Automatic Exchange of Information on Real Estate and Related Recurring Income

India has for several years been advocating within the G20 for the inclusion of non-financial assets, such as real estate, in the AEOI framework.

A 2023 G20 report cites studies indicating that cross-border holdings of immovable property have continued to rise in recent years and are frequently underreported.

These studies also suggest that cross-border immovable property is used to shelter undeclared assets that would otherwise fall under CRS reporting. The current AEOI framework, which focuses on financial assets, contains gaps because tax evasion can also occur through non-financial assets such as real estate.

The G20 leaders’ call in 2009 to end bank secrecy led to the establishment of the international Exchange of Information on Request (EOIR) standard. This standard enables tax authorities to request information on accounting records, bank accounts, and the legal and beneficial ownership of assets, including immovable property.

Based on India’s repeated requests to the G20 to expand AEOI to property, the G20 recommended in 2023 that AEOI be extended to property and related recurring income.

Developments since 2010 have significantly reduced barriers to the cross-border exchange of tax information. The IPI (Immovable Property Information) MCAA (Multilateral Competent Authority Agreement on the exchange of information) aims to enhance tax transparency among interested jurisdictions on a voluntary basis. It focuses on immovable property and is based on information that is readily available to competent authorities regarding:

(i) holdings,

(ii) acquisitions,

(iii) disposals of immovable property, and

(iv) recurrent income derived from immovable property.

There could be short-term improvements to tax transparency by developing a common legal and operational approach that enables interested jurisdictions to exchange Readily Available Information on immovable property transactions, holdings, and recurrent income.

The purpose of the Multilateral Competent Authority Agreement on the Exchange of Readily Available Information on Immovable Property (IPI MCAA), is therefore to allow such Readily Available Information to be exchanged regularly in a legally and technically consistent manner. The IPI MCAA will be further supported by an XML schema and user guide to ensure that the information is transmitted in a common electronic format.

The IPI MCAA aims to enhance tax transparency among interested jurisdictions on a voluntary basis by using information readily available to competent authorities on holdings, acquisitions, and disposals of immovable property, as well as recurrent income derived from such property. Although common due diligence and reporting rules would improve consistency, they would also require significant legislative and operational changes for authorities and intermediaries. Relying on Readily Available Information therefore offers a faster path to greater transparency. Readily Available Information includes electronically captured, searchable, and sortable data from tax administration databases or other authorities to which tax administrations have direct access, such as real estate or Beneficial Owner registers. While non-electronic or non-searchable records are generally excluded, jurisdictions may include them when they consider them readily available. Information should also be sufficiently current. Jurisdictions differ in how they tax immovable property, including capital gains, rental income, and wealth or inheritance taxes. Some tax all such income and apply the credit method, while others exempt certain categories or do not levy wealth or inheritance taxes. Visibility over foreign immovable property helps jurisdictions assess whether related wealth and income are accurately taxed. Information may also be used for assistance in tax collection where agreed.

The IPI MCAA contains two modules. The first provides visibility on holdings and acquisitions through a one-off exchange of past acquisitions when a bilateral relationship is activated, followed by annual exchanges on new acquisitions. The second focuses on income, providing annual exchanges on disposals and income derived from immovable property. Each receiving jurisdiction may opt in to one or both modules or decline to receive information. Both modules include identifying information on legal owners, and where available, Beneficial Owners. Information on legal owners is exchanged with their jurisdiction of residence, and information on Beneficial Owners with the jurisdiction of their residence. A receiving jurisdiction must also confirm that the information is foreseeably relevant for administering its covered taxes and specify which taxes it applies to.

Reciprocity is a fundamental element of the international exchange-of-information architecture, as it ensures that a jurisdiction agreeing to receive information is also willing to provide information under the same policy framework. In the context of the IPI MCAA, there is the particular feature that participating jurisdictions provide the readily available and appropriate information on an “as is” basis, while receiving jurisdictions may choose to participate in one or both of the modules described above.

In practice, this means that the scope of information sent by a participating jurisdiction, as well as the scope of information a jurisdiction wishes to receive, may vary from one bilateral relationship to another.

To avoid an overly granular application of the reciprocity principle—which would result in a fragmented scope of exchanged information and create significant system complexity—a jurisdiction may participate in the IPI MCAA if it is willing to send the information items listed in the Annex that it has readily available. This approach enables interested receiving jurisdictions to obtain the maximum amount of relevant Readily Available Information under the IPI MCAA from jurisdictions with which they have activated an exchange relationship.

In terms of the timing of exchanges, the one-off exchange on pre-existing holdings of immovable property should take place by 31 January of the year following the year in which the IPI MCAA came into effect between two Competent Authorities. This deadline allows sufficient time for a participating jurisdiction to obtain and prepare the data for exchange.

With respect to the annual automatic exchanges on acquisitions, disposals, and recurrent income derived from immovable property, Competent Authorities should make all reasonable efforts to complete the exchanges by 31 January of each year and must proceed no later than 30 June. These exchanges should cover all information that became readily available to the tax administration during the preceding year.

Information on the immovable property asset: address of the asset, unique reference number, type of immovable property, value, date of last determination of the value, type of ownership or property rights, fraction of ownership.

Transaction information: price, date of acquisition or disposal, mode of acquisition or disposal, financing information, capital gain, year to which the gain relates, taxes paid.

Legal ownership information (individual): name, jurisdiction of tax residence, address in the jurisdiction in which the individual is a Relevant Person, resident TIN, date of birth.

Legal ownership information (Entity): name, type of Entity, jurisdiction of tax residence, address in the jurisdiction in which the Entity is a Relevant Person, resident TIN, resident business identification number.

Beneficial Ownership information: name, type of Beneficial Owner, jurisdiction of tax residence, address in the jurisdiction in which the Beneficial Owner is a Relevant Person, resident TIN, date of birth.

Recurrent income information: amount of income, type of income, taxes paid, year to which the income relates.

For an individual receiving income: name, jurisdiction of tax residence, address in the jurisdiction in which the individual is a Relevant Person, resident TIN, date of birth.

For an Entity receiving income: name, type of Entity, jurisdiction of tax residence, address in the jurisdiction in which the Entity is a Relevant Person, resident TIN, resident business identification number.

Consider a Special Purpose Vehicle or SPV custodial institution owning a holding company that owns the property. If the holding company is a UK limited company (eg) with the person of significant control or PSC being the trustee, who is resident in a non-participating jurisdiction, then privacy is indeed possible.