OECD Calls for Data Sharing on Foreign Real Estate Deals, 2023
Currently, the AEOI framework of the OECD allows member nations to exchange information on bank account information to prevent tax evasion.
The Common Reporting Standard (CRS) should be expanded to cover real estate as part of the automatic exchange of information (AEOI) between nations, according to the Organisation for Economic Cooperation and Development (OECD).
The OECD issued an updated study on July 17 that assesses the current condition of tax transparency concerning foreign-owned real estate in response to a request from the G20 India Presidency. It also looks at how recent developments in other tax transparency frameworks, like the OECD/G20 CRS, and broader policy developments, like the Financial Action Task Force’s work on beneficial ownership, could influence potential improvements to tax transparency in the real estate sector voluntarily, according to the OECD.
Tuesday’s G20 Chair Summary noted the OECD Report on Enhancing International Tax Transparency on Real Estate and the Global Forum Report on Facilitating the Use of Tax Treaty-Exchanged Information for Non-Tax Purposes. The reports were released following a two-day Finance Ministers and Central Bank Governors (FMCBG) meeting.
Currently, the AEOI framework of the OECD allows member nations to exchange information on bank account information to prevent tax evasion.
India is working towards preventing tax evasion and illegal financial activities by advocating for greater transparency in foreign real estate ownership by assessors. They also plan to use the information obtained through tax treaties for non-tax purposes.
Cross-border real estate ownership is growing, according to several research. However, there are signs that this increases the possibility of noncompliance with tax laws since tax authorities frequently need more visibility into tax-relevant parts of their residents’ international real estate holdings. In addition, the FATF has classified some aspects of the real estate industry as risky.
According to the paper, interested nations might quickly advance at little expense by exchanging freely available information via already-established international legal and practical information exchange gateways.
Long-term, a model might be based on a more innovative direct access-based model, building on the current trend towards the interconnection of digitalized ownership registers accessible to designated relevant government agencies on a real-time basis, particularly in the anti-money laundering and financial regulatory space, according to the OECD.
The OECD stated in a different study that the execution of cooperation agreements might be used to share information from tax to non-tax agencies, which can include information transferred under international tax agreements. Such contracts might exist domestically between tax and non-tax authorities and between competent agencies to exchange information for tax purposes.
The number of countries participating in AEOI and the volume of information transmitted continue to rise; according to the OECD, in 2022, information on more than 123 million bank accounts and more than 12 trillion euros in assets was automatically exchanged globally.
To enhance the transparency and integrity of global real estate markets, the Organization for Economic Cooperation and Development (OECD) announced a landmark proposal in 2023 that seeks the increased sharing of data related to foreign real estate transactions.
This comes against rising concerns about using real estate transactions for tax evasion, money laundering, and illicit financial flows. For quite some time, the global community has been worried about the absence of openness in real estate deals, particularly those that involve foreign organizations.
The OECD’s proposal centres on developing a standardized international framework for collecting, storing, and sharing data on foreign real estate transactions. This includes but is not limited to, information about the identities of buyers and sellers, transaction values, sources of funds, and beneficial ownership.
Under the proposed system, real estate transactions would be reported to national authorities, who would share this data with their counterparts in other countries via a secure, shared database. This would allow regulators, tax authorities, and law enforcement agencies to more easily trace transactions, investigate suspicious activity, and ensure compliance with tax and anti-money laundering (AML) laws.
The OECD proposal is about enforcing and promoting fairness and equity in the real estate market. By shedding light on foreign property deals, authorities can ensure that all domestic and foreign players are on a level playing field and adhering to the same rules.
However, the OECD’s proposal has its challenges and critics. Implementing such a system would require significant international cooperation and coordination, and there are technical and logistical challenges in creating and maintaining a secure, comprehensive database of this nature.
There are also concerns about data privacy and protection. Critics argue that the proposal could infringe upon the privacy rights of individuals and corporations, and there are worries about how data would be protected from misuse or unauthorized access.
The OECD has acknowledged these challenges and committed to working with its member states and non-members to develop robust protections for data privacy and security.
Despite these challenges, many governments and non-governmental organizations worldwide have broadly welcomed the OECD’s move towards greater transparency in foreign real estate transactions. There is a widespread recognition that transparency in real estate transactions is critical for tackling tax evasion and money laundering and promoting fair and efficient markets.
The OECD proposal is expected to form part of the broader discussions at the upcoming G20 summit. Given the complexity and global nature of the real estate market, any meaningful reform will require significant international cooperation and commitment.
The OECD’s push for more data sharing on foreign real estate deals signifies a step towards greater transparency and fairness in the global real estate market. If implemented effectively, it can be a game-changer in the fight against tax evasion and money laundering and in the promotion of equitable real estate markets. However, challenges such as international cooperation, data privacy, and security will need to be carefully navigated to ensure the success of this initiative.
