European pilot FATCA scheme unveiled

The UK, France, Germany, Italy and Spain have developed a multilateral tax information exchange plan that uses the US Foreign Account Tax Compliance Act (FATCA) as its blueprint. 

The five countries sent out a joint letter detailing the FATCA-style pilot scheme to the European Commission’s Algirdas Šemeta, commissioner for Taxation and Customs Union. The countries hope to persuade other countries to join in a bid to create a “global system of automatic information exchange”.

Under the plan, each participating country's tax authority would collect information on financial accounts owned by foreign investors, including presumably a foreign LP's interest in a private equity fund. Participating countries would then share that information on a reciprocal basis.  

Some market sources suggest a FATCA-like arrangement at a global level would be too complex to manage. One source speaking to PE Manager said the plan would require an international body such as the Organisation for Economic Co-operation and Development, which has the ear of tax agencies around the globe, for it to work. 

Already the UK had signaled its support for EU members to adopt FATCA-like tax legislation. Late last year the Treasury reached out to some of the UK’s neighboring offshore jurisdictions, including Jersey and Guernsey, to set-up a tax exchange framework.

The UK's International Development Committee (IDC) also floated the idea of a global tax information exchange network last summer. The committee recommended the UK government: “…introduce legislation similar to the relevant section of the US FATCA, requiring tax authorities automatically to exchange information relating to UK citizens or corporations”.