Tax Information Exchange Act

Link to law: https://www.riigiteataja.ee/en/eli/ee/Riigikogu/act/511022015001/consolide
Published: 2015-01-01

Tax Information Exchange Act 1

Passed 18.12.2014

Chapter 1 General Provisions 

§ 1.  Scope of application of Act

(1) This Act provides for the rights and obligations relating to international automatic exchange of information necessary for determination of the amount of tax liability related to direct taxes.
(2) The Taxation Act and Acts concerning a tax are primarily applied to the issues within the scope of application of this Act but not regulated in this Act.
(3) If the regulation of this Act is different from the provisions of a treaty, the provisions of the treaty apply.

§ 2.  Terms

In this Act the terms are used in the following meaning:
1) the tax authority is the Tax and Customs Board;
2) a legal arrangement is an association of persons or pool of assets without the status of a legal person established pursuant to Estonian law or an Estonian branch of a foreign association of persons or pool of assets without the status of a legal person;
3) an information source is a person or legal arrangement, which, on the basis of this Act or any other legislation, provides data to the information provider to be used for the compliance with this Act;
4) a data subject is the data subject for the purposes of the Personal Data Protection Act;
5) an information provider is a person or legal arrangement which is granted rights and imposed obligations by this Act; the information provider is not the tax authority, information source or data subject;
6) a competent authority of a foreign state is a foreign person or body that is a competent authority pursuant to a treaty or the relevant legislation of the European Union;
7) the exchange of information is the automatic communication of information, needed to determine the amount of tax liability concerning direct taxes, on the basis of a treaty or under the relevant legislation of the European Union, from the tax authority to a competent authority of a foreign state and vice versa;
8) the automatic communication of information is the communication of information on a regular basis, without request, in a predetermined manner and volume;
9) the collection of information is the obtaining of information, necessary for the exchange of information, from the information provider and the requesting of information, necessary for the exchange of information, from the information provider by the tax authority.

§ 3.  Collection of information

(1) The Taxation Act shall be applied to the activities of the tax authority related to the compliance with this Act and the Agreement between the Government of the Republic of Estonia and the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA (hereinafter the FATCA Agreement).
(2) The provisions concerning tax declarations provided for in the Taxation Act shall apply to the declarations established on the basis of this Act, taking into account the provisions of this Act.
(3) The tax authority collects information for the current year and five preceding calendar years.

§ 4.  Exchange of information

(1) The tax authority shall have the right for the exchange of information.
(2) The exchange of information does not have to be reciprocal.
(3) The exchange of information may include all the information in the possession of the tax authority for the current year and five preceding calendar years, the exchange of which is prescribed by a treaty or relevant legislation of the European Union, including:
1) remuneration from employment and remuneration or service fees paid on the basis of a contract for services or authorisation agreement or any other contract under the law of obligations;
2) remuneration paid to members of management or supervisory bodies of a legal person;
3) the amount of insurance and insurance benefits paid under the life insurance contract;
4) pension paid;
5) income from immovable property.
(4) The tax authority may enter into inter-agency treaty with a competent authority of a foreign state to specify the functioning of the exchange of information.

§ 5.  Restriction on use of information

(1) Information obtained by means of the collection of information and exchange of information shall be regarded as a tax secret for the purposes of the Taxation Act.
(2) Information obtained under a treaty may be disclosed by the tax authority under the conditions provided for in §§ 26-30 of the Taxation Act, taking into account the provisions of the treaty.
(3) Information obtained pursuant to the relevant legislation of the European Union may be disclosed by the tax authority under the conditions provided for in §§ 26-30 of the Taxation Act, taking into account the provisions of the relevant legislation of the European Union.

§ 6.  Information Protection and processing

(1) The objective of the processing of information on the basis of this Act is:
1) to enable the tax authority and the competent authority of a foreign state to accurately and without doubt identify the relevant taxable persons, to administer and enforce the legislation on taxes in cross-border situations, to evaluate the likelihood of tax evasions and to avoid further useless investigations;
2) to comply with obligations undertaken by the FATCA Agreement unspecified in clause 1) of this subsection.
(2) The information provider shall notify the customer in a format which can be reproduced in writing upon establishment of business relations, for the purposes of the Money Laundering and Terrorist Financing Prevention Act, of the collection, exchange and automatic communication of information, carried out on the basis of this Act,.
(3) In addition to the obligations provided for in § 19 of the Personal Data Protection Act, the tax authority shall, at the request of the data subject, submit an extract of the information related thereto, obtained in the course of the collection of data for the current year and five previous calendar years and forwarded in the course of the exchange of information and of the authorisations granted on the basis of subsection 51 7(2) of the Taxation Act concerning this information.
(4) If the data subject proves that information for the current year and five previous calendar years forwarded to the tax authority in the course of the collection of information is incorrect due to the information provider, the information provider shall submit the corrected information to the tax authority at the earliest opportunity.
(5) The tax authority shall forward the information corrected pursuant to subsection (4) of this section to the competent authority of a foreign state and requests deletion of the information previously forwarded.
(6) If the data subject proves that the tax authority has, in the course of the exchange of information, forwarded information for the current year and five previous calendar years to a competent authority of such a state where the data subject was not a tax resident in the period that the data concern, the tax authority shall request the competent authority of a foreign state to delete the corresponding information.

