Agreement on the exchange of information between Andorra and the EU

Agreement on the automatic exchange of information signed by the Principality of Andorra with the European Union for financial accounts and income.

On 12 February 2016, the Principality of Andorra and the European Union (EU) signed an agreement for the automatic exchange of financial information that is expected to take effect on 1 January 2017 (“EU Agreement”). This agreement, which amends the one previously signed by the Principality of Andorra and the European Community in 2005 regarding the establishment of measures equivalent to those contained in Council Directive 2003/48/EC on the taxation of yields on savings accounts in the form of interest payments, incorporates the new global standard for the automatic exchange of information (“AEOI”) approved by the OECD in July of the year 2014, and applied to the Union European through Directive 2014/107/EU.

When will Andorra introduce the automatic exchange of information?

Andorra intends to collect bank data from 2017 onwards and to exchange the information as of 2018. The current legal framework excludes the automatic exchange of information in Andorra, but the new law on the automatic exchange of information is expected to be approved by the General Council in 2016 and to take effect on 1 January 2017.

Will the automatic exchange of information apply to all 28 EU Member States?

Yes. The AEOI agreement with the EU applies equally to all Member States. Specific agreements with individual EU countries will no longer be necessary.

What information is automatically exchanged under the EU Agreement?

In Andorra’s case, the information that must be exchanged includes the account number, tax identification number, name, address and date of birth of any non-resident taxpayer with an account in Andorra, all types of income (interest, dividends and income from certain insurance contracts, among others), income derived from the sale or transmission of assets and account balances. The rule applies to both natural persons and legal entities (including trusts and foundations). Pursuant to international standards in this matter, beneficial owners as well as passive structures and their controlling persons are required to be identified.

How is the automatic exchange of information (AEOI) carried out?

The information on foreign taxpayers with an account in Andorra is sent to the Ministry of Finance by the banks and by certain undertakings for collective investment and insurance companies. The Ministry of Finance automatically transmits the information to the tax authorities in the corresponding country on an annual basis.

What is the timing for the first automatic reporting of information on pre-existing accounts?

The review of pre-existing high value individual accounts (>1,000,000 dollars) must be completed within one year of the effective date of the applicable agreement.  The review of pre-existing low value individual accounts (<1.000.000 dollars) must be  completed within two years of the entry into force of the applicable agreement.     The review of any account with an aggregate account balance or value that exceeds 250,000 dollars, as of 31 December preceding the entry into force of the applicable agreement, must be completed within two years of the entry into force of the applicable agreement.

What happens with the information that is exchanged?

Customer information can only be used for the agreed purposes, that is, to determine the taxpayer’s tax obligations. How each state uses the information received from abroad is an internal issue; however, data protection must be guaranteed. A reporting jurisdiction may refuse to exchange information with a participating jurisdiction if it does not comply with the confidentiality standards established in the EU Accord.

Do customers who meet their obligations under the EU Agreement remain anonymous?

No, the purpose of the AEOI is to identify those people who are the object of the information exchange obligation.

Will the obligation to exchange information on both new clients and to pre-existing accounts be applied retroactively?

The date on which the affected banks are obligated to identify and exchange information is the effective date of the AEOI. Therefore, the EU Agreement will not be applied retroactively.

What are the bank’s obligations under the EU AEOI Agreement when determining a client’s residence for tax purposes within the due diligence process applicable to new accounts (pursuant to Andorra’s timeline to implement the AEOI a “new account” means an account opened on or after 1 January 2017)?

When opening a new account for a natural person, the bank must obtain a statement from the account holder (self-certification) indicating his/her tax residence, the reasonableness of which must be verified by the bank. The bank may rely on the customer’s statement client unless it knows or has reason to believe know that the statement is incorrect or unreliable (reasonableness test), which will be based on the information obtained when the account is opened, including any documentation obtained in connection with the procedures for the prevention of money laundering and the financing of terrorism.

When will AEOI customers be informed?

There is no legal obligation to inform clients of the information exchanged under the AEOI or to provide them with copies of the shared documentation. However, this may be regulated in the pertinent internal regulations.

Will other AEOI financial centres be added?

Switzerland, Liechtenstein, San Marino and Monaco have already signed or ratified agreements with the EU.

What will Andorra get in return for the automatic exchange of information?

The agreement is reciprocal, which means that the Member States and Andorra assume the same commitments to one another. Andorran tax authorities will therefore receive information about Andorran taxpayers with accounts in other EU Member States. The automatic introduction of the global standard is not formally related to the obtainment of other considerations. However, the European Commission has drawn the attention of the Member States to the importance correcting past situations and making any necessary corrections prior to the introduction of the automatic exchange of information.

Is it necessary to confirm the correct fulfilment of tax obligations?

The new system for the automatic exchange of information is aimed at verifying compliance with tax obligations. Consequently, the holders of financial positions must be compliant with their tax obligations.

17 May 2016.