If the transmitting State is to exchange information automatically with the receiving State, payors of income in the transmitting State must report automatically the relevant information to the transmitting State.

However, the transmitting State may exempt from taxation in the transmitting State certain payments by payors of income located in that transmitting State to non residents and foreign companies not doing business in the transmitting State.

The transmitting State may not require those foreign persons to obtain a TIN or provide a TIN to such payors of income in the transmitting State.

By using this foreign intermediary method, the payors of income in the transmitting State do not have any relevant details about the foreign persons investing in the transmitting State.

Automatic exchange of information would normally result in voluminous amounts of information, about residents, citizens or other taxpayers of the receiving State deriving income from sources in the transmitting State, being transmitted by the transmitting State to the receiving State ( transmitted information ).

Override of bank secrecy and other confidentiality laws in the transmitting State

What information should the transmitting State normally receive from domestic sources in order that the transmitting State may be able to effectively exchange information with the receiving State?

If the transmitting State does not impose any tax on such income, it may exempt from the automatic reporting requirement those payments from payors of income in the transmitting State to foreign persons.

In this way, the transmitting State attracts investments from foreign persons who know that, in the general case, the transmitting State will not have the relevant information to exchange with the receiving State.

Whether or nor the transmitting State has an automatic reporting system with regard to interest earned by foreign persons, the receiving State can provide to the transmitting State enough details for the transmitting State to obtain the relevant information from the payors of income.

For example, the transmitting State may provide that foreign persons investing in the transmitting State can channel those investments through a foreign intermediary (a foreign financial institution) that agrees to comply with applicable know your customer requirements similar to those in the transmitting State.

Otherwise, de facto bank secrecy in the transmitting State can result.

If the transmitting State does not generally receive that information from payors of income by a method of automatic reporting, the transmitting State generally cannot exchange information automatically with tax treaty partners.

The investments in the transmitting State by the foreign persons could be made in the name of the foreign intermediary, which confirms to the payors of income in the transmitting State that the beneficial owner is a foreign person and that all applicable know your customer requirements are complied with.

The result is de facto bank secrecy in the transmitting State and because of such de facto bank secrecy in the transmitting State, the foreign person may attempt to evade any applicable tax in his her its country of residence, the receiving State, which does not receive the relevant information.

Even though the income tax treaty between the transmitting State and the receiving State may have an exchange of information clause similar to 2005 OECD article 26 overriding bank secrecy and other confidentiality laws in the transmitting State, in this situation the transmitting State cannot comply with the request of the receiving State.

Therefore, the transmitting State would have to transmit to the receiving State the relevant information codified by the TIN used in the receiving State.

However, neither 2005 OECD article 26 nor the Commentary thereon actually requires the transmitting State to obtain information, and to have information available to it, in order for that transmitting State to be able to exchange information with the receiving State.

This would require the transmitting State to compile the relevant information based on the TIN used in the receiving State.

A clause similar to 2005 OECD article 26 (5) and the suggested revised UN Model article 26 (5) in the income tax treaty between the transmitting State and the receiving State would override any bank secrecy laws in the transmitting State.

First, the transmitting State may require all banks, other financial institutions and other payors of income located within that transmitting State to report automatically (through a system of computerized taxpayer identification numbers) to its tax authorities all payments of income to residents of that State.

However, such payors of income would not be required to provide such information automatically to the tax authorities of the transmitting State.

Therefore, in this fact situation, the transmitting State can comply with the exchange of information request of the transmitting State.

One problem is that the receiving State can normally process such transmitted information only through a TIN used in the receiving State (rather than a TIN used in the transmitting State).

With regard to exchange of information on request, there are at least two possible situations in which the receiving State may want information about one of its residents, citizens or other taxpayers from the transmitting State.

Also troubling is the increased reliance on diplomatic assurances sought by the sending State from the receiving State that transferred terrorist suspects will not face torture or other ill treatment following their arrival.

In order that the obligation to exchange information may be broad, a domestic tax interest requirement should not limit the obligation to exchange information.

Consequently, the transmitting State may have no relevant information about the identity of those foreign persons or about the income paid by payors of income to such foreign persons.

In the second situation, the receiving State knows that its resident or citizen or other taxpayer has an interest bearing investment in the transmitting State and sufficient details of that investment (name of account and financial institution where the account is located).

2005 OECD article 26 does not have a provision overriding any such dual criminality requirement in the transmitting State and the Commentary thereon does not refer to this issue.

In order that the receiving State adequately process such Transmitted Information, the information would have to be codified by a TIN or another identification number adequate for processing by the receiving State.

As the correspondence is in Spanish, it has been sent for translation.

The most significant recent development is that exchange of information provisions in tax treaties should override bank secrecy and other confidentiality laws in the transmitting State.

This way the frame will always reach its intended destination.

Second, the transmitting State may take even more extreme measures.

The expenses of delegations to the Council of Members shall be met by the Members concerned.

The transmitting State can place obstacles in the way of achieving an effective exchange of information with a tax treaty partner in spite of an exchange of information clause similar to 2005 OECD article 26.

Those payors of income may have to comply with all applicable know your customer (the respective payee) requirements in the transmitting State and also obtain evidence from each payee of income that he she it is a foreign person.

Search the archives for footage sent in to One Day on Earth

(Decoding telegrams sent to Federal Ministers by Governments of Federal Territories, and encoding telegrams sent by Federal Ministries to Governments of Federal Territories preparing and dispatching diplomatic bags. ) Federal House, Port of Spain.

The sender knows what she says, but not always what the targets hear.

Another person standing a great distance away can interpret the flags and reproduce the words sent.

Such transfers are only sometimes accompanied by a rudimentary monitoring mechanism, most often in the form of sporadic visits to the person from the sending State's diplomatic representatives.

The information reported in accordance with these guidelines shall be submitted in one of the official languages of the United Nations.

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