§ 7.  Incurring Costs

The tax authority and information provider shall bear their own costs relating to the compliance with this Act.

§ 8.  Compliance with obligations of collection and exchange of information

(1) Upon receipt of the request the information source shall provide the information provider with the data in the absence of which the information provider shall not be able to comply with this Act. The information shall be submitted within 30 calendar days unless the FATCA Agreement prescribes a shorter term.
(2) The information source shall ensure the accuracy of data, used for compliance with this Act, upon the submission thereof to the information provider.
(3) The information provider shall keep all the evidence confirming the compliance with the obligations relating to the collection of information and other obligations pursuant to the FATCA Agreement for at least the current year and five preceding calendar years, taking into account the principle of purpose limitation provided for in the Personal Data Protection Act.
(4) If the information provider finds that the information for the current year or five preceding calendar years forwarded to the tax authority is incorrect due to the information provider, the information provider shall submit the revised information to the tax authority at the earliest opportunity.

Chapter 2 Compliance with FATCA Agreement 

§ 9.  Application of FATCA Agreement

Implementation of the FATCA Agreement is primarily based on the FATCA Agreement, taking into account the provisions of this Act.

§ 10.  Information provider

(1) An information provider for the purposes of this Chapter is an Estonian financial institution.
(2) The Estonian financial institution is an institution established or constituted in Estonia in accordance with the conditions of Article 1 (1) (g) of the FATCA Agreement, including:
1) a credit institution and the Estonian branch of a foreign credit institution;
2) a savings and loan association;
3) investment firm and the Estonian branch of a foreign investment firm;
4) the management company and the Estonian branch of a foreign management company;
5) an investment fund;
6) an insurer engaged in life insurance and the Estonian branch of a foreign insurer;
7) the registrar of the Estonian Central Register of Securities.
(3) The financial accounts kept by the registrar of the Estonian Central Register of Securities are the financial accounts, opened pursuant to subsection 11 (4) of the Estonian Central Register of Securities Act, the account manager of which is, for the purposes of the Estonian Central Register of Securities Act, a non-participating financial institution.
(4) The financial accounts not specified in subsection (3) of this section are deemed to be kept by the account manager for the purposes of the Estonian Central Register of Securities Act.

§ 11.  Additional terms related to compliance with FATCA Agreement

(1) The representative of the Minister of Finance of Estonia is the tax authority for the purposes of Article 1 (1) (f) (2) of the FATCA Agreement.
(2) The controlling person for the purposes of Article 1 (1) (mm) of the FATCA Agreement is the beneficial owner for the purposes of the Money Laundering and Terrorist Financing Prevention Act.
(3) The confirmation of an account holder that is a natural person is a written confirmation of tax residency submitted by the account holder that is a natural person.
(4) The confirmation of the controlling person is a written confirmation submitted by the controlling person or account holder of the tax residency of the controlling person.
(5) The due diligence measures are the measures described in Annex I to the FATCA Agreement.

§ 12.  Performance of obligations through third party

A reporting Estonian financial institution may perform the obligations provided for in this Chapter, including the obligation to submit the declaration, through a third party to the extent specified in Annex I (VI) (F) of the FATCA Agreement. The responsibility related to the compliance with the obligations relies on the reporting Estonian financial institution.

§ 13.  Specifications of application of FATCA Agreement

(1) An Estonian financial institution does not have the right specified in Article 4 (7) of the FATCA Agreement.
(2) The entity accounts opened during the period of 1 July to 31 December 2014 may be considered as the pre-existing entity accounts by an Estonian financial institution. Upon treating these accounts as the pre-existing entity accounts the possibility of the postponement of taking due diligence measures provided for in Annex I (VI) (A) of the FATCA Agreement shall not be applied to these accounts.

§ 14.  Specifications for application of due diligence measures

(1) Upon taking due diligence measures Annex I of the FATCA Agreement is not applied as provided in:
1) Part I, point C;
2) Part II, point A, subpoints 3 and 4;
3) Part III, point A;
4) Part V, point A
(2) The reporting Estonian financial institution may apply the specifications provided for in Annex I (II) (A) (1) and (2) and Annex I (IV) (A) of the FATCA Agreement upon taking due diligence measures, taking into account the provisions of subsection 13 (2) of this Act. The specifications shall be applied in a uniform manner to all the financial accounts of a reporting Estonian financial institution. Specifications may be applied prior to taking the due diligence measures.

