. In this regard, the FBR has proposed amendment in the Income Tax Rules, 2002 through a notification issued here on Friday.
According to the sources, exchange of banking information has been proposed to be carried out between tax authorities of Pakistan and OECD member countries under the common reporting standards issued as per draft rules. Around 105 countries of the world would follow the same common reporting standards for automatic exchange of information under OECD model. Once the rules have been notified, the banks would be bound to exchange information of accountholders under the said provisions of the law.
The FBR rules have also highlighted the international guidelines and commentaries. For illustration, interpretation and implementation of rules, guidance shall also be sought from commentaries on the Model Competent Authority Agreement and Common Reporting Standard as developed by the Organisation for Economic Co-operation and Development (OECD) as amended from time to time. Following table may be referred to for cross-referencing to the commentary of OECD.
According to the draft rules, the said rules would be applicable for reporting financial institutions to provide information to the Federal Board of Revenue for the purposes of section 107 read with section165B of the Income Tax Ordinance, 2001. The section 107 deals with the agreements for the avoidance of double taxation and prevention of fiscal evasion and section 165B deals with the furnishing of information by financial institutions including banks.
The draft rules have also specified general reporting requirements for financial institutions to report the specified information with respect to each reportable account of such reporting financial institution to the Federal Board of Revenue (FBR) including name, address, jurisdiction of residence, TIN and other information.
Reporting financial institutions may apply the due diligence procedures for new accounts to pre-existing accounts and the due diligence procedures for high value accounts to lower value accounts. Where new account due diligence procedures are used for pre-existing accounts, the rules otherwise applicable to pre-existing accounts shall continue to be applied, the rules said. The FBR has also laid down enhanced review procedures apply with respect to high value accounts, the rules added. The FBR has also specified the due diligence procedures for pre-existing individual accounts under the draft rules.