EU, Monaco sign deal on tax transparency

The European Union continued its efforts to clamp down on tax evasion on Tuesday, signing an agreement with Monaco aimed at improving tax compliance by private savers.

The agreement requires EU Member States and Monaco to exchange information automatically, and will allow their respective tax administrations improved cross-border access to information on the financial accounts of each other's residents.

The deal is part of a concerted effort from the European Union to clamp down on tax evasion. In the last two years, the EU has signed similar agreements with Switzerland (May 2015), Liechtenstein on (October 2015), San Marino (December 2015) and Andorra (February 2016).

Through its special relationship with France, Monaco is part of the EU customs territory and located within the external borders of the Schengen area.

The agreement upgrades a 2004 agreement that ensured that Monaco applied measures equivalent to those in an EU directive on the taxation of savings income. The aim is to extend the automatic exchange of information on financial accounts in order to prevent taxpayers from hiding capital representing income or assets for which tax has not been paid.

The text was signed in Brussels on behalf of the EU by Peter Kazimir, Slovakia's finance minister for the EU presidency and Serge Telle, Monaco's minister of state.

The agreement ensures that Monaco applies strengthened measures equivalent to measures in force in the EU. However, whereas the 2004 agreement was based on the EU's taxation savings directive, that directive has now been repealed. Directive 2003/48/EC was repealed in November 2015 in order to eliminate an overlap with directive 2014/107/EU, which includes strengthened provisions to prevent tax evasion.

The agreement also complies with the automatic exchange of financial account information promoted by a 2014 OECD global standard.

The agreement sets out to limit the opportunities for taxpayers to avoid being reported to the tax authorities by shifting assets. Information to be exchanged concerns not only income such as interest and dividends, but also account balances and proceeds from the sale of financial assets.

Tax administrations in the member states and in Monaco will be able to identify correctly and unequivocally the taxpayers concerned; administer and enforce their tax laws in cross-border situations; assess the likelihood of tax evasion being perpetrated; and avoid unnecessary further investigations.

The EU and Monaco must now ratify or approve the agreement in time to enable its entry into force. The parties will strive to enable entry into force on 1 January 2017