§ 15.  General obligations of Estonian financial institutions

(1) An Estonian financial institution shall refrain from any action aimed at circumventing the collection of information related to the FATCA Agreement.
(2) If an Estonian financial institution has an affiliated entity or branch corresponding to the conditions specified in Article 4 (5) of the FATCA Agreement, the Estonian financial institution shall comply with the conditions provided for in Article 4 (5) (a) through (c) of the FATCA Agreement.

§ 16.  Data collection obligation of reporting Estonian financial institution

(1) A reporting Estonian financial institution collects:
1) data specified in Article 2 (2) (a) of the FATCA Agreement for 2014 and subsequent years under the conditions specified in the same point with the specifications given in Article 3 (3) (a), Article 3 (4), Article 6 (4) and Annex II of the FATCA Agreement.
2) the data of payments made to the non-participating financial institutions in 2015 and 2016.
(2) Upon the collection of data provided for in subsection (1) of this section the reporting Estonian financial institution shall apply the due diligence measures given in Annex I to the FATCA Agreement, taking into account the provisions of §§ 13 and 14 of this Act.
(3) The type and amount in euros of the sums included in the data specified in clause (1) 1) of this section shall be determined, taking into account the provisions of the Income Tax Act.
(4) The type and amount of the sums included in the data specified in clause (1) 2) of this section shall be determined in euros, taking into account the provisions of subsection 36 (5) of the Income Tax Act.
(5) The data for the previous calendar year specified in subsection (1) of this section shall be collected by 30 June at the latest.

§ 17.  Additional obligations of reporting Estonian financial institution

(1) In addition to the obligations specified in §§ 15 and 16 of this Act the reporting Estonian financial institution shall comply with the FATCA Agreement Article 4 (1):
1) registration requirements specified in point c;
2) requirements specified in point d if it meets the requirements for the Estonian financial institutions set out in the same point;
3) requirements specified in point e if it meets the requirements for the Estonian financial institutions set out in the same paragraph.
(2) A reporting Estonian financial institution shall immediately register with the State Revenue Service of the United States of America

§ 18.  Collection and exchange of information

(1) An reporting Estonian financial institution shall submit a declaration to the tax authority electronically pursuant to subsection 16 (1) of this Act:
1) with the data collected for the calendar year by 30 June of the following year pursuant to clause 1);
2) with the data collected pursuant to clause 2) by 30 June 2016 and 30 June 2017 respectively.
(2) The tax authority shall communicate the information received on the basis of subsection (1) of this section to a competent authority of the United States of America electronically no later than by 30 September of the same year.
(3) The forms of declarations specified in subsection (1) of this section and the procedure for the submission and filling them in shall be established by a minister responsible for the area.

§ 19.  Rights and obligations of tax authority

(1) The tax authority shall perform the functions of a competent authority under the FATCA Agreement unless a minister responsible for the area decides otherwise, taking into account the specifications provided for in this Act.
(2) The tax authority shall immediately take measures to eliminate a violation specified in Article 5 of the FATCA Agreement committed by Estonia or an Estonian financial institution and approach a competent authority of the United States of America if there is any doubt that the United States of America or a financial institution of the United States of America has committed a violation described in Article 5 of the FATCA Agreement.
(3) The tax authority shall have the right to conclude agreements with the United States of America for amendment of Appendix II of the FATCA Agreement under the terms and in the procedure provided for therein.

§ 20.  Application of more favourable conditions

The minister responsible for the area shall approve of the application of more favourable conditions specified in Article 7 (2) of FATCA Agreement or refuse to approve thereof and shall notify the Treasury Department of the United States of America thereof.

Chapter 3 Supervision 

§ 21.  Supervisory authority

The tax authority shall exercise supervision over the compliance with this Act and the legislation issued on the basis thereof in the procedure provided for in the Taxation Act.

§ 22.  Penalty payment for failure to comply with obligations of information provider

(1) If the information provider fails to perform the obligations provided for in §§ 15-18 of this Act, the tax authority may designate additional term for the performance of obligations and issue a warning of imposing penalty payment pursuant to § 136 of the Taxation Act.
(2) If the information provider has failed to perform the obligations by the due date specified in the warning, the penalty payment specified in the warning is required to be paid thereby. The tax authority shall submit a claim for payment of penalty to the obligated person by an order, determine the term of payment and issue a warning that in case of a failure to pay the penalty within the time limit, the claim shall be subject to compulsory execution pursuant to §§ 128-132 of the Taxation Act.
(3) In order to enforce the performance of the obligations the amount of penalty payment may not exceed 3,300 euros, whereas it may not exceed 1,300 euros for the first event and 2,000 euros in the second event.

