How the authorities control our bank accounts?

When we decide to open a foreign bank account, national tax authorities can be notified about this. The Polish tax office will therefore acquire a range of financial data about our company. Only some countries have not decided to participate in such fiscal cooperation and do not automatically share information with the fiscal authorities of other countries – these include Georgia and Armenia. The automatic exchange of data is an inconvenience for entrepreneurs, who value privacy and do not want the state to have access to their bank accounts.

To improve the flow of information between national authorities, Organization for Economic Cooperation and Development (OECD) has issued Common Reporting Standards (CRS). They were guidelines to provide a common approach at the automatic exchange of tax information. On the basis of these standards, financial institutions are obliged to automatically provide the tax authorities with information about accounts owned by tax residents of other countries. Poland introduced new legislation in this area in 2017.

How does the automatic tax information exchange work?

The Common Reporting Standards imposed an obligation on financial institutions (ex. banks, brokerage houses, investment funds and insurance companies) to collect and provide the local Minister of Finance with information about accounts maintained by persons with foreign tax residency. These will then be forwarded to state authorities according to the nationality of the account holders. It is worth mentioning that the exchange of information takes place automatically, it does not have to be preceded by an application submitted by the taxpayer’s state of residence.

What information do the parties exchange?

The monitoring and data collection obligations apply to both natural and legal persons who hold bank accounts. For the former, banks are required to collect data such as:

• first and last name,
• current address,
• date and place of birth,
• country of residence,
• tax identification number,
• account number,
• account balance or value interest, dividends income from financial assets.

For legal entities, it will be:

• the tax identification number assigned by their country of residence,
• information on their country of residence,
• account number and amounts of income (interest, dividends, income from the sale of financial assets and other income earned on assets held on the account)
• account balance.

Countries which are not parties to the Common Reporting Standard

Banking secrecy is closely related to the wider category of business secret. It is essential for many companies, especially those which decide to invest and operate abroad. Many entrepreneurs do not want public institutions to have full insight into their transactions and accounts. The solution to this problem is provided by the jurisdictions of ex. Georgia and Armenia, which do not require forwarding banking information of account holders to the authorities of the country where they reside. Setting up a business in these countries is a good solution for entrepreneurs, who value privacy. This also has a positive effect on the freedom of conducting business and may reduce the number of fiscal inspections.