International exchange of tax information is no longer unusual. It is now a key part of the global move towards transparency and reducing offshore structures. Governments want clear information about the assets and income of their taxpayers, no matter where these are held or how they are structured.
- Exchange of Information on Request (EOIR) allows tax authorities to obtain specific information from foreign jurisdictions.
- Tax authorities can share details about a range of taxpayer information, including bank accounts and financial transactions.
- International tax agreements, such as DTTs, are essential for facilitating information exchange between countries.
- Information exchange can help prevent tax evasion and ensure compliance with national tax laws.
- Countries may refuse to share information based on legal constraints or concerns over public order.
- Modern treaties enable disclosure of data, overriding bank secrecy and fiduciary protections.
National laws on banking and tax secrecy, restrictions on access to company information, and personal data protection can limit transparency. However, modern cooperation between tax authorities helps overcome these barriers. Tax offices can now get the information they need from their international counterparts. Let us explain how international tax information exchange works and what details about taxpayers and their offshore assets may become available to tax authorities.
What is tax information exchange?
Exchange of Information on Request (EOIR) is a common way for one country to get important tax details about individuals or companies from the relevant authorities in another country. This process is different from the well-known Automatic Exchange of Information (AEOI), where data is shared automatically, and from spontaneous exchange, which happens without a formal request.
| Methods of Tax Information Exchange | Key Features |
|---|---|
| On Request | Carried out when the tax authority in Jurisdiction A asks the tax authority in Jurisdiction B for information about a specific person or transaction. |
| Automatic | Jurisdiction A sends a standard set of data about bank and other financial accounts held by residents of Jurisdiction B in its financial institutions. Data is shared electronically every year. |
| Spontaneous | Information is shared without a request if the tax authority in Jurisdiction A believes it may be useful to the tax authority in Jurisdiction B. |
The aim of information exchange on request is to prevent tax evasion, ensure compliance with national tax laws, and support the correct use of international tax agreements. Information received through international requests can fill gaps in the evidence needed for tax checks. With help from foreign partners, tax authorities can also check if a taxpayer’s declared details about overseas assets match the real situation.
This exchange happens only when there is a specific need in a particular case. A request can be made only for a certain person, company, group of companies, or transaction. In other words, under EOIR, a tax authority cannot send a broad request covering many people and then pick out those of interest.
Reasons for tax information exchange
Exchange of information on request is a type of international legal help and can only take place if there is an international agreement (either bilateral or multilateral). Cases where information is exchanged without a formal agreement, based only on mutual understanding, are very rare.
Bilateral agreements in this area include:
- Double Taxation Avoidance Agreements (DTAAs or DTTs), which have clauses about information exchange;
- Special Tax Information Exchange Agreements (TIEAs).
The largest multilateral agreement is the Convention on Mutual Administrative Assistance in Tax Matters (1988, as amended by the 2010 Protocol). At present, 150 jurisdictions have signed the Convention (see the full list of participants on the OECD website).
Article 4 of the 1988/2010 Convention states that parties must exchange any information likely to be important for managing or enforcing tax laws covered by the Convention. This includes almost all types of taxes, as Article 2 lists nearly every tax used worldwide.
Within the European Union, information exchange on request is set out in Directive 2011/16/EU of 15 February 2011, known as the DAC Directive on administrative cooperation in taxation.
Information exchange under double taxation treaties
Bilateral Double Taxation Treaties (DTTs) aim not only to prevent double taxation but also to stop tax evasion. For this reason, they almost always include clauses on information exchange.
When countries sign or update their DTTs, the section on information exchange is usually based on Article 26 (“Exchange of Information”) of the OECD Model Tax Convention.
The general rule in most DTTs is that countries must share information that is foreseeably relevant to:
- applying the provisions of the DTT, or
- managing and enforcing tax laws of any kind, set by the contracting states, their political subdivisions, or local authorities (see Article 26, paragraph 1, of the OECD Model Convention).
In simple terms, this means almost any information related to taxes—whether direct or indirect, national or local—can be exchanged if it helps with tax compliance or enforcement. The scope of the information exchange article in a DTT is much wider than the treaty itself.
DTTs usually cover only a limited range of direct (income) taxes. However, this does not limit the scope of information exchange, unless a country has made a specific reservation when joining the treaty.
The main feature of international exchange on request is that almost any tax-relevant information can be shared. The only limits are if sharing the information would break the national laws or public order of the country receiving the request. This is what sets exchange on request apart from automatic exchanges like CRS or CbC, where only standardised data about foreign financial accounts or country-by-country reports are shared.
