The implementation of the ‘global standard for automatic exchange of financial account information’, a government-to-government automatic exchange of financial account information, is intended to curb offshore tax evasion. Developed by the OECD in close consultation with EU and G20 nations, this pact has already been signed by more than 90 countries including India. The first official exchanges are set to start from September 2017.
This new international legislation will have far reaching consequences for family offices with complex structures that span multiple geographies. This higher level of transparency is likely to lead to higher level of enquiries from local tax authorities. It also raises concerns over data security and privacy, particularly when tax authorities in ‘less established’ jurisdictions are involved.
Hence family offices might have to relook their reporting obligations and if necessary either simplify structures geographically or diversify them even further. One option is to relocate the family office base to the US, since the US is still not a signatory.