Glossary term
Automatic Exchange of Information (AEOI)
Subject: Financial Crime, Tax Crime and Transparency
Also known as: Automatic exchange of financial account information
AEOI is a system in which tax authorities of different countries routinely send each other information about financial accounts held by each other's residents, without waiting for a request.
Explanation
Before AEOI, a tax authority that suspected hidden foreign income had to ask the other country for specific information, and it needed to know where to look. Under AEOI, banks and other financial institutions collect account details, work out the tax residence of the holders, and report them to their own tax authority every year. That authority passes the data to the holders' home countries under a legal agreement. The Common Reporting Standard is the main global model, and FATCA works on a similar basis for the United States. The data usually covers names, addresses, tax identification numbers, balances and income. AEOI explains why banks now ask customers where they pay tax, and why holding money abroad no longer means it is out of sight. Customers see it as one extra tax question at account opening; behind it, their account data travels to their home authority every year.
Example
A resident of Country A has a savings account at a bank in Country B. At year end, the bank reports the account balance and interest to its tax authority, flagging the holder as a resident of Country A. The authority sends the file to Country A, where officials compare it with the person's tax return.
Not to be confused with
- Exchange on request
- On request, one authority asks about a named taxpayer. AEOI sends account data in bulk on a fixed schedule with no request.