Through existing agreements, tax authorities can request a wide range of information about their taxpayers from foreign countries, such as:
- details about shareholding or beneficial interests of specific people in foreign companies, partnerships, private foundations, or trusts;
- information about nominee and actual directors, nominee and beneficial owners, significant influence, or control;
- details of company management procedures, decision-making processes, and how profits are used;
- the contents of incorporation and other company documents;
- information about contracts, asset structures, dividend flows, and other payments;
- financial statements for the periods in question;
- whether disputed income has been taxed in foreign countries;
- bank accounts and financial transactions;
- real estate holdings;
- the presence and number of staff in a foreign company, and more.
This can include accounting records, financial reports, invoices, contracts, incorporation and legal documents, company resolutions and minutes, management records, and correspondence.
Information exchange and bank secrecy
Under information exchange on request, details about personal and company bank accounts, account holders, beneficiaries, and account transactions can be shared with tax authorities if needed.
Modern Double Taxation Treaties (DTTs) use Article 26 of the OECD Model Convention as a basis for information exchange. These treaties require countries to share almost any type of information, including banking details. A key point is:
A country cannot refuse to provide information just because it is held by a bank, another financial institution, a nominee, an agent, or a trustee, or if it relates to property interests of any person.
The term “agent”, as explained in paragraph 19.12 of the OECD Commentary to Article 26, is broad and covers all corporate service providers, including company formation agents and lawyers.
This means that for countries whose DTTs already include updated information exchange clauses, bank secrecy or fiduciary secrecy (such as trust services) are no longer valid reasons to deny information exchange. Recent practice confirms this approach.
Information obtained through international exchange on request can be used by tax authorities during tax audits and to support their case in court. Such data can serve as evidence when:
- identifying the ultimate beneficial owners of foreign structures and the real recipients of income;
- uncovering the actual role of foreign companies in payment arrangements;
- assessing whether tax benefits have been claimed lawfully, and more.
For example, if a tax authority receives data from abroad about a chain of foreign companies and the flow of payments between them, this information can help prove that these companies play only a technical role and that the payments are simply passing through. As a result, a court may decide that a Double Taxation Treaty (DTT) was used incorrectly, especially if the payment recipient in a treaty country does not have the “actual right” to the income and sends it all to another (often offshore) jurisdiction. In such cases, treaty benefits may be denied.
In another example, foreign tax authorities may confirm that income paid from the requesting country is not taxed in their jurisdiction (either as corporate tax or withholding tax). If the foreign company is related to the payer and has no real business activity, cross-border payments with no tax may be seen as an improper tax planning tool. This can lead to penalties and extra tax charges.
Finally, if a tax authority receives information outside its own remit (such as evidence of a tax crime), it can share these findings with national law enforcement agencies.
When does tax information exchange not work?
In practice, exchange of information on request does not always work smoothly. The country receiving the request has several grounds to refuse sharing information.
First, Article 26(2) of the OECD Model Convention and similar DTT rules set out cases where a country can deny a request. For example, the requested country is not obliged to:
- take actions that go against its own laws or administrative practice;
- provide information that cannot be obtained under its laws;
- share information that would reveal trade, business, industrial, commercial, or professional secrets, or trade processes, or information that would breach public order.
These rules act as a strong legal filter, protecting the most sensitive taxpayer data from being handed over. The competent authority in the requested country carefully checks each request before acting on it.
Second, information exchange is subject to reservations made by a country when ratifying an agreement. Such reservations may exclude certain types of taxes or information from earlier tax periods. In these cases, the requested country can refuse to share information.
Third, there are other reasons why information exchange may be difficult or even impossible. The effectiveness of information exchange can depend on factors such as:
- how interested a country is in getting or providing information about a particular person or company;
- the quality of cooperation between the tax authorities involved;
- how well the international requests are drafted, both legally and linguistically;
- any deterioration in political relations between partner countries.
How can you find out if a specific jurisdiction exchanges tax information?
To check if tax authorities in two countries exchange information on request, you must find out:
- whether these countries have active international tax agreements;
- and, if so, whether these agreements are actually followed in practice.
You can use the following steps to check this:
When assessing the likelihood of tax information exchange in a specific case, it is important to use official data from the tax or finance authorities’ websites of the countries involved. However, even official information may not always reflect the most recent changes or the current situation.
Conclusion
Today, information exchange between tax authorities of different countries is a real and regular practice. It involves not only developed countries but also most low-tax and offshore jurisdictions.
Modern international agreements allow the exchange of information even if it is protected by bank secrecy or held by nominees and trustees. Information received from abroad can strongly affect the outcome of tax audits and court decisions.
At the same time, the landscape of international information exchange is constantly changing and does not always expand. There are cases where countries stop exchanging information unilaterally. To understand if exchange is active between two countries, it is important to consider not only the existence of agreements but also the current relationship between those countries.