Chapter 4 Implementing Provisions 

§ 23.  Notification of information processing and collection of identification numbers of reporting persons

(1) The information provider shall inform in a format which can be reproduced in writing all customers with whom a business relationship was created for the purposes of the Money Laundering and Terrorist Financing Prevention Act before the entry into force of this Act, of the collection, exchange and automatic communication of information pursuant to this Act at the latest on 30 March 2015.
(2) In order to enforce compliance with the obligation provided for in clause 16 (1) 1) of this Act, the reporting Estonian financial institution shall notify the account holder, who or the controlling person of whom has been determined as a US person whose Taxpayer Identification Number of the United States of America is not known, of the deficiency of the customer data established as a result of the taking of due diligence measures no later than on 30 June 2016. The specified account holder shall submit the Taxpayer Identification Number of the United States of America to the reporting Estonian financial institution no later than on 31 December 2016.

§ 24.  Amendment of Estonian Central Register of Securities Act

Clause 7 (3) 6) of the Estonian Central Register of Securities Act shall be amended to read as follows:
"6) the Tax and Customs Board in connection with proceedings concerning tax matters, performance of the duties arising from the Funded Pensions Act or verification of an applicant for an activity licence for gambling or an acquirer of a qualifying holding and compliance with the provisions of the Tax Information Exchange Act;".

§ 25.  Amendment of Investment Funds Act

Clause 124 (1) 4) of the Investment Funds Act shall be amended to read as follows:
"4) the Tax and Customs Board in connection with proceedings concerning tax matters and compliance with the provisions of the Tax Information Exchange Act;".

§ 26.  Amendment of Credit Institutions Act

Clause 88 (42) 2) of the Credit Institutions Act shall be amended to read as follows:
"2) the Tax and Customs Board in the cases and to the extent provided for in the Taxation Act, the Tax Information Exchange Act and in § 572 of the Income Tax Act".

§ 27.  Amendment of Taxation Act

The Taxation Act shall be amended as follows:
1) subsection 1 (2) shall be amended and worded as follows:
"(2) The provisions of this Act apply to all state taxes unless otherwise provided for in an Act concerning a tax or the Tax Information Exchange Act.”
2) subsection 10 (2) shall be amended by adding clause 6) in the following wording:
"6) exercise supervision over the compliance with the obligations of the information provider and information source provided for in the Tax Information Exchange Act. ";
3) subsection 15 (1) shall be amended to read as follows:
"(1) The Ministry of Finance and the tax authority for state taxes have the right to provide explanations and instructions in order to explain and publicise this Act, the Tax Information Exchange Act and Acts concerning taxes for the purpose of ensuring the uniform application of the Acts. "
4) subsection 512 (2) shall be repealed;
5) subsection 512 (3) shall be amended to read as follows:
"(3) In order to ensure the determination of the correct tax liability in a foreign state the Tax and Customs Board may forward the information collected in tax proceedings to a competent authority concerned of a foreign state on its own initiative or on the basis of an application of a competent authority of a foreign state."
6) § 512 shall be supplemented with subsection (4) as follows:
"(4) The provisions of the Tax Information Exchange Act shall be applied to automatic exchange of information by way of international professional assistance.";
7) Chapter 31 of the Act is supplemented with § 517 in the following wording:
"§ 517. Use of information
(1) The Tax and Customs Board may ask permission from a competent authority of a foreign state to use the received information, in addition to the purposes provided for in a treaty or relevant legislation of the European Union, also for the purposes provided for in §§ 26-30 of this Act.
(2) The Tax and Customs Board may grant permission to a competent authority of a foreign state to use the forwarded information, in addition to the purposes provided for in a treaty or relevant legislation of the European Union, also for other purposes if these purposes have the same meaning as the provisions of §§ 26-30 of this Act.”
8) the Act is supplemented with § 1553 in the following wording:
"§ 1553. Prevention of exchange of information
(1) Failure to comply with the obligations of the information provider and information source is punishable by a fine of up to 300 fine units.
(2) The same act, if committed by a legal person, is punishable by a fine of up to 3,200 euros.".

§ 28.  Amendment of Income Tax Act

§ 572 of the Income Tax Act shall be supplemented with subsection (9) in the following wording:
"(9) The performance of the obligations provided for in this section shall be governed by the provisions of the Tax Information Exchange Act.”

§ 29.  Entry into force

This Act shall enter into force on 1 January 2015.

1COUNCIL DIRECTIVE 2011/16/EU on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (OJ L 64, 11.03.2011, pp. 1-12).
Eiki Nestor
President of the Riigikogu
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